Compared to some other logistics service providers C.H. Robinson has had a mixed year. For the financial year 2020, results just announced show that revenue has edged up 5.9% year-on-year to $16.2bn but operating profits fell 14.8% to $673.3m. This reflected a complex picture across C.H. Robinson’s different businesses.
C.H. Robinson’s large ‘North American Surface Transport’ was a big part of the problem. Operating profits fell by 29.6% despite revenue being stable. It is unclear why this is, with volumes carried down by 3.5% in the truckload business but up 20% in the less-than-trailer load segment. It seems that ‘margin compression’ due to the higher price of trucking services bought by C.H. Robinson drove-down gross profit, price rises that C.H. Robinson was not able to pass on to its customers.
In contrast, the Global Forwarding business, which operates in air and sea freight markets worldwide but is not such a different business model to the surface transport division, saw profits jump by 118% year-on-year to $175m whilst profits rose by 33.2% to $3.1bn. The contrast between the condition of the North American truck market and say global aviation was informative. C.H. Robinson said in their earnings release that “adjusted gross profits in air increased 38.3% driven by higher pricing, partially offset by a 7.5% decline in shipments”, or other words, volumes fell violently but margins leapt. The situation in ocean freight was less extreme with “Ocean adjusted gross profits increased 53.1%, driven by higher pricing and a 12.0% increase in volumes”.
The numbers from the fourth quarter looked much more optimistic compared to the whole year, with operating income up 51.2% year-on-year, however, looking forward Bob Biesterfeld, C.H. Robinson’s CEO observed that “due to several factors, including shortages in the number of drivers and available carrier capacity, freight markets remain tight” the North American Surface Transport business will continue to face some headwinds. The clear implications of this are that returns for transport asset owners in North America are likely to remain strong in the near term.
Source: Transport Intelligence, February 2, 2021
Author: Thomas Cullen