Three large logistics service providers that reported their quarterly results over the past week said that they were experiencing tough markets, although their reaction to such markets differed.
C.H. Robinson saw its revenues for the third quarter fall by 8.7% year-on-year to $633.4m and operational profits drop by 18.2% to $201.1m as margins thinned. Bob Biesterfeld, Chief Executive Officer of C.H. Robinson described “an aggressive industry pricing environment coming into the second half of this year driven by excess capacity and softening demand” in its North American Surface Transportation and Global Forwarding businesses, with North America generally being “negatively impacted by truckload margin compression”.
Kuehne + Nagel similarly experienced what its CEO described as a “tense market” with “sharp drops” in certain areas, with turnover for the quarter down 1.1% year-on-year. It described its core Seafreight market as “stagnating” although it was able to increase volumes by 4.3% and EBIT (Earnings Before Interest and Tax) rose over the past three quarters. The Airfreight forwarding business also suffered, with volumes falling by 6.4%, leading to profits over the past nine months falling by 3%. For the whole company, profit growth seems to holding up moderately although this might be being helped by weak freight rates.
XPO Logistics saw underlying revenue flat for the quarter, whilst underlying EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) appears to be continuing to grow in the range of 7-10%. Although XPO may have benefitted from its greater exposure to the US economy, its transportation business still saw small falls in revenue as did its contract logistics business. The company reported that its largest customer (possibly Amazon) had lower levels of truck brokerage and “direct postal injection”. In contrast, XPO said that “packaged goods, food and beverage and aerospace in North America, and….e-commerce in Europe” grew quite well.
These results support the impression that much of the world’s logistics markets are generally growing slowly, although some are shrinking. It is worth noting that although over the past few months much of this has been ascribed to trade tensions between the US and China, lower demand in other areas of the economy, such as consumer spending, has also played a part.
Source: Transport Intelligence, October 31, 2019
Author: Thomas Cullen