China’s largest freight forwarder reported lower revenue and headline earnings for the first half of 2026, but stronger profits across its core forwarding and logistics operations. Negative operating cash flow remains the main qualification to that improvement.

Sinotrans Limited reported a 17.3% increase in underlying profit for the first half of 2026, even as lower non-recurring gains and the withdrawal from low-return businesses pushed down group revenue and headline earnings.

Revenue fell 8.1% year on year to RMB46.45bn ($6.5bn), while net profit attributable to shareholders declined 11.4% to RMB1.72bn, according to the company’s interim results announcement.

However, net profit excluding non-recurring items rose 17.3% to RMB1.64bn, suggesting that the profitability of Sinotrans’ continuing operations improved despite the contraction in reported revenue.

The results present a more nuanced picture than the headline profit decline: Sinotrans is sacrificing some scale as it exits low-margin activities, while generating higher segment profits from freight forwarding, ship agency and professional logistics.

Lower non-recurring gains weigh on headline profit

The divergence between reported and underlying earnings largely reflects a sharp reduction in non-recurring gains.

The difference between attributable profit and underlying attributable profit narrowed to about RMB85m in the first half, from approximately RMB549m a year earlier.

Underlying earnings increased by roughly RMB242m, but this was more than offset at the headline level by the reduced contribution from non-recurring items. The available figures do not support attributing the entire change to any single category, such as asset disposals or government grants, without a more detailed breakdown.

Sinotrans’ first-half performance should therefore not be described simply as a deterioration in profitability. The group reported lower headline earnings, but its recurring operations generated more profit.

Forwarding and logistics divisions strengthen

Agency and related businesses remained Sinotrans’ largest profit contributor. The division generated revenue of RMB29.94bn and segment profit of RMB1.43bn, an increase of 18.0%.

The division includes ocean and air freight forwarding, rail forwarding, ship agency, as well as container yard and terminal-related services. Profits from ocean freight forwarding and ship agency recorded double-digit growth.

Rail forwarding profit rose 574.3% to RMB143m, while air freight forwarding profit increased 87.8% to RMB87m. The rail figure benefited from a low comparison base and should not be treated as a sustainable long-term growth rate.

Professional logistics, which provides customised supply-chain services for industries including automotive, advanced manufacturing, chemicals and major engineering projects, generated revenue of RMB14.42bn. Segment profit increased 13.3% to RMB360m.

Total segment profit across Sinotrans’ principal businesses reached RMB1.86bn, up 15.6%.

Sinotrans is the integrated logistics platform of state-owned China Merchants Group and is listed in both Hong Kong and Shanghai. It operates primarily as a freight forwarder and supply-chain service provider rather than a container shipping line.

That distinction is important when interpreting its accounts. Freight forwarders commonly record transport charges paid to shipping lines, airlines and rail operators in both revenue and operating costs. Changes in freight rates can therefore produce large movements in reported turnover without causing an equivalent change in underlying profit.

For Sinotrans, segment profit, profit per unit of cargo and cash conversion provide a clearer indication of operating performance than revenue alone.

E-commerce retreat reduces scale

The sharpest contraction came from e-commerce activities, where revenue fell 68.2% to RMB2.09bn. Segment profit declined by a much smaller 14.5% to RMB62m.

Sinotrans has been withdrawing from parts of its cross-border e-commerce logistics and online logistics-platform operations. The disparity between the decline in revenue and profit suggests that the activities being discontinued produced high turnover but relatively limited earnings.

The adjustment supports group profitability in the short term by releasing resources from low-return businesses. It also reflects a broader shift among large Chinese logistics companies away from transaction volume and towards direct customers, integrated supply-chain contracts and higher-value international services.

However, withdrawing from weak businesses is not in itself a long-term growth strategy. Sustained profit expansion will depend on Sinotrans securing more complex logistics contracts in sectors such as automotive exports, new energy equipment, industrial manufacturing and overseas engineering.

Negative cash flow tempers the improvement

Operating cash flow was the clearest weak point in the results. Sinotrans recorded a net operating cash outflow of RMB858m, compared with an inflow of RMB168m in the first half of 2025.

The company attributed the reversal mainly to a rise in ocean freight indices, which increased the amount of freight charges it advanced on behalf of customers.

Freight forwarders often pay carriers before collecting the corresponding amounts from cargo owners. When freight rates rise rapidly, this timing mismatch can absorb substantial working capital even if the underlying transaction remains profitable.

The cash outflow does not necessarily indicate an earnings problem. But until those advances are recovered, the improvement in accounting profit has not been fully converted into cash. Receivables, prepayments and customer collection times will consequently be important indicators during the second half.

Sinotrans nevertheless approved an interim dividend of RMB0.14 per share, representing an expected distribution of approximately RMB1.00bn, or 58.2% of first-half attributable profit. Its asset-to-liability ratio stood at 44.2% at the end of June.

The test shifts to the second half

Sinotrans’ interim results cannot accurately be characterised as either an across-the-board decline or a broad earnings surge.

The company generated stronger profits from its core forwarding and professional logistics operations while reducing exposure to low-return e-commerce activities. At the same time, lower non-recurring gains depressed headline earnings and rising working-capital requirements pushed operating cash flow into negative territory.

The key test is now whether higher segment profits can be maintained as ocean and air freight markets normalise—and whether Sinotrans can turn those profits into cash.

Investors and logistics customers should watch unit profitability across the forwarding businesses, the recovery of freight advances, receivables turnover, progress in the e-commerce withdrawal and the contribution from overseas operations and direct multinational customers. Only a simultaneous improvement in recurring earnings and operating cash flow would confirm that Sinotrans’ restructuring is delivering a sustainable increase in earnings quality.