E-Land benefits from sale of logistics center in China Korean retail giant gains $84 mil from the sale while avoiding redundant investment

Translated by Kim So-in 공개 2022-01-25 08:15:04

이 기사는 2022년 01월 25일 08:10 더벨 유료페이지에 표출된 기사입니다.

South Korea’s retail conglomerate E-Land Group’s sale of its first overseas logistics center in Shanghai is considered the best deal the group completed in 2021 as the deal enhanced the effectiveness of its investment in the second logistics center.

E-Land China sold its first overseas logistics center in Shanghai in late 2021 for about 260 billion won ($218 million). The logistics center, which had a floor space of 430,000 square meters, was completed in 2011.

The company is said to have earned more than 100 billion won from the sale, which is expected to be recognized as a non-operating profit for 2021 to help the company boost its net profit. The financial structure is also expected to improve as some of the secured loans will be repaid with the cash flow.

It is worth noting that E-Land Group has been building its second logistics center since April 2019. The retail giant made a strategic investment to further expand its logistics center considering that the Chinese retail market is rapidly evolving, led by the e-commerce sector. Its initial plan was to operate both the first and second logistics centers.

In 2016, E-Land Group’s three fashion units in China generated revenue of more than 2 trillion won. Yet, their revenue decreased to 1.48 trillion won in 2017 and 1.37 trillion won in 2018. The group’s move in 2019 to expand its logistics center seemingly aimed at making a turnaround by quickly responding to changes in the retail market.

E-Land Group accelerated its digital transformation in 2020 amid the Covid-19 pandemic. The conglomerate established its O2O inventory cloud system, with its same-day delivery rate increasing to some 90% through the integrated logistics system. It set up a system that utilizes some 3,000 stores across the country as small fulfillment centers, using inventories of those stores.

Yet, it turned out that its original plan to operate the two logistics centers has become less useful as local stores started to take on the roles of logistics centers. The second logistics center has a floor space of 440,000 square meters, or roughly the size of 60 football fields. The center handles 330 million units per year based on fashion apparels, which is more than four times that of the first logistics center.

E-Land Group decided to offload its first logistics center and started the sale process last year. The timing of the sale was appropriate as demand for logistics centers grew in the country amid booming e-commerce market after the pandemic, which pushed up the value of the logistics center.

The Korean retail conglomerate has been making efforts to improve its financial soundness for years in a bid to reduce its financing costs. E-Land World’s financing cost amounted to 314 billion won in 2020 on a consolidated basis.

The groups also sold a logistics center in Cheonan, South Chungcheong Province, to Neo Value Partner Asset Management for 160 billion won in 2021.

“We are redeploying logistics resources considering new or existing logistics centers, and the latest sale aimed at preventing redundant investment and optimizing infrastructure,” an official at E-Land Group said. (Reporting by Hyo-beom Lee)
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