Income from operations at US trucking giant and forwarder CH Robinson grew by 39.1% y-o-y to $176.85m in the first quarter, even as revenue fell 8.3% to $4,047m. CEO Dave Bozeman said, “We’re not waiting for a market recovery to improve our financial results, and the strategies that the Robinson team is executing are relevant in any market environment.”
North American Surface Transportation – efficiencies improve earnings
Despite the challenging market conditions in the US trucking industry, the North American Surface Transportation (NAST) division reported a 31.9% y-o-y increase in income from operations to $143.7m. Revenue fell 4.4% to $2,868m.
In linehaul truckload, the rate per mile increased approximately 4.0% y-o-y. Cost per mile increased 3.0% and as a result the adjusted gross profit (AGP) per mile increased 11.5%,
In LTL, AGP improved 4.9% y-o-y due to a 4.0% increase in AGP per order and a 1.0% increase in LTL volume. Across the division however, volumes fell 1.0% y-o-y in the quarter but operating expenses fell 4.7% due to cost optimisation and productivity improvements, as well as an employee headcount that was reduced by 12.1% y-o-y.
Speaking of the successful quarter for his division, NAST president Michael Castagnetto said, “Our team continues to dynamically assess the best combination of volume and margin to improve our earnings. We know we have optionality to pivot towards more volume or more margin depending on the market conditions and we are making adjustments multiple times per month, week and day while maintaining our discipline.”
Global Forwarding achieves significant earnings growth
Though in the order of 30% of that of NAST, the Global Forwarding division also achieved strong earnings growth – this time a 36.1% y-o-y improvement to $42.9m on revenues that fell 9.8% to $704.9m.
As other global forwarders have observed in their own results – notably DSV and UPS – there is a modal shift from air to ocean due to the cost differential between them. At CH Robinson, the fall in overall revenue was attributed to this modal shift but even so, AGP in ocean forwarding improved 2.2% y-o-y due to a 1.5% increase in shipments and a 1.0% improvement in AGP per shipment. Air volumes fell 3.0% y-o-y in the quarter but this was offset by an 11.0% y-o-y increase in AGP per ton shipped.
The Customs value-added service saw some benefit from the changing shape of international trade into the US and for the company, this meant a 1.5% increase in volumes of customs traffic that also saw an uptick of 1.5% in AGP per transaction.
At the same time, average employee headcount was down 7.4% y-o-y in the Global Forwarding division and operating expenses fell 4.6% in the period.
Trade wars and tariffs ‘just another disruption’
Though US based and thus heavily exposed in part due to the trade policies of the current US Administration, the company seems to be taking these disruptions in its stride. CFO Damon Lee explained, “We look at tariffs as just another market disruption for our customers, but we’ve had several disruptions over the years, right? You’ve had disruptions in the South China sea. You’ve had the port strikes. Those disruptions all show up slightly differently but they’re all disruptions to the supply chain. And certainly, our customers have been diversifying to limit those disruptions on the impact of their business, and they’ve partnered with us on creative solutions to lessen that impact as well. So what I would say is, certainly, we’ve seen a lot of that city with customers partner with us on various ways of diversification. And I think this bodes well for our ability to move up the value stack with a lot of our key customers.”
From these results it seems that though CH Robinson and its competitors are all in the same storms of trade wars and freight recessions, not all are as badly impacted by the same conditions due to their different strategies. The company seems well placed for any recovery in either situation should it come in the short to medium term.
Author: Richard Shrubb
Source: Ti Insight
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