The robustness of the ‘less-than-trailer load’ segment of the US trucking market has continued to deliver for XPO, despite an otherwise low demand for road freight.
The focussed ‘less-than-trailer-load’ (LTL) provider gained control of its losses in its European division and increased operating profits in its North American business. Revenue in the fourth quarter increased by 6% year-on-year to US$1,940m whilst net profits moved from a loss of $36m in the fourth quarter of 2022 to a profit of $58m.
The money was made by the North American LTL business. This saw higher tonnage and shipments, with the latter rising by 6%. The result was an ‘adjusted operating income’ 50.9% higher than the same quarter last year. XPO stated that better yield as well as more business drove profits 32% higher, however Q4 2022 had seen higher profits from the sale of property and this has moderated the rise in comparative profits. It appears that for the past quarter XPO has been able to sustain the “attractive pricing environment” that it believes is a characteristic of the LTL sector in the US.
In contrast, its LTL and ‘pallet network’ business in Europe is still recovering. Although the business saw a loss of $2m in the quarter, this is better than the $60m seen in the fourth quarter of 2022. Revenue did edge-up by 2% year-on-year but on some ‘adjusted’ measures profits at this business fell back slightly. It is unclear why this business is struggling, although the market environment in parts of continental Europe is difficult.
For the whole year XPO’s performance has been workman-like. Revenue is up by 0.3% at $7.7bn but net income has fallen by 71.65% to $189m, although XPO is now a much smaller business. Presumably the losses experienced as a result of the spin-off of RXO are at an end, although it’s worth noting that XPO still had to pay for some ‘environmental’ problems it encountered. All XPO now has to do is work-out how to make money from its LTL and pallet-networks in Europe.
Author: Thomas Cullen
Source: Ti Insight
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