Resilient C.H. Robinson well placed heading into H2 uncertainty

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US-based 3PL C.H. Robinson recorded total revenues of $3.6bn in Q2 2020, down 7.2% for the period year-on-year. Over the first half of 2020, the fall in headline revenues is less steep at 3.0% compared to 2019. The impacts of Covid-19 disruptions are starker at the operating profit level (‘net revenues’ for C.H. Robinson) with Q2 income down 11.6% to $614m and the H1 figure down 13.9% at $1.2bn.

The headline figures are perhaps typical for a forwarder largely exposed to the US market, particularly in the trucking-heavy Transportation segment, but the picture is more mixed and nuanced at the division level and show a good degree of resilience to challenging market conditions.

In Transportation, the picture was characterised by falling volumes which drove revenues down. At a division level, revenue in Q2 fell 8% to $3.3bn. As across the whole business, it was in Q2 when falls were sharpest, with Transportation revenue down a more moderate 3.5% in H1. The North America Surface Transportation (NAST) segment sits within the wider Transportation division at C.H. Robinson and is key to its wider performance. At $2.5bn in Q2, NAST accounts for around 74% of Transportation revenues. Across the segment, income was $379.6m, 22% lower than Q2-2019.

Stay-at-home orders and restrictions on commercial activities were strict across regions of the US in Q2 which affected performance in NAST, although not as badly as some analysts had predicted. NAST revenue was 13.8% lower in the three months to 30-Jun. For the same period, income was down in the Truckload (-28.5%) and LTL (-13.2%) business lines. The Truckload business line, which accounted for 66% of NAST income during the quarter, saw volumes fall 4.5%, but while it was able to reduce costs by 2%, this was outpaced by pricing falls which amounted to 5.5%. These dynamics saw the Transportation division’s operating margin reduce to 15.3% in Q2 2020 from 16.9% a year earlier.

At the Global Forwarding division, the picture was positive – revenue grew 14.8% to $708m during the quarter and over the first six months of 2020, the division is nearly 10% up compared with 2019. The primary driver was the air freight business line which benefitted from an increase in charter volumes and larger shipments as overall capacity tightened and rates spiked. Net revenues in air freight more than doubled from $25.2m in Q2 2019 to $51.5m in 2020, an increase of 104.4% despite an overall fall in volumes. While this was partially offset by volume fall in ocean forwarding which pushed net revenues down there by 7.8% to $78.7m for the quarter, the picture is clear – well-managed air forwarding businesses can proposer despite the huge market uncertainty in during 2020. Across the division, operating income grew 120.8% to $58.8m with the operating margin nearly doubling to 36.1%.

Elsewhere, in C.H. Robinson’s Other and Corporate Division revenue was essentially flat at $444.7m, up 0.1% year-on-year. Volume falls related to restaurant closures in the US saw net revenue at Robinson Fresh decline 3.3%, although this was offset by rises in the Managed Services and Other Surface Transportation business lines.

During the quarter, income from operations at CH Robinson totalled $188.8 million, down 17.% from last year due to declining net revenues. Its operating margin also declined to 30.7%, down from 32.7% last year. “Despite a volatile environment, we were able to deliver solid performance across all of our business units due to the tireless efforts of the C.H. Robinson team members around the world and our diversified portfolio of logistics services,” said Bob Biesterfeld, Chief Executive Officer of C.H. Robinson. “Our business model is resilient and responsive. We have a strong balance sheet, and we exited the second quarter with $1.6 billion of liquidity.”

C.H. Robinson finds itself in a strong position halfway through 2020, although the picture isn’t a wholly positive one as the Covid-19 crisis rumbles on. The NAST segment is hugely significant to C.H. Robinson, contributing 68.2% of all revenue in Q2 2020. The main Truckload and LTL business lines are also highly important within NAST with both impacted by the US response to Covid-19 and the various commercial restrictions imposed. C.H. Robinson is weathering the storm better than others – both in the US and globally – but it will need to show it can continue to adeptly manage its global operations and take advantage of its global operations, most notably in air freight. With the direction of the US response to Covid-19 uncertain, global operations will be key if C.H. Robinson is to maintain the position of relative strength it takes into the second half of the year.

Source: Transport Intelligence, 30 July 2020

Author: Nick Bailey


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