Jeffrey Musser, the President and CEO of Expeditors International of Washington, is retiring after a career leading of a company that has not always been easy. He leaves Expeditors performing remarkably well for present market conditions.
In its just published results, the company saw revenue for financial year 2024 up 14% year-on-year at US$10.6bn whilst operating income was 11% higher year-on-year at $1bn. ‘Net earnings attributable to shareholders’ were up 8%. The fourth quarter results suggested an even more optimistic prospect, with operating income up 51% year-on-year.
The reasons for Expeditors’ strength are in great part to do with the conditions in the airfreight market, especially out of China and on the trans-Pacific routes. Discussing the results, Jeffrey Musser commented that the sector was supported by “strong demand from Asia, along with heavy de minimis-driven e-commerce business and increased demand for technology products”. In other words, the e-retailers operating out of China have driven a strong market for airfreight. In addition, he said that there was “limited access to air capacity”, presumably in belly freight leading to an above average reliance on freighters. Airfreight volumes in the last quarter of the year were higher by 11%, leading to airfreight volumes at levels last seen in 2021.
In sea forwarding the conditions were different. Here Jeffrey Musser said that capacity was used-up “by front-loading, as shippers scrambled to limit disruptions from potential port labour actions” as well as the effects of the Red Sea crisis. He described the conditions as “turbulent” although it appears that this might have actually helped Expeditors profits, with Mr Musser observing that “these are when Expeditors tends to perform at its best, as we double-down to find solutions for our customers to avoid the worst of the chaos”.
Unsurprisingly Jeffrey Musser and Expeditors think that the prospects for the near term are unclear with it being “extremely difficult to predict the impact to global air supply and demand that may result from actions such as the anticipated U.S. elimination of certain de minimis exemptions. So, too, whether recessed Red Sea hostilities will lead to resumed ocean transit via that route remains to be seen”.
Expeditors has benefitted from its exposure to airfreight and in particular, its exposure to airfreight across the Pacific. In contrast to some other forwarders, it has been able to profit in such a market. The underlying strength of the airfreight market in the short-to-medium term is such that Expeditors may be able to sustain its profits through next year at least, despite the volatility.
Author: Thomas Cullen
Source: Ti Insight
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