Expeditors Q3 results see predictable instability underpinning profits

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Expeditors International of Washington’s third-quarter results reflected a familiar pattern in the forwarding markets at present.

The company saw buoyant revenues, up over the third-quarter by 19% and for the nine-months to the end of September up by 13% year-on-year. Profits were similarly strong with operating income (profits) up 22% and 12% respectively. This was despite a 5% fall in both airfreight and sea freight volumes.

Jeffrey Musser, Chief Executive Officer, described how the market saw volumes start “to recover across most of our products during the quarter, even as the global effects of COVID-19 continued to impact our business worldwide.” He continued, explaining how similarly the to second quarter “the pandemic caused an increase in demand for certain goods at the same time that air capacity remained tight due to travel restrictions and the limited schedule of domestic and international passenger flights. This caused continued imbalances between carrier capacity and demand, principally on exports out of North Asia, which was the only market in which air volumes increased during the third quarter. To meet the urgent transportation needs that could not be fulfilled with scheduled capacity, we utilised charter capacity for certain customers, resulting in higher average buy and sell rates.” This continuing demand for high rate air services explains the profitability of the company despite the lower economic activity. Musser said that airfreight rates were lower in the third-quarter “than the extremes we experienced in the second quarter” but they were still “historically elevated and highly unpredictable due to ongoing supply/demand imbalances”. In Musser’s opinion this situation is likely to continue “until passenger traffic starts to return in a meaningful way”

With regards to ocean freight forwarding, although Expeditors has not seen the business not as severely affected, shipping lines “remain disciplined and are carefully managing capacity even as volumes have increased from the lows we saw earlier in this pandemic”. It is unclear what effect this has had on Expeditors profitability.

What might be deduced from these results is that the airfreight market is highly unstable and could well see major pricing shifts in 2021 but the sea freight market is more stable in the longer-term.

Source: Transport Intelligence, November 5, 2020.

Author: Thomas Cullen

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