Samsung SDS, the internet technology solutions unit of South Korea’s Samsung Group, said Friday that it does not plan to spin off its logistics business this year, defying market expectations that the move would be made in the near future.

“We have no plans to spin off our Business Process Outsourcing unit (which provides global logistics services) this year,” Samsung SDS CEO Chung Yoo-sung announced during a shareholder meeting held in Seoul on Friday.

Samsung SDS officially announced in June 2016 that it was considering spinning off its logistics process outsourcing business, which generated around 42 percent of the company's total revenue in 2016. 
 

For the past year, the company had not clarified when or how it would carry out the spinoff, depending on which the firm’s shareholder value would undergo steep changes.

“We’ve been reviewing multiple ways to carry out the spinoff, but have decided to put it off for the time being as we need to further stabilize and expand our business globally,” Chung said, citing plans to “reconsider the option at a later time.”

Following the news, Samsung SDS shares plunged 8.47 percent to a closing price of 135,000 won ($120) on Friday.

According to the CEO, Samsung SDS has been working on separating out the logistics business portion from its overseas subsidiaries including those in Singapore, Brazil, US and China.

This year, the firm will focus on opening more logistics business offices globally, with aims to operate 70 branches in 42 countries by the year’s end. It currently runs 49 branches in 29 countries.

Most of the new offices will be formed in Western Europe and North America, where there are many companies seeking to export their products to different markets in Asia, according to Kim Hyung-tae, executive vice president of Samsung SDS’ smart logistics business unit Thursday.

Looking ahead, Samsung SDS is confident in the competitive edge of its smart logistics platform Cello. The platform uses the Internet of Things technology to track and monitor the movements of its shipments in real time as well as offers a variety of add-on IT services to help clients optimize their overall logistics management.

Powered by its Cello platform, Samsung SDS handled around 390,000 tons of global shipments last year, making it one of the world’s top 10 logistics companies by shipment volume. With aggressive expansion, the firm's logistics unit is aiming to post 4 trillion won in revenue in 2017, Kim said.

While its main IT services business has largely remained stagnant, Samsung SDS’ logistics business has grown sharply over the past few years, accounting for around 42 percent of the company’s total revenue last year.

In 2016, Samsung SDS’ logistics business posted 3.44 trillion won in revenue, up 33 percent from the previous year. Its operating profit quadrupled on-year to 173.4 billion won in 2016. 

By Sohn Ji-young (jys@heraldcorp.com)