Ti Insights chief analyst Thomas Cullen reflects on C.H Robinson’s results and the wider logistics market.
Further confirmation from C.H. Robinson that freight markets – to quote the company’s CEO Bob Biesterfield – “are entering a time of slower economic growth where freight markets will continue to cool from their peaks and will operate more reliably and at more normalised rates, with fewer disruptions”.
C.H. Robinson’s results for the Third Quarter of 2022 were not terrible, with revenues down just 4% and operating profits down 7.5% year-on-year. Yet this contrasts with the results for the past nine months, where revenue is up 18.2% and operating profits are 38.8% higher. Still the implication strongly suggests that the markets have turned for the Minnesota based forwarder.
The problem is in air and sea forwarding. The business units in sea freight saw a 25.5% fall in gross profit, whilst air freight forwarding saw a 21% fall. In comparison, sea and air forwarding have seen gross profit for the previous nine months grow by 21.6% and 4% respectively.
There is also a contrast between sea and air forwarding and C.H. Robinson’s US road freight operations, with full truck-load and less-than-truck load seeing a 19.6% and 22.4% rise in gross profit in Q3. Judging by C.H. Robinson’s numbers, US road freight seems to be reacting less violently to any logistics market downturn.
Yet the level of growth is still lower, with the ‘North American Surface Transport’ division, which combines LTL and FTL, seeing revenue in Q3 rise by just 4.9% year-on-year, in contrast to the 15.6% for the first nine-months of the year. The explanation for higher gross profit and operational revenue is that the costs of trucking services has been falling faster than trucking rates.
Like any good freight forwarder C.H. Robinson has been profiting from the gap between the two numbers. The question that may be asked is, why is this not happening in the sea and air freight sectors? Possibly a logistics service provider such as C.H. Robinson has a stronger positioning in the US road freight market than in global sea and air freight, or more likely, the contrast between demand and supply in these latter markets is more harsh.
For information on the forces driving ocean shipping rates, including capacity released onto the market and new builds reaching market, download our free White Paper: Ocean rate tracker Q4 2022, published today.
Author: Thomas Cullen
Source: Ti Inisights
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)