The core of C.H. Robinson’s business is ‘freight brokerage’, that is road forwarding. The company has a hugely strongly position in this market and has increased profits relentlessly. Yet over the past six months the North American road freight market has resembled the sort of conditions seen in the global sea and air freight sectors. C.H. Robinson’s revenue in its ‘North American Surface Transportation’ division in the first half of the year rose by 10.4% year-on-year to $4.6bn but its operational profit (income from operations) fell by 14.2%. Full truckload and intermodal business was hit particularly badly.
The fall in profit was due to the rates that C.H. Robinson charged its customers remaining flat whilst the cost of the truck services that it bought in rose by 4%. This, combined with higher administration costs, depressed profits.
Similarly, at the explosively growing if rather small ‘Global Forwarding’ business, revenue was up 40.9% year-on-year, but operational profit rose only 11.8%. Robinson Fresh, which is the food logistics (and trading) business, saw revenues edge down by 1.4% but income from operations crashed by 35.8%.
Overall, the whole company saw revenues climb by 11.8% to US$7.1bn whilst Net Income fell by 11% to US$233m.
Part of C.H. Robinson’s experience over the past half year is a company that is willing to sacrifice short-term profit from longer-term market share. It has been hiring people and investing in infrastructure which is probably pushing-up costs. But the numbers also illustrate that even beyond the container shipping, the wider transport markets are tightening as demand jumps. The consequence is that the middle-men suffer. It is quite likely that C H Robinson’s margins will bounce-back as the annual contracts with its customers unwind and it is able to push-up prices, yet its experience illustrate that underlying growth has been strong in many economies around the world.
Source: Transport Intelligence, July 25, 2017
Author: Thomas Cullen
