CJ Logistics is turning its attention to the U.S. and India as it seeks to make international operations a bigger source of profitable growth, while improving efficiency in its domestic delivery and fulfillment businesses.
At a company town-hall meeting on Aug. 27, Chief Executive Shin Young-soo said CJ Logistics needs to focus not simply on expanding its business but on improving the quality of its growth, with stronger results in international markets becoming increasingly important.
The strategy reflects a shift for the South Korean logistics company. Its global operations have already become its largest business by revenue, but the company now faces the challenge of converting that scale into higher profits.
Global operations generated 2.38 trillion won, or about $1.8 billion, in revenue during the first half, accounting for 36% of CJ Logistics’ total revenue. That was larger than the shares generated by its parcel and e-commerce business, at 29.6%, and contract logistics, at 26.6%.
The global business also was the company’s only major division to exceed its first-half operating target. Revenue reached about 2.38 trillion won, or $1.8 billion, compared with a target of 2.23 trillion won, representing 106.6% of the goal.
But revenue growth hasn’t translated into higher earnings.
Second-quarter global revenue rose 9.4% from a year earlier to 1.21 trillion won, or about $910 million, while operating profit fell 1.4% to 20.4 billion won, or roughly $15 million.
Growth in shipments from a major U.S. customer, along with expansion in India and cross-border e-commerce, was offset by weaker project-forwarding activity amid geopolitical risks in the Middle East.
That pressure is prompting CJ Logistics to put more emphasis on profitability and portfolio discipline rather than simply adding overseas operations.
The company recently exited a noncore shipping business in Vietnam and is concentrating more resources on contract logistics. The number of consolidated and affiliated companies within its global business fell to 88 at the end of the first half from 110 at the end of last year.
Some overseas operations, including businesses in China, Africa and Vietnam, are being sold or wound down as the company focuses capital on markets where it sees stronger long-term opportunities.
The U.S. and India are emerging as the main targets.
U.S. revenue rose 20% in the second quarter from a year earlier, driven by new business from large warehouse-and-distribution customers, higher pricing from existing customers and cross-selling between freight forwarding and other logistics services.
Revenue in India increased 5%, helped by new consumer-goods contracts. The company has been working to diversify its Indian customer base beyond its traditional concentration in steel-related businesses.
Cross-border e-commerce was another strong growth area, with revenue jumping 53% in the second quarter.
CJ Logistics is also trying to increase the amount of business it handles for each customer. The company wants to connect its freight-forwarding operations with local contract-logistics services, creating what it describes as a global end-to-end platform.
The strategy is designed to reduce reliance on the more volatile freight-forwarding business while increasing the company’s presence in steadier contract-logistics operations in strategic markets.
That shift could become increasingly important as CJ Logistics seeks to turn its international scale into a more predictable source of earnings.
For now, the numbers show a business that has successfully expanded overseas but still has work to do on profitability. The next phase of its global strategy will depend less on how quickly it can add revenue and more on whether it can convert U.S. and Indian growth, cross-border commerce and broader customer relationships into sustainable margins.
Shin said the company needs to find new growth opportunities in larger global markets while strengthening its competitiveness and profitability at home.
For CJ Logistics, the goal is becoming clear: make global growth not just bigger, but more profitable.
