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C.H. Robinson Worldwide posted a dip in third-quarter profits as it got squeezed between freight contracts and the cost of shipping the cargo.
The logistics and shipping company, based in Eden Prairie, Minn., said net income fell 7.1% to $136.5 million from $146.9 million in the same period a year earlier. Diluted earnings per share dipped to $1 from $1.07.
Revenue increased 9.6% to $4.2 billion from $3.9 billion in the same period a year earlier. Net revenue — the difference between what C.H. Robinson collects from clients and the cost of using third parties to ship their goods — fell 7% to $589.3 million from $633.4 million.
Truckload net revenue per day hit a low point in July and then improved in the subsequent months, CEO Bob Biesterfeld said in an Oct. 28 conference call with industry analysts.
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As the economy started to recover from the recession caused by the COVID-19 pandemic, freight “demand recovered faster than carrier capacity returned to the marketplace,” Biesterfeld said.
“More loads moved up to the spot market, which causes spot pricing to increase and drove sharp increases in our cost of purchase transportation,” he said.
The squeeze was most pronounced in the North American Surface Transportation segment, the company’s largest. The segment’s operating profit fell 30.5% to $122.5 million.
Excluding fuel surcharges and costs, C.H. Robinson’s average North American truckload linehaul rate per mile rose by 10.5% in the quarter. But the truckload linehaul cost per mile jumped by 16.5%.
Truckload volume rose 0.5% and less-than-truckload volumes grew 13.5%. The company said both represented market share gains when compared with an 8% decline in industry volumes, as measured by the Cass Freight Index.
Total revenue rose 3.5% to $2.9 billion compared with the same quarter a year earlier. The gain came from higher truckload pricing and an increase in less-than-truckload shipments. But net revenue still dropped 15.2% to $122.5 million as C.H. Robinson paid more to ship goods than it collected from clients.
The company is working with some clients to negotiate new pricing. Additionally, it has contract talks with 150 of its top 700 truckload customers this quarter, providing an opportunity to better match fees with the cost of transportation, Biesterfeld said.
C.H. Robinson’s Global Forwarding segment posted gains in revenue and operating profit, helped by higher pricing in air and ocean freight. That continued a second-quarter trend that resulted from a decline in commercial air travel because of the pandemic.
The segment’s revenue rose 39.2% to $832 million. Net revenue increased by 16.1% to $157.7 million. Operating profit jumped 87.6% to $46.3 million.
The company said the outlook for future quarters is improving.
“We believe we are still in the midst of a strengthening freight cycle that we anticipate will continue into 2021. Freight markets are continuing to tighten in the fourth quarter due to higher demand as we enter the holiday season and lower availability of carrier capacity,” Biesterfeld said.
The CEO said some of the savings and other initiatives C.H. Robinson launched at the start of the pandemic are likely to improve its performance going forward.
The logistics firm, for example, slashed its travel budget. While Biesterfeld expects business travel to resume eventually, it will be at a lower level as the company has learned how to work virtually with its staff, clients and business partners.
Likewise, C.H. Robinson is reviewing its real estate portfolio. Biesterfeld said the company has invested in technology to enhance remote work productivity and that it doesn’t need all the office space it was occupying prior to the pandemic.
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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