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C.H. Robinson Worldwide’s first-quarter profit declined by more than half as pricing pressure impacted revenue for its truckload operations.
The logistics and shipping company, based in Eden Prairie, Minn., said first-quarter net income dropped 51.7% to $78.1 million from $161.8 million in the same period a year earlier. Earnings per share declined to 57 cents from $1.16 in the 2019 period.
Revenue increased 1.4% to $3.8 billion from $3.75 billion in the year-ago period. The gain came from C.H. Robinson’s intermodal business and operations it categorizes as “other logistics services.”
The company is taking multiple steps to cut expenses as it adjusts to the recessionary conditions caused by the pandemic. It began furloughing employees in April, with plans to trim about 7% of its global workforce. Furloughed workers still will receive medical insurance coverage, and the company said it plans to bring as many back as possible as business conditions improve. The company ended the first quarter with about 15,000 workers.
C.H. Robinson also suspended its stock repurchase program and stopped providing a match for the retirement plans for its U.S. and Canadian employees. It cut CEO Bob Biesterfeld’s pay by 50% and the rest of the senior management team’s pay by 20%. It cut the retainer for members of its board of directors by 50%. The logistics firm also slashed all travel and instituted a hiring freeze for the balance of the second quarter.
The moves are expected to save C.H. Robinson about $60 million over the remainder of the year. Operating income at the company’s largest segment, North American Surface Transportation, fell 53.4% in the first quarter to $98.5 million from $211.3 million a year earlier. The decline came even as revenue for the segment edged up 1% to just above $2.8 billion. That increase in freight volume was offset by lower pricing. Excluding the change in fuel prices, C.H. Robinson’s average North America truckload rate per mile fell by 8.5% in the quarter.
“The first quarter was a tough quarter. There is no way to call it anything other than that,” Biesterfeld said in a conference call with analysts and investors April 29.
The North American Surface Transportation segment is shedding workers in a move to use technology and other gains in efficiency to improve productivity, Biesterfeld said. The headcount in the division fell 5.2% during the quarter, even after including the absorption of Prime Distribution Service. C.H. Robinson purchased Prime from Roadrunner Transportation Systems Inc. for $225 million in cash during the quarter.
Revenue in C.H. Robinson’s Global Forwarding segment fell 1.3% to $530.4 million from $537.6 million a year earlier. The segment’s operating income dropped 15.8% to $12 million from $14.2 million.
As states and cities started to issue shelter-in-place orders to reduce the spread of COVID-19, C.H. Robinson saw commerce outside of critical industries “draw to a halt,” Biesterfeld said.
“It seemed to hit small businesses first and the hardest, and had an outsized impact on LTL compared to truckload,” Biesterfeld said. “Obviously, as entire industries shut down such as automotive, this had a negative impact on volumes.”
The largest declines came in automotive and manufacturing, which account for about 25% of the company’s revenue.
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“The flip side of this is that consumer staples and food and beverage, retail, paper and technology all continue to perform really well and show volume growth. These industries make up about 40% of our revenues,” Biesterfeld said.
The company’s capital expenditures will hover in the $60 million-to-$70 million range for the year, with most of the spending going to technology improvements. It doesn’t plan cuts.
“Long-term, our strategic focus remains unchanged. … We need to make investments today to engineer costs out of our model for tomorrow,” Biesterfeld said.
The company ended the quarter with $294.6 million in cash, down from $447.9 million on Dec. 31.
“We continue to have a strong balance sheet and exited the first quarter with over $1.2 billion of liquidity,” Biesterfeld said. “We are well-positioned to weather the economic uncertainty in the months ahead.”
The company plans to maintain its quarterly dividend, he said.
C.H. Robinson ranks No. 7 on the Transport Topics Top 50 list of the largest logistics companies in North America.
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