Logistics Provider LBC Express Slips Into The Red

Logistics provider LBC Express (PSE: LBC) of Manila, the Philippines, has reported higher nine-month revenues in the year to September 30, 2019 compared to the corresponding period of 2018. But it also reported a decidedly lower net income after tax and a lower total comprehensive income too. Matters took a turn for the worse in the penultimate quarter of the year and the company has reported a small loss.

Third Quarter Numbers

LBC's revenues from operations for the three months ending September 30, 2019, were 3.73 billion Philippine pesos ($71.92 million), which was an increase of 12% year-on-year. Consolidated revenues grew in the quarter because of revenue growth in the logistics segment of the company's business. Retail and corporate sales grew by 12%. The company attributed the growth in its domestic business to additional branches and a price increase in October.

The cost of services increased by 24% in the third quarter of 2019 compared to the same period in 2018 to stand at a figure of 2.77 billion pesos ($53.46 million). Cost hikes were driven by growth in the volume of logistics services, as well as increases in the cost of delivery and money remittance, staff costs, depreciation and rent.

Unfortunately, in the various statements by the company, there are places where the various numbers do not correlate. For instance, in the official narrative, the company stated its third quarter gross profit this year had fallen to 633.73 million pesos. However, the tabulated figure in the consolidated statement of comprehensive income states that gross profit for the quarter is just under 956.92 million pesos. FreightWaves here reports the tabulated numbers from the consolidated financial statements.

Gross profit fell through the floor by 42%, down from 1.09 billion pesos ($20.18 million) in the third quarter of 2018 to just under 957 million pesos ($18.46 million) in the third quarter of this year.

Operating expenses declined in the third quarter, by about 11% year-on-year, to just under 697 million pesos ($13.45 million) because of a reduction in claims, losses and depreciation.

The company took a downward turn in its accounts of "Other income." There was a loss of about 619.44 million pesos ($11.95 million) on valuation of a derivative. In January 2017, the company undertook a complex financial debt issue of about 2.52 billion pesos (about $50.0 million at January 2017 rates) to fund corporate acquisitions and working capital. The debt is convertible to equity and there is a derivative element to it. The debt is also secured by a pledge of 100% shareholding over subsidiary company "LBC Express Inc.," which owns a substantial number of companies within the group that actually carry out business.

That derivatives-loss was offset by the sale of a subsidiary company for 443.86 million pesos ($8.56 million). There was also an increase in interest expenses, however. this was because of the adoption of a new financial reporting standard that requires recognition of interest from lease liabilities.

Nonetheless, the surge in third quarter costs and the issues related to derivatives did some damage, which can most clearly be seen in the company's "income before income tax" account.

At the end of the third quarter of 2018, that figure was 176.48 million pesos ($3.27 million) but, by the end of the third quarter of 2019, it had fallen by a stunning 83% to 30.84 million pesos ($595,000).

LBC's net income after tax swung from a positive 85.32 million pesos ($1.58 million) in the third quarter of 2018 to a loss of 62.09 million pesos ($1.20 million) in the third quarter of 2019.

Looking Into The Longer Term: LBC's Nine-Month Numbers In Brief

LBC also reported on its nine-month numbers. For the nine months of January through September 2019, the company reported 11.57 billion pesos ($223.33 million) of revenues from services, a 27% increase on the same period in 2018.

The company's cost of services surged by 38.57% to 8.40 billion pesos ($161.99 million) – that's a difference in absolute terms of about $50 million – and it reported a 4.1% increase in gross profit to 3.18 billion pesos ($61.34 million). Operational expenses increased by 18.8% to stand at 2.12 billion pesos ($40.89 million).

Net income after tax fell through the floor, and possibly through the basement too, by 64.75% from 1.28 billion pesos ($23.7 million) at the end of nine months to September 2018 to about 452 million pesos ($8.71 million) in the nine months ending September 2019.

About LBC Express

LBC was founded in 1945 as brokerage and air cargo agent "Luzon Brokerage Corp." Today, LBC provides retail and corporate courier and cargo, money remittance and logistics services including last mile delivery. Its retail logistics services include couriers, air cargo and balikbayan boxes. In 2018, the company forwarded 899,115 "balikbayan boxes," which are cardboard boxes full of various items sent by expatriate Filipinos (known in Filipino as "balikbayan"). It forwarded 277,513 parcels last year and handled just under 30,000 tons of air cargo. Its corporate logistics services include freight forwarding and supply chain management.

The company has a presence in 30 countries around the world including Malaysia, Australia, Japan, Saudi Arabia, 11 countries across Europe, the U.S. and Canada. It operates 32 warehouses, 74 cargo and remittance branches and has access to a further 981 partner agent branches around the world. LBC employs about 13,500 people globally.

This graph shows the total weekly import shipments (both containerized and non-containerized) in the U.S. as reported to U.S. Customs & Border Protection from the beginning of March to November 2019. Source: FreightWaves Sonar.

Read more stories by Jim Wilson. Jim is based in Australia but he mostly covers Asia's maritime sectors. He can be reached with comments, suggestions and tips via [email protected].

Image Sourced from Pixabay

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