C.H. Robinson continues to be one of the most successful major LSPs in the world. And for the present at least, that success is anchored on its position in the US trucking sector.
In its latest third quarter figures the contrast between the truck brokerage business in the US and global freight forwarding was striking. For ‘North American Surface Transportation’ total revenue was up 18.7%, net revenues were 23.3% higher and income increased 34.9% year-on-year. For the nine-months ending September 30, income was up 25.8%.
The key to C.H. Robinson’s success was its ability to increase its rate-per-mile by 14%, whilst its transport cost-per-mile rose only 12%. The underlying demand picture was not perfect, with volumes in the truckload segment of the market falling by 0.5% and intermodal demand falling by 6%, compensated for by LTL volumes rising by 4.5%. The trend in volumes for October was down 2%.
Other than the impact of rising fuel prices through the year, the long-term pressure on costs is clearly coming from higher wages, dominating the 15.6% increase in operating expenses.
Contrast this with the Global Forwarding business. Underlying sales were ok, with revenue up 15.8% in the third quarter and 16.8% over the past nine months. However, net revenue in the third quarter was up only 3.3% whilst operational income crashed 23.4%. For the nine months to the end of September operational income is down 17.5%. In the forwarding market C.H. Robinson could not keep the growth of air or sea freight costs under control and not efficiently pass them onto customers, leading to a profits squeeze. However, in the fresh produce forwarding and logistics operation Robinson Fresh, it was able to keep costs under control and increase profits 84.8% over the third quarter, although over the past nine months profits are down 1.3%.
Overall, the truck brokerage business at C.H. Robinson has delivered profits, with the whole group seeing net income up 47.6% at $175.9m for the third quarter and net income up 35.5% $477.4m for the nine months. Despite flat volume growth and in the face of higher costs the company was able to drive profits forward. The global air and sea freight markets are very different. Perhaps C.H. Robinson does not have as robust a business model here.
Source: Transport Intelligence, November 1, 2018
Author: Thomas Cullen
