Message

Message from the Chairman and President's Report

Dear Fellow Shareholders,

Two years ago, we committed to transforming LBC for the long-term by initiating digital transformation. In many ways, it is the biggest, most complex change management we ever had to work together for a 70-year old company—a heritage brand—with over 10,000 employees around the globe.

The results we’ve seen so far confirm that our strategy is working.

We are Delivering Leading Performance.

In 2019, we achieved record high revenues of P15.2 billion, a 23% increase from the prior year and a five-year compounded annual growth rate of 17%.

Our Logistics revenues rose 25% to P14.2 billion— almost double from just three years ago—with strong performance across all customer types and geographic markets. At the same time, our Money Transfer Services revenues returned to growth with 3% increase to P992.3 million. We generated P2.1 billion of operating cash and delivered P356.5 million to shareholders in cash dividends. Above all, we gained market share in both our business segments—a key indicator for our future success.

We are Innovating with the New.

The numbers only tell part of the story. They do not fully reflect the journey and the many changes under way.

Today, we are making progress in our transformation. Data analytics whether operational or predictive is now available to us and it already informs the business decisions that matter most. For example, we use GPS information to create a database for last mile deliveries, and Business Intelligence to drive insights and decisions based on real-time data.

More importantly, a key benefit that this process brings is innovation— and there is evidence that our digital transformation is laying the groundwork for innovation and customer satisfaction. It helps us improve our understanding of customers’ evolving needs and provides us with a platform to envision new products and customized solutions for an overall enhanced total customer experience. Our website, for example, is no longer primarily a source of information. It is now capable of online real-time transaction processing and customer service, with interactive features such as package tracking, rate calculators and scheduling of pick-ups for parcels and cargo, as well as real-time customer service support through the “Live Talk” capability. Other examples are our new services such as retail Cash-On-Delivery and Cash-On-Pickup, and online remittance service.

In the years ahead, we aren’t slowing down our efforts. We expect to see further improvements in our productivity, data integrity, and scope for planning and optimization as we deploy new logistics systems throughout the second half of 2020.

“We use GPS information to create a database for last-mile deliveries and Power Business Intelligence to drive insights and decisions based on real-time data.”

Market Share

We help our customers become more connected, no matter where they are—often in some of the most geographically remote areas in the country.

Fueled by our scale and network of partners, we’ve maintained leading positions in our chosen business segments for decades. And it’s no coincidence. Because to stay on top, we know we have to move better—across the nation, around the world, and on any device.

With a growing team of more than 10,000 people serving over 20 million customers worldwide, we continue to be the Philippines’ leader in domestic express delivery and air freight forwarding. Today, we are the largest among national industry players with a market share of 40% in express delivery and 22% in air freight forwarding.

We are Making Good Choices.

Strategy is about making choices and right decisions —framing new positions, but also accepting limits. During the year, we refocused and divested in QUAD X to realign its strategic direction and with a view of re-tuning performance separately from LBCEH. We completed a number of acquisitions in North America and Hawaii to further strengthen our position in these markets. Key acquisitions included LBC Mundial, LBC North America and LBC Mabuhay Hawaii which operate as a cargo and remittance company in California, USA, New Jersey, and Hawaii, respectively. In addition, LBC Mundial owns a subsidiary operating in Nevada, USA as with LBC North America in Canada. All in all, acquired businesses during the year contributed P1.8 billion in revenues.

We also thoughtfully added to our branch footprint as well as expanded our ground delivery fleet. Today, we are in 30 countries and territories around the world providing logistics and remittance solutions to families, communities, and businesses of all sizes. We’ve established 1,466 company-owned branches and 33 warehouses nationwide, and 77 cargo and money branches and 1,021 partner-agent branches across Europe, Middle East, Oceania, Asia Pacific, and North America. Including remittance partners, our reach spans over 500,000 locations covering more than 200 countries and areas of the world.

“Today, we are in 30 countries and territories around the world providing logistics and remittance solutions to families, communities, and businesses of all sizes. ”

Year-on-Year Growth and GDP

The Philippines has one of the most remarkable economic transformations in Asia in recent decades powered by strong consumer demand, large, young, and globally competitive workforce as well as resilient remittances from overseas Filipinos.

From 2010 to 2019, the economy has expanded by a compound annual average of 6.3% compared to 4.4% gross domestic product (GDP) growth in the past decade. More recently, it has continued to evolve quite steadily—increasing public infrastructure and human capital investments such as in education, skills, and health and growing by 6.4% per year from 2015 to 2019. In the last three years, GDP growth rates were 6.7% in 2017, 6.2% in 2018 and 5.9% 2019.

Similarly, the local logistics and warehousing market has witnessed tremendous growth, rising from P404.0 billion revenues in 2013 to P623.51 billion in 2018, representing a 9.1% annual growth on a compound basis according to Ken Research. The freight forwarding segment, where our industry is, captured 76.5% of the market at P477 billion, with an annual growth of 8.4%. In terms of volume, the market registered an increased domestic container freight traffic from 2.1 million twenty-foot equivalent units (TEUs) in 2013 to 3.1 million TEUs in 2018.

At LBC, we’ve grown our revenues by 17% per year in the same five-year period from 2015 to 2019, with growth rates of 15% in 2017, 24% in 2018 and 23% in 2019. Over that time, we’ve entered new markets, expanded our services, embarked on a digital transformation, invested in our team, and ultimately sought to understand the evolving customer needs. In doing so, we believe we have truly differentiated ourselves and that our results validate our conviction that our strategy was appropriate and well-timed.

We are Moving with the Filipino.

The world is not what it used to be. The coronavirus (COVID-19) pandemic has transformed it to a time of great uncertainty that few, if any, of us could have imagined. Country after country closed borders. Governments adopted lockdown measures. Schools and businesses were shut. People were asked to stay home. But what has remained clear is that the people around the world need to connect with each other.

Our role—our responsibility—is to make that happen, which means staying up and running at full speed in the face of complexity. What motivates us is the concern we have for our communities—our employees, families, customers, and all Global Filipinos. Because they have never needed us more.

Yet, for the first time in our history, global air cargo came to a near standstill. Being the largest air freight forwarder in the country, we knew this required new ways of thinking and working.

With this in mind, we’ve launched a clear set of objectives, anchored on our core values, for how we would approach an evolving situation in which we are collectively living through. Our guiding objectives are:

1. Lead employees and customers to safety (our frontline);
2. Boost revenues amid uncertainty (our topline); and
3. Compress and control costs (our bottomline)

As ever, none of these priorities and objectives happens overnight or without the commitment and capabilities of an incredible workforce. I want to thank our teams in 30 countries for staying focused on our customers, creating value for our shareholders, and rebuilding the foundations for a better society.

Our role—our responsibility—is to make that happen, which means staying up and running at full speed in the face of complexity. What motivates us is the concern we have for our communities—our employees, families, customers, and all Global Filipinos. Because they have never needed us more.

Thank you, and stay safe.

MIGUEL ANGEL A. CAMAHORT
Chairman of the Board
President and Chief Executive Officer