Kuehne + Nagel sees revenue fall but profits rise over first nine months
Despite declining revenue, Kuehne + Nagel reported increases of 6.3% and 5.1% in gross profit ...
One of the largest US freight service providers, CH Robinson, has said it will look to increase its scale and reduce reliance on its trucking businesses after reporting disappointing full-year earnings to the New York Stock Exchange yesterday.
Although the company saw revenue climb 12.3% to $12.7bn, chief executive John Wiehoff said that around half of that growth was organic, with the remainder derived from its acquisition of US freight forwarder Phoenix International late in 2012.
“Size and scale matter in our business and it’s important that we continue to grow our top line and that we have a stronger presence in the market so we can take advantage of that size and scale,” he told analysts at an investor presentation.
While revenue from its core full truckload business remained broadly stable over the year, it fell sharply in the final quarter, which Mr Wiehoff attributed to a variety of factors.
“You have the economic recession and the changes as a result, and you have the cyclical fluctuations. But there are also changing supply chains and shippers focusing on efficiency rather than growth.
“There have also been changes around technology for both shippers and 3PLs, and that has affected pricing, as well as the escalation of competition, especially in the truck brokerage world.”
As a result of the weakness in what is its core market, he said the company was now looking to grow its forwarding and intermodal arms.
Revenues from its global forwarding business grew by 37% year-on-year in the fourth quarter, as the acquisition of Phoenix was realised, and CH Robinson cemented its position as the largest US forwarder on the transpacific.
“The most important thing was that we were the number-one NVOCC [non vessel-operating common carrier] from China, in terms of teu,” said Mr Wiehoff. “That was a strategic goal, with both Phoenix and CH Robinson having focused on that in the past. To retain and grow that volume creates a competitive advantage.”
He added that most of the most of the office and operating integration had been completed last year, and the next phase was increasing cross-selling and the integration of account management.
Chief financial officer Chad Lindbloom said growth on the transpacific would largely reflect the underlying trends on the trade: “In the first four months of this year we are still operating under the constraints of annual contracts signed last year. However, the more we get the two companies integrated, from an operational perspective, there will be more opportunities for the less-than-containerload and air gateway businesses.”
Mr Wiehoff also promised a greater focus on the intermodal offering, after the division reported a 9.7% growth in revenues, despite lower volumes. It saw success in transferring truckload volumes to the rails, a niche that fits with the company’s overall structure, but he admitted lack of intermodal assets could hamper further growth.
“We feel very positive about our knowledge of intermodal and the relationship between truckload and intermodal, and we know where it makes sense to ship by which mode.
“The challenge is in denser freight, where an asset commitment does serve these relationships better – it just creates so much more efficiency that it is difficult to be price competitive if you don’t have those assets.
“We are interested in growing our organic capacity with more equipment – or the right acquisition might come along. We are looking at whatever type of investment would move us along,” he said.