Poor market conditions highlight differences in performance

Optimism about the logistics market and its short-term prospects has been in short supply this quarter. Both the air and sea freight markets are depressed and contract logistics is not performing much better. Yet, the results of leading freight forwarders have not been uniform.

As is so often the case, Kuehne + Nagel bucked the market trend with its air & sea forwarding revenues and profits both up in low single digit percentages. This appears to be in part attributable to continued increases in market share as volumes also increased despite both markets either shrinking or hardly growing at all.

This is all the more surprising as Kuehne + Nagel is heavily exposed to the European market, which has seen strong exports, but import traffic is very weak.  Expeditors International delivered a not dissimilar performance with both higher volumes and profits. The surprise was Panalpina which matched these two traditional leaders, even seeing increases in tonnage in its previously shaky air freight business.

Yet, many of their competitors performed much worse. DHL Forwarding’s revenues and profits drifted down by around 4%, whilst UPS Supply Chain saw a marked downturn in profits, despite only a modest fall in revenue. CEVA’s performance was most concerning with a heavy fall in revenue, but a near halving of profits.

Admittedly, part of the reason for UPS’ and CEVA’s heavier falls is the degree of exposure to trans-pacific air-freight, especially concerning the logistics of electronic consumer products. The good news here is that this market may well pick-up in the short-term with a number of big product launches scheduled for the next few months. However, Expeditors is also exposed to trans-pacific traffic, posing the danger that it could simply swallow up market-share at UPS and CEVA’s expense.

Once more the question around these numbers is, why do the ‘usual suspects’ outperform the market? All are experiencing tough market conditions, yet some grow whilst others shrink.