Freight forwarder C.H. Robinson has exceeded expectations with a substantial improvement in its results for the year. Although the past twelve months has barely seen any increase in sales across the whole company, operating margins have firmed-up and ‘income from operations’ has increased 30% year-on-year for the whole year, and 71% in the fourth quarter year-on-year.
At the core North American Surface Transport business, revenue was down over both the quarter and the year but C H Robinson seemed to take what the management likes to call a “disciplined approach” to the market and was able to increase profits. “Income from operations” over the fourth quarter increased 38.1% whilst the full year saw a 15.5% rise year-on-year. Unsurprisingly the company described the US trucking market as having “an oversupply of truckload capacity compared to freight demand” yet in both truckload and less than truckload CH Robinson was able to increase rates per mile faster than its costs increased. One of the reasons for this was reduction in its workforce, with the average employee headcount in the fourth quarter down 12.4% year-on-year.
The Global Freight Forwarding business had a different experience. It saw quite strong sales volume, with revenue up 24.7% in the fourth quarter, led by the high freight rates in container shipping. This resulted in C H Robinson increasing its gross profits in ocean freight by 27.7% as the number of shipments rose by 3.5% and the gross profit per shipment was up by 23.5%. In air freight there was a similar sales dynamic, with volumes in terms of tonnage up 15.5%. Underlying costs did increase as the company paid its forwarders more despite simultaneously reducing headcount by 9.5% over the year. Over the twelve months income from operations has risen by 147.6% year-on-year.
These results do suggest that the new management at C H Robinson have been effective in increasing profitability through better productivity. The market conditions in both ocean, air and road freight have turned-up over the past quarter, but not enough to explain the improvement in performance at C. H. Robinson. Dave Bozeman, C H Robinson’s CEO described how the company had created a “new Robinson operating model” and that seems to have some substance.
Author: Thomas Cullen
Source: Ti Insight
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