News / XPO Logistics takes a hit from the virus crisis – but 'we are ironclad', says Jacobs

XPO Logistics saw its first-quarter earnings hit by the coronavirus pandemic, yesterday reporting revenue down 6.7% and operating income by 63%.

Group revenue for the first three months was $3.86bn, while operating income was $81m, compared with the $132m it posted in the first quarter of 2019.

However, adjusted ebitda fared much better, down from £343m last year to $333m, although that did not include $47m “of transaction, integration and restructuring costs, primarily related to the company’s terminated review of strategic alternatives”.

In January, the company announced “the possible sale or spin-off of one or more of XPO’s business units”, excepting the North American less-than-truckload unit. But the project was abandoned as the scale of the pandemic began to be revealed.

Yesterday, Bradley Jacobs, chairman and CEO, said XPO Logistics’ results had been looking relatively rosy, until the social lockdowns began in earnest.

“Our results were tracking well until mid-March, when Covid-19 reached pandemic proportions. At that point, our end markets rapidly deteriorated.

“We acted quickly and took comprehensive safety measures to protect our employees on the front line. I’m immensely grateful to our team for stepping up to the challenge of providing essential supply chain services in this environment,” he said.

However, Mr Jacobs was also keen to stress that, despite the impact of the coronavirus on the results, XPO’s cash position remained strong.

“XPO has $2.5bn of liquidity and an ironclad business model,” he said. “Even against the current backdrop, we’re on track to generate hundreds of millions of dollars of free cash flow this year.”

And he added: “We’re ready to serve customers through the fits and starts of the recovery, however long it takes, with our e-commerce capabilities, intelligent automation in our warehouses, a digitally connected transport platform and keen visibility into operating data.”

XPO’s transport division bore the brunt of the coronavirus effect, the company disclosed, with revenue for the quarter declining from $2.66bn last year to $2.46bn this year. Operating income was $120m, compared with $128m last year. Logistics operations saw revenue of $1.44bn, down from $1.49bn last year, while operating income was $38m, compared with $46m.

“The decrease in revenue primarily reflects the company’s elimination of certain low-margin business, the downsizing of business by the company’s largest customer and the negative impact of Covid-19 in Europe,” it said.

However, it did see an improvement in adjusted ebitda for the division, up from $113m last year to $121m, which it said “primarily reflects the increasing benefit of the company’s technology initiatives, resulting in workforce productivity gains and pricing optimisation”.