Welcome to the 2025 mid-term results announcement of Sinotrans. If you would like to retrieve the PowerPoint presented today, please send us an email. We will share it with you. Today, we have with us the Chairman, Zhang Yi, Board Director, General Manager, and the Chief Digital Officer, Mr. Gao Xiang, Deputy General Manager, Secretary of the Board, and the Chief Legal Consultant, Mr. Lee, and the Financial Director, Ms. Li Xiaoyan. We also have Ms. Wang Xiaoli, Ning Yaping, Cui Xinjian, and Mr. Cui Fan, the Non-executive Board Director. Today, we are going to break it down by two parts. One is we will invite our Chairman to give us a brief outlook of the next half of this year or the review of the last half of this year.
Dear investors, good morning. I am Zhang Yi, Chairman of Sinotrans.
I would like to extend a warm welcome and announce the mid-term results of first half of 2025. With frequent global hot spots incidents, the overall tariff levels remains historically high, and the international partner environment is significantly uncertain, while China's economy demonstrated resilience amid these changes. However, we also noted the affected domestic demand remained insufficient. Following the U.S. announcement in April of reciprocal tariffs to multiple countries, international sea and air freight demand showed a trend of weak growth, and the risk directly affected the freight rates for both sea and air transport. The average China Containerized Freight Index fell by 8% year-on-year. In air freight, the rates for U.S. and European routes declined significantly from January to April. Although the rates saw some recovery after U.S. announced 90-day tariff relief in mid-May, it remains below the level observed in February last year to June.
Overall, the macro environment has posed significant challenges to Sinotrans operations. Yet we have effectively navigated the severe path brought by external disruptions. In the first half of this year, we proactively and swiftly responded to changing conditions, achieved revenue of CNY 50.5 billion, and net profit attributable to shareholders reached CNY 1.95 billion, particularly with an overall 35% year-on-year quarter-on-quarter increase in the adjusted non-recurring net profit in the third quarter. Right now, in the first half, we have declared an interim dividend of CNY 0.945 per share and representing a cash dividend payout ratio of 15.5%. When combined with the share repurchase amount, the total payout ratio could achieve 26.7%. During the period, our sea freight forwarding business volume increased by 6% year-on-year, despite the downturn in the overall market amounting pressure on logistics companies on both sides.
We have done ongoing management of low efficiency operations, and this has helped us keep the process for container largely stable. The controllable capacity of our air channel reached 159,000 tons. In July, we have released the first ever central SOE asset-based REIT at banks warehousing under this lease, achieving a premium rate of 16.16%, record high at the time, which shows the net capital markets strong confidence in our operational credibility. In the first half of this year, we upgraded our strategic marketing system, focusing on both the quality and expansion of the market development. We identified key industries and classified industry-specific marketing strategies. Through this pilot initiative, emerged as headquarters-led integrated management. We have continued to optimize our resource allocation with notable achievements.
We have further strengthened and expanded co-ownership to strategic resource partners, accelerated the transition toward a new carrier model, and consistently enhanced the capabilities of controlling cargo capacity and managing both sides. The lease issuance has already been communicated and will not be iterated here. in June, we have announced its intention to divest 25% equity stake in Loscam International. If this transaction is complete, it will enable us to further sharpen our focus on core operations, also deliver a positive impact on the near-term financial performance and cash flow. In first half of this semester, we advanced our digital transformation efforts, leading to evident benefits. Guided by the objective of achieving group-wide operational integration, Sinotrans accelerated the rollout of this operational system, refined its digital transformation indicator framework, and steadily promoted the adoption of CRM system.
We have deepened reforms to enhance resilience and drive sustained organic growth. We identified six key reform initiatives. Establishing a strategic marketing system Sinotrans, including developing standardized logistics products, building an integrated resource operation system, creating a new cost management and control framework, fostering innovative model for international talent management, and accelerating comprehensive and risk development of the group operations. In the first half of this year, we activated new engines for overseas development, achieving significant results from this internationalized strategy. The total profit from overseas operations increased by 18.1% year-on-year. In Hong Kong, we launched the first ever freight by area cross-border green transport express direct service, fostering ecosystem for cross-border road transportation. In Europe, we advanced the development of Liege hub in Belgium and established a branch in Serbia to form a synergistic network with our node in Romania.
We have continued to expand across border road transport channels connecting GCC countries in the Middle East and Latin America. In Africa, we reinforced the role of Djibouti as a regional logistic hub and developed cross-border transport corridors across the continent. We have also strengthened our commitment to technological innovation as a core driver. Sinotrans has initially developed a comprehensive smart logistics solution capability covering multiple business scenarios and leveraging diverse technology combinations. Notably, the commercial operation mileage of our autonomous driving highways exceeded 3 million km. We initiated six new smart warehouse projects spanning five major industries, launched our first smart warehouse in Europe. Multiple AI platform applications were introduced, fostering our AI platform ecosystem. We also updated the Sinotrans Green Logistics White Paper and actively participated in the formulation of national industry standards.
We have launched pilot projects for new energy heavy-duty trucks and associated charging infrastructure. As a result, the first half of the year saw a reduction in both total operational carbon emissions and carbon intensity. Let me break it down by different segments. In the first half, the logistics segment generates revenue of CNY 14.32 billion, with profit around CNY 320 million. However, due to the persistent weak domestic demand, the country logistics market continues to face pressure. The warehousing rates were historically low. While the segment experienced a decline in both revenue and profits as rigid cost structures. This performance was consistent with the broader market condition. Moving on to the forwarding service. This is the cornerstone segment. It generates revenue of CNY 29.63 billion and profit of CNY 1.22 billion.
While the segment's revenue declined primarily due to the lower freight rates, the company strengthened cost control, enabling overall product profitability to remain relatively stable. As in the e-commerce segment, we report revenue of CNY 6.57 billion, up by 7.3%, and we generated a profit of CNY 72 million, and the growth was primarily driven by higher business volumes from the online freight platform. However, the profitability faced pressure due to the declining market rates. Currently, influenced by the U.S. tariff policies, there is significant risk of declining foreign trade, particularly in exports. Amidst profound transformations, including the restructuring of global supply chains, evolving customer demands, and reshaping of regulatory frameworks, Sinotrans will continue to enhance its market expansion capabilities. We are committed to achieving a strong conclusion to the 14th Five-Year Plan.
In the second half, we will focus on strengthening strategic implementation, focusing on high-end international intelligent green development. Second, market expansion. We will focus on key industries. We will strategically deploy resources and acquire perspectives with both differentiated competitive advantages. We will strengthen water transportation by consolidating procurement for existing business operations, enhance integrated operational capabilities, focusing by collaborating effectively with the right port partners to strengthen control over sea shipping routes. The development of standardized products for water transport channels will be prioritized. We will focus on enhancing contract logistics of bolstering solution leadership in target industries, focus on high-value segments by tapping into the customer's extended supply chain needs. While in expanding overseas markets in Southeast Asia, capabilities across diverse business types will be enhanced with a focus on automotive, electronics, and green energy industries.
In Europe, the focus will be on serving local customers' needs, deepening collaborations with the local port resource partners, building overseas warehouses in Germany, and building warehouse and distribution capabilities in Hungary. In Middle East, we will accelerate the replication of a contract logistics model in countries like Saudi Arabia and South Africa. Sinotrans will focus on improving local and service capabilities for rail freight operations as well across the Eurasian Land Bridge region. In strengthening management, we will enhance organizational governance, reinforce risk control, and achieve full coverage of risk and compliance systems across all overseas subsidiaries. In compensation management, we will refine salary management policies and have robust monitoring inspection systems. In risk control as well, we will integrate management requirements into the digital workflows. We will drive for excellent performance.
Sinotrans will intensify the market expansion efforts, strengthen cost control, and systemically optimize our asset utilization. Overall, Sinotrans will maintain strategic focus, overcome challenges, and continuously enhance management capabilities to ensure a strong conclusion to the 14th Five-Year Plan. We are committed to achieving new breakthroughs in high quality, more efficient, and structurally optimized development while we are leveraging our strengths to deliver greater value to shareholders. This is the overview of the first half of this year. Thank you for your support.
Thank you. I believe. Let's move on to the Q&A session. If you have any questions, once we pull you through, please say, what is your name? What do you represent? Then, you can raise your question. Please press asterisk one, and then you'll be put through.
We are in your leadership from China Merchants Securities. It's such a great pleasure to raise questions as the first in the line. We saw that the dividend per share remained stable, and the payout ratio moved up significantly in the first half of this year. What is your outlook to the second half of this year? It will have an impact, it will have a positive influence of the divestment of Loscam International. With the significant increase of the payout ratio in its first half, what is your outlook for the second half of the payout ratio?
Mr. Li will take this question.
Thank you for your question. Since we were listed in the H-share market, we have continuously improved the payout ratio, achieving over 50% last year. Even amidst great challenges this year, we have seen a robust cash flow.
That's why we can support a stable and improved payout ratio around 53.5% in the first half, and it could reach over 70% due to the divestment in Loscam International. It really shows that our confidence to the long-term growth of our business segment. We have announced the intention to divest 25% of Loscam International. In the second half, if it completed successfully, it will continue to inject more cash flow to our book. Based on the CapEx and some of the business acquisition in the second half, comprehensively, we are still positive. We continue to be very positive with the payout ratio in the second half. It will remain relatively stable. We will try our best and within our capability to deliver the best level of interest to our shareholders.
Thank you.
Thank you. Next question from Changjiang Securities.
Thank you. Gu Junwen with Changjiang Securities. I have two questions. One is that in the first half, with great impact of external influences, the sea freight business was facing great pressure, and the profitability in the first half still remained stable. What kind of motives or tools have you successfully adapted to counter-react to the external influences? We still see some of the pressure showing evidently for this freight forwarding. Particularly for the air channels, what is your outlook for the air channels performance in the second half?
Mr. Gao will take the first question, please.
Thank you for the question. In the first half, we have also been impacted by the external factors, including geopolitical tensions. The overall sea freight and air transportation, also the comprehensive land transportation, were greatly impacted. The container capacity remained stable.
The supply and demand dynamics were quite fluctuating in the first half with the American group, particularly for the small parcel policies. The e-commerce fluctuated greatly due to that policy. Based on these conditions, we have proactively and swiftly adapted to the new changes. Overall, we made several attempts and efforts. One is we reallocated the core resources, corresponding adjusting to different tariff levels. We have leveraged the core influence of our leading clients and our position. We have been able to redistribute the capability. That is why we have achieved a stable performance in the first half. In this container procurement and some of the centralized or this coordinated deployment, we have been able to control the cost efficiently. Now, we also made great attempts to improve our efficiency of the cost control.
That is one of the good examples, or demonstration for us to improve our cost control capability amid new changes and fluctuations in the market.
Mr. Xu will take the second question about the establishment improvement of the air channels.
I think the great external impact is the trade war between China and U.S., and also the demand side was under great market pressure. Based on multi factors, this segment has suffered a slight decline. But the possibility still enjoys a slight improvement compared with the pre-pandemic levels. In market development, capacity procurement, and network collaboration with the local suppliers, we will enhance our capabilities and improve our efficiency. All of these efforts will bolster our performance in the second half. As to the air channel, we have greatly adjusted the capacity procurement and enhanced our deployment capabilities. We have strengthened the procurement of the capacity side.
That is why we can achieve a positive improvement compared with the same period of last year. Overall, the freight war will still become a sticking point and pain point to the overall logistics market. Amidst these challenges, in the short term, from the fourth quarter, from Q4 this year, we anticipate that the air channel will see a recovery, but it really depends. Let's see. It depends on the market dynamics. Thank you.
Lin Zhang from ARTAI Securities.
In the first half of this year, even with very complicated situations from the macro foundation, we still achieved significant performance. About the sea freight, the forwarding, the per unit profitability remains stable compared with the same period of last year. It improved greatly compared with the overall level of last year.
Amid these great fluctuations in the market, how do you make it to achieve the stable unit profitability, like per container profitability? What is the trend for the second half? About the logistics segment, particularly the contract and project logistics. What is the main concern? Is the fluctuations or risks in exports. What's the demand dynamics right now for the logistics side? Thank you.
That's it all. We'll take the questions. Thank you for your question about the sea freight forwarding. Your question is on how do we manage to maintain a stable profitability per unit. On Sinotrans, there are several segments in this sea freight forwarding. One is the booking, order booking, and also the shipping agency. We have single parts, like the single process, a multi-process, or the one-stop holistic forwarding business.
The profitability for the single-part forwarding remains stable, and for the profitability for the holistic one-system service improved robustly. This is due to our decision to the over transformation to the new carrier model. That is why the GP model remains stable. About the China enterprises going global trend, as your second question. Right now, this is a macro trend or transformation from manufacturing capacity exports of the manufacturing capacity to exports of the Chinese local products. A lot of the Chinese brands and companies have set up their capacity in Southeast Asia and some parts of Europe. We also move quickly accordingly in such macro trends. We can be a more supporting pillar to the Chinese enterprises going global.
Strategically, while conventionally most of our clients are Chinese domestic enterprises, but with our global network building up and within our capacity, we have a lot of the international clients. We can provide end-to-end business services. And we have support of the local service providers as well in a lot of the international markets.
Thank you.
Paul Yan, Securities. Next question.
Thank you. I am with Goldman Sachs. First, congratulations for the strong performance amid great fluctuations in the first half of this year. I have two questions. The first one is how do you balance the CapEx and profitability in the future? If the ROI will face pressure, then how do you balance the CapEx and the return to shareholders?
In the future, the second question is, in the future, we know that the cash flow is sufficient, but with more CapEx in the pipeline in the future, what is your anticipation of your market capitalization? The overseas business accounted for around 20%-30%. Then how do you value and capitalize the overseas business?
I will take it briefly, and then other managers will respond in detail. Financially, we are very healthy. The debt-to-asset ratio remains at a healthy level. The operating cash flow remains very healthy and robust in the first half. And we went very robustly in the CapEx control. And in the dividend payout, the dividend payout depends on our considerations of remaining robust and safe financial profile because the external market is so very fluctuated. This is a lifeline and a bottom line for us to keep and remain a healthy financial profile.
But at the same time, we want to deliver value and benefits to shareholders. So we will take a comprehensive consideration on multiple factors. We want to balance this out while keeping a healthy financial profile and also delivering great value to our shareholders. The second question is the overseas business, and Mr. Gao also shared with us our plan for the overseas business expansion.
The overseas business was one of the pilot segments for our future growth and expansion. And that will also be put as one of the priorities in CapEx funds. The core element is on the return of investment and the market value of these overseas segments. Because Sinotrans puts great value and significance on market value. We have been listed in A-share and H-share markets. We really value the market value.
So overseas business will still be put on one of the priorities in our future plan. I would like to reiterate, a lot of the overseas market valuation outperformed us from our peers. But amid such great challenges and market fluctuations in this global landscape, the overall market expectation, particularly in terms of M&A market value, will go down. I think that bodes well to our M&A fund in the future. In the relatively short amount of time, short period, we are very confident to balance the CapEx and the overseas business expansion.
Thank you for your question. Ruoxi from CICC.
Thank you. Ruoxi from CICC. We have seen a decline in the government subsidy. How do you expect the government subsidy trends in the second half? And the second question is, have you seen any signs of recovery of the logistics market, and what is your plan on this?
Mr. Gao will take the question.
Thank you for the question. The profit of logistics is around CNY 700 million, a slight decline compared with the CNY 1 billion in the past year. The subsidy for the charter freighter business and also the overall freight forward business have declined. The subsidy payments into Sinotrans have not suffered a drastic decline because we have controlled and managed the Sino-U.S. charter freight business. The subsidy payments declined due to our proactive control of the Sino-U.S. trade volume, the charter freight business volume, not mainly because of the government initiative. In terms of your second question, the effect of domestic amount of logistics market is insufficient, and the central government's stimulus policy has not been released yet, has not been pronounced in the market demand yet. It is demonstrated in the statistics, like the vacancy rate and the freight rate.
It continued to go down compared with last year. The market has shifted, like the auto market and new energy market. Compared with the conventional fast consumer market, these new emerging markets have enjoyed a boost. We need to be swiftly responding to these new opportunities. The profitability increased by 18% through the export. This is due to our expansion of the overseas export business in the segment of the contract logistics. You can see that we can respond quickly to different dynamics in different sub-segments.
Thank you. Fine Asset. Good morning.
Good morning. I'm talking with Fine Asset. I have two questions. The first is speed up of digital transformation, like chairman's information, your effort, and your strategic deployment. In terms of digital transformation, what is the status quo right now? How will it boost our operation and expansion of business segments?
The second question, what is the status with your collaboration with Pony.ai? What is the update and about the autonomous driving? Where are the pilot projects and what are your plans for pilots in other regions? Thank you.
Thank you. I will take your question. Thank you. Regarding digital transformation, we took a different strategy compared with our peers. In business adjustments, we transformed. We have adopted a new carrier model. This decision was based on the trends of the industrial structure in China, as you may see in e-commerce and the live broadcasting platform boosting in China, the logistics markets were disrupted and went through huge transformation. That is why we kept up with these trends, deploying international networks and building our capacity in controlling the supply chain, controlling cargo, and controlling the capacity.
Owing to this overall digital transformation, our business model transformed into the end-to-end service delivery. The operational model also transformed from single-port operation and service into a holistic, sophisticated service delivery. Our organizational governance also transformed from the single-station management to the middle-platform governance and administration. These efforts have turned effective, reflected in our performance improvement, like in the second half of last year and also the first half this year. We have maintained quite robust in our operating performance. The whole group-wide digital coverage has expanded significantly. That could enable us to satisfy the demands of the expanding e-commerce demand. Step by step, we have basically completed the deployment of the charter freight service. We have a lot of the direct clients. All of our direct clients have been included into the direct CRM system. That is why we can spot emerging market opportunities.
Based on this rich market insight, we can move more quickly. We have moved forward from the customer service to standardized product, standardized service. The whole quotation system now has been successfully piloted in some of the regional offices. In the next stage, we will optimize our product delivery, service delivery system. That could be more adapted to this trend of Chinese enterprises going global, them requesting end-to-end system service, requiring better resilience of the whole logistics service system. Regarding your question, the second question, autonomous driving. Three years ago, we initiated a Sinotrans, another logistics joint venture company with Pony.ai, focused on intelligence and autonomous driving of truck fleet. Now, the commercial operation mileage of autonomous driving highways have exceeded 3 million km, and there were no accidents. The safety and security of the autonomous driving has been guaranteed and verified.
This autonomous driving can extend and can cover a commodity and goods transportation, covering a lot of the major ports. At the main highway from Beijing, Tianjin, and to Southern China, you can see the autonomous driving fleet transporting along this public highway.
Thank you.
Wang Yue from Minsheng Asset. Please.
Thank you. I have two questions. We have noticed that the cash flow in the first half of this year improved significantly compared with last year. But the accounts receivables also stay a great portion. What is the reason behind? You mentioned that you have issued REITs in the first half of this year. What is the major contribution of the issuance of the REIT?
Thank you for your question. The first question is about the accounts receivables, right? Now, it is best to compare the status to the beginning of this year.
Primarily, in the first year, we will put more efforts in expanding market expansion. Then the second half, we will move quickly on recruiting a lot of the accounts receivables. Over these years, we have stepped up our efforts in control and management of the accounts receivables. If you compare with some of the peers and the counterparty in this industry, we outperform significantly. The second question is about the REITs, right? What is your second question? About REIT? Oh, I got it. The backing assets of the REIT consists of the logistic companies that we own. The payment of the accounts receivable depends on the terms of the payment stipulated in the contract, with our different logistics company. I don't know if I have responded your question. Oh, your second question is what is the contribution for REIT issuance? The issuance of the REIT went successfully. Right.
The premium rate was back at high. At point of issuance, the premium rate really was one of the top levels in this market. It contributed around CNY 780 million. In the future, there will be CNY 340 million extra to be injected into the profit first. Some of the effort will be done by stock repurchase. We will always aim for the higher return target project.
Thank you.
Next, Yu Peng yiming from Zhongding Investment.
T hank you. Mr. Zhang just touched upon the priorities for the second half of this year, focusing on the strong conclusion of 14th Five-Year Plan. Could you elaborate on this? What is the progress right now, concluding the 14th Five-Year Plan? Could you also elaborate on the future positioning of your business and what are the main priority focus?
The 15th Five-Year Plan right now is in the making, which is one of the main priorities. We are reporting back our market insight. The overall positioning, market positioning, right now was broadly clear in our strategy. During the last Five-Year Plan, our growth was innovation-driven, internationalized logistics company. Same with the next round. In the 14th Five-Year Plan, our market position was around the international global logistics platform. But in face of the disruptive changes in the global market, we have indicated an incremental growth. And now as one of the top players, our goal is to become a world-class logistics company. Conventionally, the growth path could not sustain in the future. That is why our position was innovation-driven business model reshaping. There are two keywords, globalized, internationalized, and holistic management.
From the perspective of management governance, our role or our priority for the next Five-Year Plan is to make an international plan and internationalize all of the holistic governance, because we have holistic segments from air to sea to land transportation. We need to step up our leadership role in this industry. At the same time, we are having many rounds of discussions on how we should implement and how should we execute this plan. I think the first keyword is the market-driven. We are always centered in market-driven development. Client-focused, delivering value to our clients and customers. This is one of our core missions and the sources of value delivery. And we will continuously build our solution capabilities and an ecosystem of logistics service. As we have mentioned, we have multi-mode holistic logistic solution capabilities.
We have already built that capabilities, but moving forward, we need to smartly and intelligent connect all of these capabilities built up in different parts of the world. The global market, the global demand will be more diversified. In the future, we will synergize the capabilities that we have held in different parts of the world. And the second keyword is the service delivery. In the 14th Five-Year Plan, compared with our counterparts in domestic international markets, we have built our distinctive advantage in delivering holistic logistic service. Put it briefly, we need to build a network internally and build a platform externally. Internally, we should synergize the resources that we hold to move it online and improve the digital transformation.
Externally, with the backing of the digital transformation of the internal resources, of the domestic resources, we need to build a ready-to-use platform connecting our clients and be integrated into the digital supply chain of our clients in different parts of the world. That is one of the main gains, to be integrated into our clients' global supply chain. Sinotrans has this distinctive characteristic. We are one of the key players in public transport service providers. We have developed extensive partnerships with airline shipping companies, logistics parks, and other external partners. Backed by these built and established capabilities, we want to build a more resilient, more efficient, and more intelligent and green service provider in the logistics market. So that is our consideration for the next Five-Year Plan. Of course, it's in the making. It won't be released by the end of this year.
While nationally, a lot of movements were underway with industry consultations with the government, we will gather all of this information, the market trends and also the government trends. We will draft and complete the 15th Five-Year Plan by the end of this year.
Thank you.
Next question. Yes, please take the third.
Thank you. I have one question. We have seen the announcement of the stock up, the stock repurchase, and how will it positively influence the next strategic plan? While this partner is quite complementary with our service, it has been one of our long-term partners. In this macro trend, we have strengthened our partnership. With more stakeholding in this partner, we believe that we will have more say in capacity building in our transportation channel to stabilize our capacity supply.
Yes, we have stocked up around CNY 300 million, and we will update the extra stock up plan based on the market conditions. As you know, the super markets is still not stable. I think that financially, there won't be a lot of burden. Antong and Sinotrans have always been long-term partners with each other. I think this new capital connection with Antong will bring more benefits for us to build strategic synergy. While they took a leading role in the trade domestically and internationally. In terms of our market positioning, we think we can build a mutually reinforcing force. I think this kind of a stock-up in Antong will also have far-reaching influence to the next five-year plan. They have fleets in Yangtze River and Pearl River Delta region.
Through the partnership with Antong, we are confident to deliver more standardized water transport products, connecting or building up more capacity in different regions and ports. I think that is a very reasonable plan, and we will make more announcements based on the market conditions.
Thank you.
Next question. Randolph with Zhongyi Asset.
Good morning. I have two questions. One is Loscam International, the investment, what is the status right now? We have seen that net profit margin has declined in the first half. What are the main influencing factors? Is it because of the foreign exchange rates or anything else?
Mr. Xu and Mr. Chen will take these questions.
About the investment in Loscam International, we have made a public announcement. Right now, everything's on track, because right now it's in the process of inspection and approval of the State-owned Assets Supervision and Administration Commission.
Once it's approved and implemented, we hope that by the end of Q3 and in the beginning of Q4, this deal will be completed and closed. I think it will bring positive benefits to our cash flow and financial profile. The second question is around the influence of foreign exchange rates. Let's reiterate the second question, clarify the second question. The second question is on the net profit margin went down a bit. Is it because of the foreign exchange rate fluctuations? From the cost side, we have different denominations, like some US dollars and some euros. Of course, the foreign exchange rate could be one of the factors. The decline of cost went lower than the decline of profitability. That is why the net profit went down a bit. Like we have mentioned earlier, the profitability was quite leveled off with the pre-pandemic level.
I think this bodes well to speak viably for our performance.
Next question. Cathy with HSBC.
I have three questions. The first one is, in the first half of this year, we have noticed some of the impact of air freight, the sea freight. Do you expect the significant climb of sea freight business in the second half? The second question is, the profitability of the sea freight business went up by 18%. Do you have any of the figures in absolute terms? How does it contribute to the overall profitability? The third question is about the forwarding business. In the first half, the revenues went down by around 68%, but the profitability went up or even remained stable. How did you do that?
Mr. Gao will take the question.
The first half, due to reciprocal tariff policy, we have seen some of the sea freight, we have a lot of the sea transportation run. Overall, the Sino-U.S. transportation volume went down a bit, but if you look at different routes with Southeast Asia and Europe, the volume remained stable. So this sea freight run has not impacted greatly to the overall sea freight volume. About the second question, the overseas business. With the trend of the Chinese enterprises going global, we have swiftly stepped up the capacity building of our overseas business markets. The profitability of overseas business accounted for around 10% of the overall profitability. This is the first time that we have achieved this level of profit contribution. So with the expansion of overseas business, we are confident that this ratio will go up. The third question? About the freight forwarding business.
We have made continuous attempts in optimization in this regard. We have been optimizing the business restructuring. Like focusing on the profitability of new incremental business. That is why you see a slight decline in the revenue, but the profitability go up. It is mainly due to optimization of the internal management, particularly focusing on the profitability management.
Any other questions?
Next question, Mari Benio, Garon Capital.
Good morning. I am with Garon Capital. About the sea freight segment, the first half of this year. What is the proportion of the U.S. route sea freight business, and what is the trend of that? Do you expect any increase in the Southeast Asia route?
Based on the first half, the Sino-U.S. route accounted for 15% of the overseas sea freight, down by 1.6% compared with the same period of last year.
As to Southeast Asia, it grew, accounting around 44%, up by 1.3%, while the routes to Europe were stable with the same period of last year, accounting for around 15%. About the re-export trade, with the tariff policies remained uncertain among different regions of the world. Currently, the re-export trade went up a bit due to the industrial restructuring, not because of the non-compliant recurrence rate.
Thank you.
Next question. Yang Yuan, Investment.
Good morning. I am with Yuan Investment. Now we are clear that you will put more assets in overseas market expansion. Do you have any priority projects, M&A targets, and the timeline? Can you give us more details on this? Thank you.
Mr. Xu will take this question.
Thank you. We prioritize on the Chinese supply chains going global. For example, in Southeast Asia, Middle East, and some parts of Europe.
Because the air freight business was more connected to the European market. Now we have covered fully in Southeast Asia and in Europe, where we step up the warehouse capacity building. We have around 700,000 sq m in the self-owned warehouse and also the leased warehousing. We will continue to enhance the capacity of the warehousing area. As to M&A, we will target more on the external partners in local markets. In core regions, we will build strategic partnerships with local suppliers. We expect to speed up the transformation of building up our capacity and network in the international market.
Thank you.
Thank you all for your questions. Do you mind if the time. Let's move to the last question. [Non-English content ]
Deepak Malya, please.
Hi, good morning. Thank you very much for taking my question.
[Non-English content]
Yeah. So I had a question with respect to the outlook for the second half. We've seen quite a lot of front loading in the first half for the sea freight business. At the same time, the expiry of the de minimis regulations resulted in significant drop in the air freight volumes out of China, because these were mainly designed for the U.S. Now going into the second half, do you think that the sea freight volumes could shrink or even-
Oh, I'm sorry. Because the interpretation line is not round way.
Sorry, do you want me to repeat my question?
Yes. I cannot do the simultaneous. I need to do the consecutive. Please, let's take the final question from you and please reiterate your question. Thank you.
Yeah, sure. What is this outlook for the second half, given that first half was strong for sea freight and we see a lot of trade impact in the air freight business. What is the outlook for the second half in the forwarding business?
Oh my god. Sorry.
It's okay. I can take it offline with the team. It's okay.
Yes, thank you. Because the lines are mixed up and the Chinese channel is rolling and I am listening to you, but the line wouldn't still.
No problem. I can take it offline. Thank you very much.