Kerry Logistics’ chairman, George Yeo [Yong Boon], for most of his life was either a military man or a politician, and joining one of Asia’s largest supply chain service providers represented a new direction for his career.
While global logistics as a business might have been new to Yeo, his military career saw him rise to Chief of Staff for the Singapore Air Force. His political posts included a stint as Minister for Trade and Industry, during which he was instrumental in negotiating FTAs (Free Trade Agreements) with the US, Japan and Australia. So while it might have seemed, at first glance, an odd career move for the former politician, logistics (albeit military logistics) and international trade were major features of his former career choices.
The Logistics Choice
Yeo measures his words in conversation or interview, the quiet logic of the construct is evident. For that reason, moving into the private sector (August 2012) and into a business that is certainly known to have a level of volatility would at first blush seem out of character.
When asked why he chose ‘logistics,’ Yeo explained that after politics, (he lost the 2011 elections) “he didn’t know what he’d do; but Robert (Kuok) did.” Robert Kuok, chairman and patriarch of the Kuok Group asked him to join Kerry. For Yeo it was a sea change, as he said, it was “very interesting to live in Hong Kong” [in contrast to his home city of Singapore].
From one perspective, Yeo was born into “logistics” as his father was a stock keeper and ran a couple of “rickety” lorries (trucks) for a rubber godown (warehouse) owned by a Dutch company. Back then bags of rice or bales of rubber, were shifted by “coolies” with most of the workers being Chiu Chow (originally from eastern Guangdong that moved into Southeast Asia). During vacation Yeo worked with his father and recalls, “they thought me a bit of a nerd, but they were kind to me.” Asked about the difference between his previous careers and working in logistics, Yeo said, “From a technical and operations aspect not so different – technical logistics in the air force was very important to me…it [required] very precise systems management.”
Yeo is quick to point out that the private sector is different from public service, as the logistics company must continually adjust to the customers’ needs – “customized solutions” embedded into the users’ supply chain. This is not only Kerry Logistics’ theme, but also part of an overall trend among Hong Kong logistics companies to provide specialized services that are “value added,” and enable Kerry to climb up the supply chain and make the most of the geopolitical position of the company in Hong Kong (global headquarters) with the obvious constraints of land and a sector-wide labor shortage.
When the AJOT interviewed Yeo at the company’s global headquarters on the 16th floor of the Kerry Cargo Centre in Kwai Chung, it was impossible to ignore the major reconstruction on the building.
The building, like Kerry Logistics itself, was being renovated with an eye on the future. The building resonated with the thump of jackhammers, and bamboo scaffolding rose up the sides (still being used in Hong Kong) with cloth draped down over the outside in an effort to reduce dust and debris.
Before the interview, it was widely speculated that the company would launch an IPO (Initial Public Offering) on the Hong Kong Stock Exchange in the near future. At the time of the interview, Kerry Logistics was part of the Singapore-based Kuok Group, a conglomerate including real estate, hotels, trading, shipping, investment and agricultural interests. The diverse interests make the group one of the world’s largest processors of palm oil and simultaneously, the owners of the Shangri-La hotel chain, which the Kuok family started in 1971. At nearly ninety-years old Robert Kuok, the group patriarch, is still the richest man in Malaysia and ranked in the top fifty in the world.
Kerry Logistics was under the umbrella of Kuok Properties in Hong Kong and has benefited from the expansion of China’s trade, especially within the ASEAN region. It’s considered to be the third largest forwarding group in the Hong Kong/China region and arguably the largest unaffiliated logistics company.
As Yeo explained about the future expansion of Kerry Logistics, “there’s a very nice tag line, ‘Asia Specialists, China Focus, Global Network.”
“ ‘Global Network’ because logistics is global, and the ‘Asian Specialist’ because the Asia trade is what we really do.”
“We have the global network to facilitate the Asian trade.” Yeo added.
Yeo sees a tremendous expansion in the intra ASEAN trade with China. Back in September 2013, when President Obama was immersed in the battle over the government shutdown, Chinese Premier Li Kequiang attended the opening ceremonies of the China-ASEAN Expo (CAEXPO) and increased cooperation with Southeast Asia. As Yeo pointed out, “China has overtaken the U.S. as the world’s No. 1 trading nation and has become the largest trading partner for 128 countries in the world. China-ASEAN trade is estimated to be more than doubling from $400-billion last year to $1-trillion in 2020.”
Another point that Yeo makes is that the geography of Asia is changing. The greatest challenge to logistics in Asia might well be “border crossings.” The point-to-point times are coming down as infrastructure improves, but border crossings are still time consuming, and “time is money” in the logistics business. As the border crossings improve, access to markets will improve. Yeo was also quick to note that as Myanmar is more fully integrated into the ASEAN fold, the overland network of roads will open China trade up to entirely new routes to market.
The opportunities in the intra-Asian business coupled with the global network (which Yeo confided needs to be fleshed out in places like North America,) was part of the logic behind the Kerry Logistics IPO in December (The IPO also opens up the possibility for expansion through acquisition to improve the network.)
Kerry Logistics had a turnover of around $2.5 billion in 2012. The initial IPO raised HK$2.2 billion ($284 million) spinning the company off from the already Hong Kong-listed Kerry Properties (reportedly 56% owned by Kuok family interests.) Post IPO, the Kerry Properties stake will be just over 43% but could fall slightly lower should an additional 15% be issued.
In a statement Kerry Logistics said it intends to use approximately 51% of the total estimated net proceeds from the Global Offering for funding capital expenditures in connection with future expansion and acquisition activities; approximately 40% for repaying part of the loans from a fellow subsidiary controlled by Kerry Properties Limited; and approximately 9% for working capital and general corporate purposes.