C.H. Robinson’s 2019 full year results reflect the poor market conditions. As expected, the company reported a loss in revenues, total revenue reached $15.3bn for the year ending December 31, 2019, down from $16.6bn in 2018 which equates to a considerable 8% year-on-year decrease. Total net income for 2019 amounted to $577m, down by 13.2% year-on-year. By segment, total revenues for each were down significantly but margins were up year-on-year. Considering the current state of the market with the US-China trade war, increasing protectionism and slowing global economy, it seems C.H. Robinson’s top line figures do not tell the whole story.
The below par performance can be attributed to low freight volumes and the general weak freight environment. The Transportation segment’s revenue was down by 7.7% from $15.5bn in 2018 to $14.3bn in 2019, whilst Sourcing saw a 11.5% decline to $987m from $1.1bn the previous year.
Nevertheless, the segment’s margins increased in profitability. Transportation saw its revenue margin increase from 16.7% in 2018 to 17.3% in 2019 and Sourcing’s margin was recorded as 10.5% in 2019, up from 10.0% in 2018. During the tumultuous year, C.H. Robinson coped well with lower volumes. Bob Biesterfeld, C.H. Robinson’s CEO, noted an increase in contractual and LTL volumes contributed to margins holding up, “For Q4-19 pricing adjustments to reflect the current market enabled us to deliver flat volume in North American Surface Transport truckload, including a mid-single-digit increase in contractual volume, and 4.5% volume growth in LTL”. For the year, LTL and Customs were the only two sub segments of Transportation with positive growth results, at 1.3% and 3.8%, respectively.
On the other side of this, the other sub segments of Transportation have shown some significant decreases in net revenues including Intermodal, Sea and Air which saw declines of -14.8%, -1.5% and -11.4%, respectively. C.H. Robinson indicates the market conditions are the cause for the slump in forwarding revenues. This seems a credible reason, as Ti Market Sizing corroborate the company’s figures; the sea freight forwarding market saw weak growth in H1-19 at 1.9% and the air freight market shrank by 4.2% in real terms.
Biesterfeld commented on the Q4-19 results, “While our fourth quarter financial results demonstrate that we are not immune to large cyclical swings in the freight environment, we firmly believe that our continued investments through cycles will drive the alignment between net revenue growth and operating costs needed to drive operating margin expansion through freight cycles over the long term.”
The freight forwarding market has had one of the worst years, growth wise, since the 2009 recession and so revenue and operations are of course going to be negatively impacted. C.H. Robinson’s margins indicate they have altered operations to counteract this cyclical issue. The acquisition of two European forwarding companies, Space Cargo and Dema Service, could also be seen as diversifying away from the American market as trade tensions have substantial impacts over the last few years. C.H. Robinson has acknowledged the disappointing performance of 2019 but does not seem disheartened.
Source: Transport Intelligence, February 4, 2020
Author: Holly Stewart