Turnover and profits down as Kuehne + Nagel struggles through the pandemic
Kuehne + Nagel today reported reduced turnover and profits for the first nine months of ...
CH Robinson, the largest North American 3PL and overland trucking firm, reported dismal annual and fourth-quarter results to investors yesterday, showing revenue and profit declines in almost every sector of its business.
“I’ll get straight to the point – our net revenues, our operating margins and our earnings per share all finished well below our long-term targets,” chief executive Bob Biesterfeld bluntly stated at the beginning of yesterday’s earnings call.
“We have been facing some extreme, if not unprecedented, cyclical changes in our North American trucking market – one year ago we were experiencing record net revenues per shipment and double-digit company net revenue growth. This was followed by a period of rapid price declines due to oversupply and weak demand.”
Its freight forwarding division arguably turned in the worst performance: fourth-quarter revenues were down 11.4% to $600.1m and operating profit down 49.5% to $15m, “primarily driven by lower pricing and volumes in ocean and air”; and full year revenues and operating profit were down 6.4% and 12.1% respectively.
Mr Biesterfeld said “tariffs and recessionary fears continued to impact demand”, with air and ocean freight forwarding arms both posting double-digit net revenue declines on the back of weak volumes – ocean freight was 1.6% down and air freight shipments dropped by 7.5%.
Additionally, the March acquisition of Spanish forwarder Space Cargo for $48m had led to a 3.4% increase in headcount, ramping up costs.
“Over time we expect to delivery margin expansion through a combination of growth that exceeds headcount growth, and investments in technology that drive efficiency improvements,” Mr Biesterfeld added.
And chief financial officer Mike Zechmeister indicated that acquisition efforts would largely be targeted at the freight forwarding sector.
“We believe M&A is a lever to help us develop our geographical network, range of services and scale, and we prefer strong businesses that are non-asset based. We have a solid pipeline of opportunities,” he said.
The company’s largest segment remains its North American Surface Transportation (NAST) division, where fourth-quarter revenues decreased 8.3% year on year to $3.8bn, and operating income was down a massive 46.5% to $136.8m. Full-year revenues were down 7.9% to $15.3bn and operating income down 13.4% to $790m.
“We aren’t immune to large swings in the market, but we believe our investments will allow us to achieve margin expansion this year; and by the middle of this year, the operating margin will improve,” Mr Biesterfeld told analysts.
“We don’t believe in chasing freight to the bottom of the market as pricing is reset annually.” he added in a Q&A session.
A detailed analysis of NAST’s existential dilemma can be found at Freightwaves.