News / XPO Logistics delivers 'solid' third quarter results as cost cuts take effect

XPO Logistics has left its full-year forecast of a 2019 EBITDA target of $1.67bn-$1.72bn unchanged after it delivered third quarter results that were broadly in line with last year.

Quarterly revenue for the US-headquartered road freight and contract logistics group was $4.15bn, compared with $4.34bn in the same period in 2018, which was largely due to a decline in “freight brokerage and direct postal injection revenue from the company’s largest customer, lower rates in truck brokerage and unfavourable foreign currency exchange”.

However, it managed to post slightly higher EBITDA for the quarter – $438m this year compared with $415m last year, although that excludes $11m of “restructuring costs, primarily severance” – due to the cost control and efficiency programmes it has been steadily introducing over the past couple of years.

Chairman and chief executive Bradley Jacobs said: “We delivered a solid beat on adjusted EBITDA, outpacing the macro through cost control and margin discipline.

“Our significant investments in technology are creating tailwinds across our operations. We’re executing on 10 initiatives that represent a pool of $700m-$1bn of potential profit improvement over the next several years.

“One large opportunity is to apply our XPO Smart productivity tools to the $5bn of annual costs related to our variable labour spend.

“All 10 initiatives are specific to XPO and largely independent of the operating environment. We’re very focused on the size of the prize and the meaningful potential uplift to our profitability,” he said.

It explained that some 60% of this $700m-$1bn profit improvement would be found through cost efficiencies, which would include obvious measures such as increased group procurement and back office rationalisation; while it was looking to improve $1.3bn on LTL procurement and use the XPO Smart platform to reduce staff spend.

It added that it additionally aimed to increase revenues through moving increasing numbers of shippers to use its XPO Connect and XPO Direct platforms, as well as increasing cross-selling to European shippers and introducing more advanced pricing analytics across its operations and geographic segments.

XPO’s logistics operations generated revenue of $1.51bn in the third quarter, compared with $1.52bn for the same period in 2018. It said that organic revenue growth was 2.4%, “led by consumer packaged goods, food and beverage and aerospace in North America, and by e-commerce in Europe, largely offset by a reduction in business from the company’s largest customer”.

Earlier this year, it revealed that “its largest customer”, widely reported to be Amazon, had decided to withdraw some $600m in annual business from XPO, and the effect of this continues to show in its accounts.

However, it posted a third-quarter operating income of $61m in its logistics operations, compared with $59m last year as it continued to rein in costs following the Amazon loss.