Good day, and welcome to the ZTO conference call webcast to announce the fourth quarter and full year 2021 financial results. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Huiping Yan, Chief Financial Officer. Ms. Yan, the floor is yours, ma'am.
Thank you, operator. Hello everyone, and thank you for joining us today. The company's results and an investor relations presentation were released earlier today and are available on the company's IR website at ir.zto.com. On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer, and Ms. Huiping Yan, myself, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and future plans, followed by myself, who will go through financials and guidance. We will both be available to answer questions during the Q&A session that follows. I remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such statements are based on management's current expectations and current market conditions and operating conditions, and relate to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict, and many of which are beyond the company's control, which may cause the company's actual results, performances, or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, and factors are included in the company's filings with the U.S. Securities and Exchange Commission. Company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required by law. It is now my pleasure to introduce Mr. Meisong Lai. Mr. Lai will go through these prepared remarks in their entirety in Chinese before I translate for him in English.
[Non-English content].
Thank you, Mr. Lai. Let me translate first. Hello everyone and thank you for joining us today.
In the fourth quarter of 2021, ZTO delivered a 6.34 billion parcel volume, which increased 17.2% and expanded our leading market share by 0.2 points. While maintaining a superior quality of service and customer satisfaction, we continued our focus on profitable growth volume and grew our net income 35% year-over-year to reach RMB 1.75 billion. The year of 2021 was exceptional. Facing continued COVID-19 pandemic shock waves, complex geopolitical environment, and intense competition in the industry, ZTO once again achieved solid growth against a slew of uncertainties by being self-assured and the best we can. We delivered 22.3 billion parcels and became the first express delivery company in the world to achieve an annual parcel volume that exceed 20 billion.
Our market share advanced to a robust 20.6% for the year. Everyone under the ZTO brand collaborated and made remarkable progress in enhancing brand recognition, optimizing operational efficiencies, and improving comprehensive capabilities. First, during the annual Double Eleven shopping festival, ZTO became the first express delivery company with a daily capacity of over 100 million parcels across all stages, four of them, throughout the parcel flow. The incremental volume of 5.29 billion parcels for the year solidified our number one position in the industry for the sixth consecutive year. Second, we held steadfastly the number one position above our peers for quality of services and customer satisfaction, measured by a comprehensive set of indexes tracked by Cainiao, and the customer complaint rate closely monitored by the State Post Bureau.
Third, we made further strides on creating a just, equitable, and transparent environment in which our shared success culture was deepened, our sense of social responsibility and accountability enhanced, and our network partners are increasingly self-motivated with renewed confidence. Fourth, we further integrated operations, finance, and technology through standardization and digitization to manage and measure business processes so that our vast network of infrastructure resources could generate greater efficiencies and better economies. As our core business soundly developed, we endeavored to build up our comprehensive capabilities, such as services for heavy and bulky parcels, integrated warehousing and delivery, cross-border logistics, smart equipment design and manufacturing, financial services, time-definite and cold-chain services, last-mile post and commercial solutioning. We were exploring and building more and more capabilities to cater towards varied logistic needs.
It was with joint effort by everyone that we were unable to overcome challenges and achieve satisfactory results toward our strategic goals in market share gain, service quality, and earnings. In 2022, our strategy remains, and our execution plans will center around the following five objectives. First, to achieve solid growth of our market share, we must ensure the health of our network. Start from the aspiration to empower, we will rely on objective data to differentiate varied conditions or potentials associated with our network partners, more suitable and precise policies, and better incentivize overall volume growth. For outlets with slow or negative growth, more field visits aim to gain deeper understanding of the real challenges our network partners face can help us identify root causes and appropriate solutions.
Moreover, we must protect the rights and interests of those on the front line, alleviate the bottleneck in workload and cost pressure by building last-mile posts. With ease of access to commerce and services for customers, our market share will steadily grow. Second, to ensure profitability and earnings growth across the entire network, we need to build a systemic framework of digitized operating reprocess, tracking, and quick decision-making. Practical implementations of technological tools can help bring visibility to key metrics for process effectiveness and efficiencies from end to end, and allow us to advance from post-modern reactive to in-progress responsive or even ahead-of-time predictive. The Volume Cost Profit project we initiated in later part of 2021 has generated meaningful results.
Further initiatives will help delineate OpEx with greater granularity so that more holistic, accurate and timely pricing decisions can be made to drive better productivities, less waste of resources, and higher earnings. Third, to ensure continued lead in service quality, we need to further improve our service capabilities. In 2022, we will pay continued attention to infrastructure development and focus more on optimized design and layout of the sorting centers consistent with longer term needs. Our integrated tri-layer throughput model will gradually evolve with increasing volume intake and operations adaptations. Meanwhile, we will improve performance evaluations as well as reward and reprimand regulations to promote productive actions by network partners and couriers out of their own initiatives.
A comprehensive, systematic, yet flexible governing system that is capable and applicable, pliable to multiple needs and customized demand for customer for product and services can help provide consistent, efficient, safe, convenient and high quality product and services experience for our customers. Fourth, to ensure the safety of pickup and delivery, transit and sorting, and the flow of critical information through the whole process, we must build and strictly enforce safety assurance measures. Uninterrupted operational process and necessary checks for safety and precautions are sometimes competing priorities, but we must be vigilant with both. Paying close attention to conditions of the livelihood in front line while maintaining high levels of integrity can deter corruption and cultivate self-discipline. Fifth, to ensure a continued development of our ecosystem, we need to enhance coordination and synergy.
This year, we will promote collaboration and seek opportunities to cross-pollinate and expand customer base as well as market presence. Through ongoing efforts to enhance our integrated service capabilities, ZTO can then effectively convey to our customers a comprehensive logistics brand concept of reliability, stability, and efficiency. To achieve all of the above, of course, we need to ensure an environment conducive for shared success, shared success culture, a culture that is built upon a common goal and behaviors by a group of people who trust one another, work cohesively, contribute as individuals or as a team. Our future depends on the new generation of leaders who has great potentials and are recognized by effective talent identification and training system, who seek personal growth, and are given the chance to step up for greater responsibilities under a fair promotion and elimination framework.
2022 is a year when ZTO will turn 20 years, and this is also the year in which we will embark on our second venture. Despite many uncertainties in the world, the foundation of China's economy is solid, and its upward momentum and stamina is strong. Being an infrastructure that is crucial to day-to-day lives, express delivery industry will continue to maintain a medium to high speed of growth towards a promising future. Our industry will continue its consolidation, where strong players get stronger as the competitive dynamics gradually stabilize. Price and quality will strike new balances, where competitive advantages are increasingly demonstrated through scale and efficiency. ZTO is very favorably positioned.
In the process of transforming from quantity to be with higher quality, we will rely on digitized tools, pay consistent attention to capacity and capability development, effective and efficient resource allocation, partner network stability with secured fundamental rights and interests. The successful development of a competitive mode with high quality, comprehensive logistics service capabilities within the next five years will ensure us to go from leading advantage towards absolute and equal advantage. We firmly believe that we can achieve greater and better results in our journeys ahead. Now, let's have Ms. Yan take us through our financials. Hello, everyone. As I go through our financials, please note that unless specifically mentioned, all numbers quoted are in Renminbi and percentage changes refer to year-over-year comparison.
Detailed analysis of our financial performances, unit economics and cash flow are posted on our website, and I'll go through some of the highlights here. We achieved volume targets by growing parcel volume 31.1% to 22.3 billion for the year, with firm implementation of our consistent strategies. Our leading market share further expanded by 0.2 points to 20.6%, while maintaining superior quality of services for the year. Our adjusted net income increased 7.8% to RMB 4.9 billion. Total revenue increased 11.6% to RMB 9.2 billion for Q4, and increased 20.6% to RMB 30.4 billion for the year. Annual ASP for the core express delivery business declined 1.3% and 5.7% for the quarter and the year respectively, as competition turning towards sensibility.
Average parcel weight drop contributed $ 0.03 out of the total of $ 0.07 decrease in ASP for the year. Average parcel weight decreased 4.9% to 1 kg for the year of 2021. Total cost of revenue was RMB 6.97 billion and RMB 23.82 billion, respectively, for Q4 2021, which increased 8.9% for the quarter and increased 22.9% for the year. Unit cost of revenue for the core express delivery business decreased 2.9% for Q4 and for the year.
Unit transportation costs declined 3.3% for Q4 and increased 0.8% for the year, primarily due to the combined effects of increased use of self-owned high capacity trailer trucks and improved low rate, as well as a negative impact for increase in diesel price and the expiry of favorable toll road fee waiver from mid-February to May in 2020. Unit sorting costs increased by 4.1% for Q4 and declined 1.1% for the year because of higher level of automation and improved economies of scale, offset by increased labor costs and higher depreciation and amortization charges given there were more sets of automation sorting equipment and facilities placed in service. Gross profit increased 21.1% for Q4 and 12.9% for the year.
Gross profit margin increased 1.9 points to 24.4% for Q4 and decreased 1.5 points to 21.7% for the year, which resulted mainly from competition driven ASP decline, partially offset by cost productivity. SG&A excluding SBC increased 13.1% to RMB 472 million for Q4, and increased 16.3% to RMB 1.6 billion for the year. SG&A costs as a percentage of revenue remained low at 5.1% for the quarter and 5.4% for the year as our corporate structure remained lean and stable. Income from operations excluding SBC increased by 31.1% for Q4 and 14.6% for the year.
Associated margin increased 3.3 points for Q4 and decreased 1 point for the year, which performed better than the gross profit margin change because of positive SG&A leverage and increased other operating income, namely VAT super deduction and government subsidies and tax rebates. Operating cash flow was RMB 3 billion for Q4 and RMB 7.2 billion for the year, increasing 48.2% and 45.8% respectively. CapEx expenditure totaled RMB 9.3 billion for the year as we secured larger tracts of land for developing comprehensive logistics facilities and increased the number of self-owned fleet and automation equipment. We reasonably anticipate cash generated from operating activity will well exceed capital expenditures for 2022 and onwards.
The company announced a $0.25 dividend for the year for shareholders on record as of April 8, 2022, representing a 25.9% dividend payout ratio similar to those of previous years. Now turning to business outlook. Considering the current market condition uncertainties, the company expect the parcel volume of 2022 to be in the range of 26.3 billion-27.6 billion. Representing a 18%-24% year-over-year increase, that is well above the anticipated industry average. These estimates represent management current and preliminary view, and are subject to change. Now this concludes our prepared remarks. Operator, please open the line for questions. Thank you.
Yes, ma'am. We will now begin the question and answer session. To ask a question you may press star then one on a touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time a question has been addressed and you'd like to withdraw your question, please press star then two. As a courtesy, we please ask that you limit yourself to one question and a single follow-up. Again, it is star then one to ask a question. At this time, we will just pause momentarily to assemble our roster. The first question we have will come from Qianlei Jiang of Morgan Stanley. Please go ahead.
Thank you, operator. [Non-English content].
I'll translate for myself. Thank you management for taking my question and congratulations on the very solid fourth quarter result. I have two questions. The first question is about cost trend, so considering several factors, a higher fuel price and potential labor cost inflation, also take into consideration of potential economy of scale following a higher volume being handled in this year, and also the potential disruption from the recent COVID resurgence, which might bring some fluctuation to the volume. What's the unit cost outlook for 2022 from the management's expectation? This is the first question. The second question is about profitability.
We have heard from the industry that some of the players are discussing with their customers about pricing hikes due to the cost inflation. But taking into consideration of the current economic outlook, the potential pressure your customers are facing, considering, for example, the soft consumption demand growth as well as the cost inflation they are facing, do you think there could be downside risks to the pricing or unit profitability? Do you see a downside risk to the previous guidance on the bottom line over 30% year-over-year profit growth, which you guided last time? These are my questions. Thank you.
[Non-English content].
Thank you for your question.
[Non-English content].
Thank you for your question, and let me translate and supplement where needed. First question, you really asked three questions. The first question is regarding the cost. If assuming the current condition remains, the stable market conditions and pandemic situation remains under control, we believe our cost productivity will continue to generate results. The digitized initiative as well as more detailed level of management throughout our operating process, for example, load rate, increase utilization of our resources improvements. There is a high probability that our costs will continue to be managed down. I'll supplement one point.
The oil price increase the special situation in China because there is a regulating mechanism. So in the fourth quarter, we already seen such impact coming through, but yet we are able to utilize some of the stock that we purposefully purchased so that we can alleviate some of the cost increases. In fact, the estimated oil hike cost impact is about $0.03 in the fourth quarter, and we were able to still gain around $0.03 of productivity in our transportation segment. So that is to say that very reasonably anticipated cost management will give us a confidence that our overall operating costs will likely to continue to gain productivity and perhaps decrease.
Second question you asked is really around the pricing. What had happened in 2021 and before a fierce competition and some of them are insensible and deviating from the market reality. Those are no longer the case. We believe in 2022, the stabilization of pricing will go hand in hand with the entire industry's shift from high quantity to higher quality, i.e.
Higher quality of earnings. Speaking for ourselves, the initiatives that we described earlier in gaining profitable growth through specific mechanisms, in pricing, in finding waste and eliminating waste of resources, providing proper pricing to our network partners will allow us to achieve our goal. Currently, first of all, we didn't give a guidance. In any case, on the earnings, we have high confidence that we will significantly improve our earnings compared to 2021.
Thank you very much, Mr. Lai .
Yeah.
The next question we have will come from Tian Hou of TH Capital.
[Non-English content].
Congratulation for a great performance in 2021 under the extreme situation. I have two questions. One is what is ZTO's investment plan in 2022? Given the market competition is really competing on the uniqueness and competitiveness, so in which area ZTO want to invest to further enhance our competitiveness?
And the second is how does Mr. Lai to see the logistics market in the future, given JD is acquiring Deppon, so that is one thing happened in the logistics market. What's going to happen next? I would like to hear what's Mr. Lai's view on that. Thank you.
[Non-English content].
Let me translate for Mr. Lai and also supplement answers. We have consistently invested in our infrastructure as well as comprehensive capabilities, because we do believe that the future of competition lies with not just the express delivery itself, but all the other comprehensive integrated services that is a ecosystem. Our focus, especially of late, on collaboration among all the ecosystem businesses that are developing in our whole system, is to maximize the utilization. Our past focus as well as going forward, will continue to be on the land acquisition, vehicle upgrades, and also automation level of improvement.
We are also increasingly paying more attention in supporting our network partners in providing them financial support where needed in developing their own capabilities that is consistent and in sync with our platforms capabilities. Thirdly, we have also begun to invest in technology, in digitization, so as to drive further productivity and become competitive in digitized solutioning. Our frontline partners interest and their rights are in a way well preserved and protected, because we are also investing in our last mile post system. In summary, all these will allow us to steadfastly, consistently develop our capability internally as well as externally, to go from leading to absolute and equal advantaged.
The example Mr. Lai gave relates to a track of land that we acquired lately that is designed to house six levels of operations, the first two being designed for express delivery business, and all the above are open for warehousing warehouse processing and delivery, as well as other comprehensive capabilities that are evolving, such as cold chain services. This will reduce overall cost, improve timeliness and provide better experience for our customers. Now you mentioned about the acquisition by Jingdong of Deppon.
Certainly there are many ways of increasing capabilities, either through organic or inorganic growth. As we set our sights on developing e-commerce advantage in the future, we will explore feasible and fit in terms of inorganic growth. The development of total comprehensive capabilities has to be done in a way that is the most cost efficient, driving greater synergy as well as integratable solutions. I hope that answers your question.
Yeah, it does. Thank you.
Thank you.
Next we have Gangxian Liu of CICC.
[Non-English content].
Congrats for another strong quarter. Two questions on my side. First is sort of about ADR. We heard some news about SEC and we already see some secondary listed companies are preparing for primary dual listing in Hong Kong. So I wonder if management could share your view about this potential sort of political risk and is there any planning or initiatives that we will take? The second is about the combination of so-called three networks. I wonder what's the current progress and the results as of now? And is there any other specific, more specific targets for this year or a couple of years into the future that you can share with us? Thank you.
[Non-English content].
First let me translate for Mr. Lai for the first question that he answered relating to the tri-layered integrated throughput system. We have consistently throughout our past focused on efficiencies in which we showed our advantage by investing early in land and facility, vehicles, as well as sorting equipment. As our competitors slowly catches up with their investment, then that difference within those advantages are narrowing. However, because of our increasing volume and our efficiencies in our traditional first layer, which is connection very effectively run between sorting hubs, center to center, we are developing greater efficiencies and capabilities among all the outlets towards their better connection with our sorting hubs. The second layer is the origination outlet to destination sorting hub, so therefore, they are bypassing the origination sorting center.
In the future, we are expecting about 100 of super sorting centers that is owned and operated by us with 200-300 self-sufficient and capable sorting or sorting mini centers operated by our network partners, who has the capability of connecting directly to sorting centers, bypassing the origination center. That is the second layer. The third layer refers to the capability of direct routes, trucks running, connecting our origination outlets to destination outlets. We have estimated each segment of the trip saved could reduce per parcel cost by around $ 0.30, and that is quite meaningful.
To achieve that, we are currently and have been in the past, but currently more so, in helping our network partners who we mentioned that has been with the company, has confidence and trust in us and the future, who are willing to invest and develop their own capabilities. We expect in the next three to five years, about 15%-20% of our volume will come from the operating layers other than the original center to center layer. The estimated cost reduction is about RMB 3 billion-RMB 4 billion. Now, let me go through the second, but your first question regarding the current listing and SEC requirements. Recently, you all have seen there are active discussions amongst the authorities and government bodies.
While we are hopeful that productive and practical solutions could be reached, and agreement could be put in place, we are actively researching and planning for our options. Hong Kong primary dual listing is one of the options that will give us proactive control. Positively a response to your question that we are in the process of evaluating such options to us. I should add that finding a solution such as or preparing for with a solution that is, for example, Hong Kong dual primary listing is not for avoiding of disclosure. You know that we have always been very open and transparent in providing all the pertinent information to our investors who can make sound decisions.
This is also our initiatives are also for the purposes of opening up more investment opportunities for investors that are closer to our home market. This is a comprehensive decision and approach.
Okay. Thank you. Very helpful.
Thank you.
Next we will take Fan Tso of Bank of America.
Maybe now I'll translate my two questions. Number one is the COVID lockdown impact on our volume. Would management be able to quantify a little bit, especially in cities that we are seeing more stringent lockdowns such as Shenzhen and Dongguan, how it is impacting our daily volume. Second question is about our time-definite parcel business. Could management provide an update? Are there any target in terms of volume or revenue contribution in the medium to long term? Thank you.
First of all, let me make a remark that we have already exceeded our one-hour call, and the market is already open, so we will refrain from any comments that could specifically communicate numbers and so on. We are willing to answer the question regarding the COVID situation. Let me just make some closing remarks here because we really wanna make sure of compliance. We have trust in the government and agencies who are working hard day and night in addressing the COVID situation. The impact is there for sure. You are all aware what's in the public, what's announced here and there, all the numbers. Please pay attention to those and gather your numbers on that.
Regarding the time definite product, Veri is a product that we rolled out last year aimed to standardize the time definite requirements and put commitment around the promise of time and also for the delivery. Please, operator, we need to conclude this call.
Great. Yes, ma'am.
We are open for calls subsequent, we have scheduled many calls for you and please feel free to connect with us.
Oh, thank you, ma'am. Sorry about that. All right. Again, the conference call has now concluded. Again, we thank the management team for your time today. Thank you everyone for attending. At this time, you may disconnect your lines. Thank you everyone. Take care, and have a wonderful day.