US trucking industry on the verge of freight-tech revolution
For those of us outside, the size of North America’s haulage sector never ceases to ...
“Solid”, “strong” and “well-positioned” is how CH Robinson described its second-quarter performance, despite net revenue falling 11.6%, to $614.5m, and income from operations declining by 17%, to $188.8m.
CEO Bob Biesterfeld said: “Despite a volatile environment, we were able to deliver solid performance across all of our business units, due to the tireless efforts of the CH Robinson team members around the world and our diversified portfolio of logistics services.
“We also continued to make progress on our strategic, long-term initiatives around market share gains and productivity improvements.”
Not all CHR’s team members were able to work tirelessly, however. Half of the furloughed employees were made redundant, as the company “harnessed the benefits” of its “technology investment”.
Year-on-year figures for the second quarter showed 573 jobs in North American Surface Transportation (NAST) unit were lost, while the full-time equivalent was a reduction in 806 jobs. However, Global Forwarding’s staff numbers stayed broadly constant and the number of administrative and other positions grew.
There had been some concern over a high staff costs at the forwarder, and its investment in technology had been expected to reduce the headcount, although the IT department grew.
CFO Mike Zechmeister told an earnings call: “Given our progress in leveraging technology and processing improvement investments … approximately half of our furloughs were converted to long-term workforce reductions.”
He added: “We expect volume growth to continue to outpace headcount growth in NAST in a meaningful way. Our focus is on widening that productivity gap between the percent change in headcount and the percent change in volume by continuing to simplify, standardise and automate processes for our customers, carriers and employees.”
Asked whether growth in volumes would lead to the headcount increasing again, Mr Biesterfeld said: “I do believe that the productivity gains can be sustained.”
He said the second quarter brought “unprecedented volatility”.
Mr Biesterfeld explained: “Our truckload net revenue per shipment increased substantially early in the quarter, as the cost of purchased transport fell due to soft demand. This was followed by a sharp increase in the cost as businesses reopened, demand for freight increased and the number of active carriers declined, causing a significant decrease in our net revenue per shipment.
“From a net revenue per shipment standpoint, each of these fluctuations on their own would have been the largest intra-quarter changes that we’ve experienced in over a decade.”
But there were some highlights, with NAST showing a sixth consecutive quarter in market share gain, up 4.5%, and 2% volume declines in truckload and LTL, compared with a 21% industry decline.
Air freight helped boost the Global Forwarding division by 19.5% to total revenues of $707.8m, with net revenue in air up 104%, despite a 35.5% fall in volumes. A 64.5% net revenue increase “was driven primarily by some large projects within our project logistics business”.
Ocean saw net revenue fall 7.8%, with an 8.5% fall in volumes. Customs net revenue fell 16.5% as transaction volumes fell 17%, while operating expenses fell 9.7%, as the company cut travel and staff costs, with short-term cost cuts amounting to $40m in the quarter, which is expected to rise to $80m in the full year.
“These short-term cost controls were put in place when they were greatly needed and demonstrate our ability to flex our cost structure as our business cycles change,” said Mr Biesterfeld. “We’ve learned a lot, as we’ve managed through the pandemic, about how to be more agile, how to work and to sell differently, how to collaborate and communicate more effectively, and how to serve our customers and carriers in new ways.”
As other companies have seen, the number of B2B digital transactions, from automated truckload bookings to location updates and tenders, rose “exponentially”, with more than 1bn transactions anticipated for the full year.
M&A could still be on the cards, said Mr Zechmeister, adding: “We continue to maintain a strong pipeline of opportunities… The current environment is certainly favourable from a borrowing standpoint to the extent that financing is needed.”
Would CH Robinson look to buy a digital forwarder?
“Anecdotally, we’ve heard some stories from shippers that some of the new entrants have become less aggressive in pricing, but that’s really pretty situational, “ said Mr Biesterfeld.
“In terms of M&A, we’re always going to look at the best way to deploy our capital, [by] driving long term shareholder value through a risk-adjusted return basis. Any deal we do we expect to be accretive to EPS in the long term. And for us to consider M&A, we need to be adding either new capabilities, expanding our global footprint, making the improvements to our technology.”