With parcel volumes growing 12.6% y-o-y to 34.0bn pieces, adjusted EBITDA grew 12.8% to $2,240.6m on revenues that improved by 12.1% y-o-y to $6,066.4m at Chinese Tongda carrier ZTO Express.
50% average daily volume growth
Even with a supposedly cooler economy than in the past, ZTO Express has seen volume growth that is positively stellar by comparison to many Western carriers. CEO Meisong Lai pointed out that in Q4, “Our average daily retail parcel volume exceeded 7m… nearly 50% over the same quarter last year.”
Quantity over quality?
With a margin close to 37%, this is the sort of earnings that Western carriers could only dream of. The carrier has long made a point of handling only the most profitable parcels in the past, but this seems to have changed. Ms Huiping Yan, CFO of ZTO Express said, “Slow to recover economic conditions caused a greater proportion of e-commerce parcels being low-value or unprofitable.”
Lai added to this idea of a change of direction by saying “We estimate that the industry [volume] growth for 2025 will likely be around 15%. It is paramount for us to achieve volume growth above the industry average.”
Driving costs down to achieve better margins
One of the advantages that Chinese carriers have over their Western counterparts is their relatively low costs. ZTO Express was able to reduce these even more in 2024, with Yan saying, “Combined unit sorting and transportation costs decreased approximately six cents through productivity initiatives.” In terms of EBITDA margin, this still only achieved 0.2 basis points of growth, but at 36.9% it is in the order of 300% that of comparable Western carriers such as UPS.
Lai continued that in China, “Consumers are motivated by the value-proposition associated with online purchases.” However, he added, “The trend of spending downgrade persisted where parcel unit pricing continued to be under pressure.”
Though there are only five major Tongda delivery companies in China, there is intense competition in the parcels market. ZTO is one of the most profitable carriers among the five, and it will be interesting to see how it maintains such margins as the parcels market returns from relatively slow growth (in China terms) to what is projected to higher volume growth trajectories in the coming year.
Author – Richard Shrubb
Source: Ti Insight
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