This is the most profitable financial report since Aneng's listing——
In 2023, the company's revenue will approach 10 billion yuan, reaching 9.917 billion yuan, a year-on-year increase of 6.2%, adjusted pre-tax profit of 654 million yuan, turning losses into profits, at the same time, gross profit will increase by 73.6% to 1.268 billion yuan, and net profit will change from a loss of 218 million yuan in the same period of 2022 to a profit of 407 million yuan.
Seeing the performance of Aneng's financial data, many people said that they said that business was not good in the past few years, so why did Aneng still make money?
Taking the data for 2023, the annual average of the global manufacturing purchasing managers' index is 48.5%, down 3.3 percentage points from 2022, and the average monthly operation of the whole year is below 50%, and the global economic recovery momentum continues to weaken. Under the changing global economic situation, the global logistics industry is deeply trapped, and the growth of industry cargo volume is weak. According to statistics from British accounting firm Price Bailey in December last year, 463 logistics companies in the UK have declared bankruptcy in the past year. The failure rate of logistics and transportation companies is rising at a rate unheard of in more than a decade, and many transportation companies are struggling to survive, according to Price Bailey staff.
So, in such an unfavorable environment last year, how did Aneng achieve contrarian growth?
The cost logic of contrarian growth
In the face of industry adversity, Aneng's contrarian market climb is thought-provoking, and the answer may lie in its cost logic.
Reducing costs and increasing efficiency is an eternal topic for the logistics industry, and it is also a booster for enterprises to grow.
On the one hand, high logistics costs are directly related to the profitability of enterprises, which not only affect the pricing strategy of goods, but also determine the response speed and overall competitiveness of enterprises in the event of market fluctuations. Especially in the context of the economic downturn and the intensification of industry involution, whether the cost can be effectively controlled has even become a decisive factor for the survival and growth of enterprises.
On the other hand, cost leadership is not simply to reduce the cost of a single item, but to achieve a cost advantage over competitors at the same competitive level through excellent operation management, technological innovation and supply chain optimization. This has been echoed at the national policy level, the "Government Work Report" put forward the implementation of the action plan to reduce logistics costs during the year, which is intended to guide the logistics industry to achieve institutional, structural, management, technical and comprehensive cost reduction, quality and efficiency improvement, and guide logistics enterprises to pursue higher efficiency, quality and profit margins, rather than simply reducing service prices, therefore, the essence of the cost leadership strategy is a comprehensive embodiment of cost, service, quality, timeliness and other dimensions.
Looking back on the past year or two, the industry's leading express companies have given up on large-scale price wars and instead focused on lean management practices, striving to achieve excellent cost control in all aspects, so as to drive profit growth in the face of adversity.
Taking Debang as an example, in the past few years, Debang has effectively controlled the rapid growth of business operating costs through measures such as reasonable asset allocation, site integration, and technology empowerment, and last year's non-net profit was 568 million yuan;
Best also recently released a financial report, showing that by streamlining operational processes, reducing non-essential expenses and improving overall operational efficiency, Best Express's gross profit has turned from negative to positive, and its gross profit margin has increased by 8.3 percentage points compared with 2022.
Similarly, through the in-depth implementation of the cost innovation strategy, ANE has significantly improved its cost-effectiveness in 2023, with gross profit growth of 7%, gross profit margin jumping to 12.8%, and adjusted pre-tax profit exceeding 600 million yuan.
Through public financial reports or express reports, we can see that the top listed express companies in the past year have focused on cost optimization and control. Among them, ANENG has achieved remarkable results in cost control and gross profit improvement, which further confirms its solid implementation of the cost leadership strategy.
Exploring ANE's cost management strategy may be the key way to unlock its profit code.
The core cost items were deeply reduced, and the expenditure was reduced by 330 million yuan
The operating cost of Aneng can be divided into four parts: trunk transportation, distribution center, value-added services and delivery services, of which transportation and distribution costs account for nearly 70% of the total cost.
In 2023, ANE achieved significant reductions in these two key cost links: the cost of distribution centers was reduced by 168 million yuan, an improvement of 7.6% year-on-year, and the cost of trunk transportation was reduced by 160 million yuan, an optimization of 4% year-on-year. Together, the two have saved the company about 330 million yuan in cost expenses.
On the distribution side, from May to July last year, Aneng decisively closed 55 smaller-scale self-operated distribution centers, reducing the number of distribution centers from 136 to 81, and effectively reduced site rent, labor costs and equipment leasing and other related expenses by optimizing the distribution network layout and lean planning of the reservoir area.
On the transportation side, thanks to the decline in fuel costs, the advantages of centralized procurement and the increase in the direct rate of trunk lines brought about by the adjustment of the distribution structure, the transportation cost of Aneng has also decreased under the condition of reducing the damage rate and shortening the timeliness. At the same time, in order to reduce transportation costs and improve transportation efficiency, ANE sold surplus trunk trucks and optimized the ratio of trucks to trailers.
It is understood that Aneng is one of the few companies in the express industry that adheres to and successfully implements the self-operated fleet model, and its self-operated fleet consists of more than 3,600 trunk high-capacity trucks and about 6,300 trailers, which involves billions of billions of capital investment behind this huge asset allocation, and builds a deep barrier through capital, so that Aneng and most of its peers have opened a gap in transportation costs, under the same business conditions, "relative to most competitors, it can naturally maintain 5%-10% the leading edge of net profit".
In the second half of the year, the results of this series of cost optimization measures were more obvious. According to the data, its unit transportation cost plummeted to 310 yuan/ton, a decrease of 17 yuan/ton from the previous month, and the unit distribution center cost also shrank sharply to 156 yuan/ton, a decrease of 32 yuan/ton from the previous month.
At the same time, ANE has built a sound management and control mechanism and implemented the streamlined reform of the organizational structure, which has reduced administrative expenses by 13% year-on-year in 2023, that is, saving about 130 million yuan.
With a cost-based pricing mechanism, the average weight of the ticket was reduced to 93 kg
In the fourth quarter of last year, the average daily cargo volume of ANE increased by more than 10% year-on-year, and this advantage will be further extended and further amplified into 2024.
Those who are familiar with the industry know that the smaller the average weight of the ticket, the higher the profit of the enterprise. With a cost-based pricing mechanism, ANE is gradually replacing the lower margin and negative gross margin with better quality and higher gross margins.
Last year, the supply structure of Aneng has been greatly improved, and the average weight of tickets has decreased by 12.3% from 106 kg to 93 kg, of which the growth rate of 0-70 kg mini receipts and 70-500 kg small receipts LTL reached 9.1% and 2.4% respectively, and the growth of small tickets drove its transportation unit price to rise by 13 yuan/ton. With the increase in overall product prices and the decrease in core costs, ANE's gross profit margin increased significantly from 7.8% to 12.8%, reaching the best level since its listing.
While reducing costs, ANE Logistics' various service indicators have been significantly optimized. In terms of timeliness, the average delivery time per order has been shortened by 8 hours, and now it only takes an average of less than three days to complete the delivery; in terms of quality control, the loss rate has dropped sharply, and the number of lost pieces out of 100,000 goods is only 0.2; and in the customer satisfaction assessment, the complaint rate per 100,000 votes has dropped from 1,294 to 461 votes, a decrease of 64.4%, which shows that its cost reduction and efficiency improvement strategy is effective.
Entering 2024, ANE Logistics will position this year as a "cost year". At the performance meeting, Aneng revealed that it will continue to implement a series of cost reduction and efficiency improvement measures this year, for the distribution center, by optimizing the infield operation process, using digital tools to refine the management of scheduling, investing in automation equipment to improve the processing capacity of e-commerce packets, accelerating site turnover and improving the turnover rate and other means to reduce costs; With the help of scale effect, the frequency of cargo distribution and the straightening of lines are increased, forming a positive cycle of decreasing costs.
Jin Yun, Executive Director and Chief Operating Officer of ANE Logistics, pointed out that the results of the above measures have been verified in the first quarter of this year, and the cost optimization results generated by them have shown that they are sustainable.
The path to change behind cost leadership
Michael Porter, known as the "father of competitive strategy", has put forward three classic strategies, one of which is the "cost leadership strategy". Qin Xinghua, co-chairman of the board of directors, CEO and president of ANE Logistics, has also said on many occasions that "the total cost should be 1 cent lower than the industry-leading level", which can be understood as ANE's optimization of costs down to every penny, because the savings per penny cost may mean hundreds of millions of profits. But it's worth noting that behind the lead by 1 cent is not simply around the cost, its core is not even the cost, but the whole strategy.
In September 2022, ANE put forward a new strategic direction of paying equal attention to profit and quality, focusing on effective scale growth, and put forward the "five most" new goals with cost optimization as the core: optimal cost, most stable timeliness, best quality, densest network coverage, and fastest service response.
This profound change has now basically ended, and it has also enabled Aneng to return to the path of growth.
In 2023, some Aneng operation areas will receive year-end bonuses of up to seven months' salary due to exceeding the profit target, which is the practice of daring to authorize and giving up profits.
While promoting organizational reform, ANE completed the integration of industry and finance, full budget management and other systems to ensure that each region can achieve independent operation and decision-making under the flat management framework, so that the entire organization can be driven independently and coordinated like the EMU model.
At the organizational level of smaller units, ANE deployed a customer-oriented iron triangle organization to achieve the fastest response in the logistics industry - 5 minutes response, 2 hours resolution, and zero repeated complaints.
In addition to organizational change, the most talked about by the industry is its network ecological construction.
The boss of a regional outlet of Aneng introduced, "Aneng has canceled more than 20 fines last year, and there are basically no fines." ”
At the same time as canceling fines such as cargo volume assessment, ANE also canceled the comprehensive compulsory contracting, with the intention of creating the healthiest and most stable network ecology. By the end of 2023, ANE has more than 28,000 freight partners and agents in its entire network, with a township coverage rate of 98.2%, ranking first in the express transportation industry.
It is worth mentioning that ANE has successfully joined hands with Pinduoduo's overseas cross-border business, and gradually connected with platforms such as Douyin International, 1688, Cainiao Network, and Tmall, which is regarded as an important growth point for ANE in the future.
Summary: The "leftover is the king" of express sports
In recent years, in a complex and volatile economic environment, the LTL market has faced pains. According to the McKinsey report, the LTL market will grow at a rate slightly higher than GDP in the medium to long term. At present, the whole network express accounts for 10% of the total LTL (150 billion market size), which is the market with the most long-term growth and scale efficiency value in the LTL market, and the share of the top five leading enterprises has exceeded 60%, and it is also the only track that may run out of the 50 billion level leader.
Jin Yun said that today's express market is like the express market ten years ago, the economic downward pressure in recent years has accelerated the increase in industry concentration, the next 3 to 5 years, the whole network to join the express market may appear 2-3 companies that stand out, and concentrate on integrating the market share of the remaining several franchised express companies. In this process, whether you can have an absolute cost advantage will become the key factor that determines the victory or defeat.
In the franchise express market, whether it is the scale of cargo volume, the scale of outlets or the scale of revenue, Aneng has outperformed its peers, and is expected to achieve a growth of about 15% this year. Jin Yun bluntly said at the performance meeting, "Last year, we spent most of our time paying attention to internal structural adjustments, and did not pay attention to external competition, and were not surpassed when we were most likely to be surpassed by the second place." Now the core internal problems have been solved, and there is no longer any need to worry about being surpassed. ”
Looking back at the development of the U.S. LTL market, it has experienced a period of rapid expansion, integration and maturity, in the early stage, the U.S. LTL companies have also experienced a long period of low profit margins, and later with the development of the U.S. economy, the transportation category is gradually biased towards high value-added and lightweight, and the market has a strong impact on transportation timeliness, The demand for cost and value-added services continues to increase, the industry concentration is also increasing, leading companies have formed a LTL transportation network throughout the United States, and now their LTL market has formed a stable monopolistic competition pattern, and the market value and profits of leading companies such as ODLF have increased significantly.
Referring to the United States, China's LTL market has also experienced a period of rapid expansion and is now accelerating the transition to a stage of integrated development. Compared with the United States, China's LTL market is larger and contains higher potential for consolidation. Judging from the practice of Chinese players such as Aneng, the express franchise model has fully verified its feasibility in terms of profitability in China.
As for who will become the final winner after the integration reshuffle, it remains to be tested by the market, but it is foreseeable that those who can maximize cost advantages, take into account the efficient timeliness service quality and grasp the opportunity of industry integration enterprises, will undoubtedly occupy a favorable position in the competition, and it is expected that "the remainder is king".
Author | Logistics Mahjong Hu
Source | Logistics Salon
This article is the author's personal opinion and does not represent the position of Logistics Salon