XPO’s Q4 improves a mixed year

XPO Logistics has expanded its transportation partnership with Corteva, an agriculture innovator, with a a new, multi-year contract.

XPO Logistics had a better fourthquarter illustrated in results published on February 10, however, over the full-year, sales and profits were down. Q4 saw revenue increase “$4.67bn, compared with $4.14bn for the fourth quarter 2019…Operating income was $228m, compared with $202m for the fourth quarter of 2019.” Yet for the full-year revenue edged down $396m to $16,252m whilst net income fell heavily to $117m in 2020 from $440m in 2019. “Adjusted” Earnings Before Interest, Tax and Amortisation for the full year 2020 was $1.4bn, compared with $1.7bn for 2019.

In the fourth quarter, progress was similar across both of the business with ‘Transportation’ seeing a 13% increase year-on-year to $2.94bn whilst operating profits were up 15% at $200m and ‘adjusted’ EBITDA was $331m. Much of the increase in profits was down to the expansion of the ‘truck brokerage’ capability where “revenue increased by 75.5% year-over-year to $616m for the fourth quarter 2020, compared with $351m for the same period in 2019. Net revenue increased 110.0% year-over-year to $115m for the quarter, compared with $54m for the same period in 2019”.

The ‘Logistics’ business also had a good quarter in terms of revenue growth “led by strong demand from e-commerce and other consumer-related verticals” resulting in revenue climbing by $200m year-on-year for Q4, but “decreases in operating income and adjusted EBITDA were primarily related to a spike in labour costs due to record e-commerce peak demand, as well as start-up costs for new contracts won” resulting in a fall in operating profits of $5m as compared to the same period last year, to $68m.

XPO also made an interesting comment on the planned floatation of its logistics business as a separate company. Whilst observing that the new company would create “the second-largest contract logistics provider in the world” it also said that “there can be no assurance that a spin-off will occur or, if one does occur, of its terms or timing.”

XPO Logistics has not had quite as successful a year as some other major logistics companies. It is too exposed to traditional parts of the economy for that, none-the-less, its truck brokerage and last-mile exposure were able to keep the company moving forward. It is a reminder that XPO is very large, diversified and therefore fairly stable.

Source: Transport Intelligence, February 18, 2021

Author: Thomas Cullen

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