CJ Logistics, the top courier service provider in South Korea, is ramping up its market penetration by injecting over 100 billion won into its U.S. subsidiary. As competition intensifies among domestic logistics providers, the company appears to be strengthening its overseas operations, which, despite lower revenue compared to domestic business, offer a larger market size.
According to the logistics industry on the 20th, CJ Logistics provided 115 billion won to its U.S. subsidiary, CJ Logistics Holdings America Corporation, on the 18th through a capital increase. CJ Logistics owns 100% equity in the subsidiary. The funds secured through this capital increase will be used by the U.S. subsidiary for the exercise of redemption rights on redeemable convertible preferred shares (RCPS) and for interest payments.
This capital increase is interpreted as a move to enable the U.S. subsidiary to actively target the market through continued investments. As of the end of September, the capital size of CJ Logistics' U.S. subsidiary was 354.4 billion won, with liabilities amounting to 18.8 billion won.
CJ Logistics has been actively investing in the U.S. market, including acquiring the U.S. logistics company DSC Logistics in 2018. The share of U.S. business sales rose from 9% in 2019 to 11% in the third quarter of this year. Sales in the U.S. institutional sector, which stood at 972 billion won in 2019, increased by 18.5% to 1.1518 trillion won last year.
This year, cumulative revenue reached 955.7 billion won by the third quarter, expected to exceed last year's revenue. The operating profit margin for the U.S. business, currently at 2.4%, is set to increase by expanding the share of warehousing and transportation (W&D) operations. Last year, the domestic business's operating profit margin was 4.7%.
CJ Logistics is constructing a 102,479 square meter (about 31,000 pyeong) ambient-temperature warehouse in Illinois. The company is establishing logistics centers in three locations, including Chicago and New York City. A total of 600 billion won will be invested in this project, which is being conducted in cooperation with the Korea Maritime Promotion Corporation over a total area of 360,000 square meters.
A representative from CJ Logistics noted, "We plan to strengthen our position in the North American W&D business and expand our global logistics territory through the expansion of logistics hubs based on advanced technology and automation."