Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ZTO Express (Cayman) Inc (ZTO, Financial) achieved a 10% year-over-year parcel volume growth, reaching RMB8.45 billion.
- Adjusted net income increased by 11% year-over-year to RMB2.81 billion, demonstrating strong profitability.
- The company maintained industry-leading service quality management and reduced customer complaint rates.
- ZTO Express (Cayman) Inc (ZTO) implemented initiatives to reduce last-mile delivery costs and improve profitability for couriers.
- The company announced an interim cash dividend of USD35 per ADS and ordinary share, reflecting a 40% payout ratio.
Negative Points
- Market share contracted by 2 percentage points compared to the same period last year due to intensified price competition.
- The proportion of low-priced e-commerce parcels continues to trend up, putting pressure on pricing.
- Operating cash flow decreased by 7.5%, mainly due to dividend tax and increased financing or loans to network partners.
- Unit sorting costs increased by 4.6% due to higher depreciation and amortization costs on new equipment and facilities.
- Despite the strong growth in parcel volume, the company's ASP for core express delivery business stayed flat.
Q & A Highlights
Q: ZTO's parcel volume growth was 10%, slower than the industry. Will there be any strategy adjustments to maximize volume and profitability in the second half? Also, is there room for further operating efficiencies?
A: (Meisong Lai, CEO) The industry exceeded expectations in parcel volume growth. Our market share decreased by 2% due to intensified price competition and unprofitable volumes. We controlled such volumes to focus on service quality and profitability. We aim to achieve 15-18% growth for the year and are confident in meeting this target. For operating efficiencies, we have ample reserves in our 26 super sorting centers and expect continued cost efficiency gains.
Q: Can you provide details on the current and target daily retail parcel volume, and initiatives to reduce costs for network partners and last-mile delivery?
A: (Meisong Lai, CEO) Our current daily volume of non-e-commerce parcels is 5.4 million, aiming for 6 million by year-end. Initiatives include enhancing consumer willingness to send parcels, training couriers, shifting quality management focus, and strengthening cooperation with e-commerce platforms. For cost reduction, we are increasing courier income and improving outlet profitability through direct linkage to last-mile posts, reducing delivery costs.
Q: What are the capital expenditure plans for 2024 and 2025, and how will they impact cost reduction?
A: (Meisong Lai, CEO) Most of our super sorting centers are self-owned, and we have sufficient reserves for future capacity needs. CapEx spending will be minimal, focusing on upgrading existing facilities. We anticipate generating increasing free cash flow and returning more to shareholders. For cost reduction, we will continue to improve connectivity between outlets and sortation centers, reducing the number of sortations and achieving greater cost efficiencies.
Q: What is the company's strategy for balancing volume and profitability in the face of intense price competition?
A: (Meisong Lai, CEO) We focus on profitable growth by controlling unprofitable volumes and improving service quality. Our strategy includes upgrading customer mix, refining products and services, and enhancing brand awareness. We aim to achieve a balance between volume and profit, ensuring sustainable growth.
Q: How does ZTO plan to enhance its competitive advantage and differentiate itself from competitors?
A: (Meisong Lai, CEO) We are focusing on service quality, last-mile strategic objectives, and profitability for couriers. Initiatives include improving network policies, enhancing service quality, increasing retail parcel ratios, expanding last-mile coverage, and strengthening collaboration with online platforms. These efforts aim to create unique competitive advantages and improve brand recognition and customer satisfaction.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
