C.H. Robinson gains volume, strengthens profit

William B. Cassidy, Senior Editor | Oct 28, 2015 4:17PM EDT

The economy may be softening, but for C.H. Robinson Worldwide, the largest U.S. non-asset third-party logistics company, business keeps rolling in. North American truckload volumes rose 7 percent in the third quarter, while less-than-truckload volumes rose 32 percent year-over-year.

“This is the 24th consecutive quarter where we have grown our year-over-year North America truckload volume,” Andrew C. Clarke, C.H. Robinson CFO, told Wall Street analysts. Truckload net revenue, after payments to truckload carriers, rose 10.8 percent to $344.7 million.

C.H. Robinson is taking market share, Clarke believes, as volumes are declining slightly at other companies against which the 3PL benchmarks its performance. 

Globally, demand for freight forwarding was softer, partially because of a tough comparison with the third quarter of 2014, when the West Coast port crisis spurred business. Ocean transportation net revenues increased 1.6 percent on a small volume increase, the company said.

Net transportation revenue rose 12.5 percent to $560.1 million in the quarter, while gross revenue dropped 1.4 percent to $3.42 billion. “Net revenues grew more than total revenues, due primarily to the impact of lower fuel prices this year,” John P. Wiehoff, chairman and CEO, said.

Net profit increased 11.6 percent to $139.4 million, while operating profit before taxes and other charges rose 14.4 percent to $232.7 million. The company's net revenue margin improved by 220 basis points from last year's third quarter to 18.4 percent.

Both truckload and LTL volume increases tracked previous quarters. Truckload volume at C.H. Robinson rose 7 percent in the second quarter and 6 percent in the first quarter, while LTL volume rose 33 percent and 28 percent in the same periods. LTL net revenue, the second-largest portion of C.H. Robinson’s net sales, rose 38.6 percent from the year-ago quarter to $94.2 million.

C.H. Robinson is still reaping benefits from its $365 million acquisition of Freightquote last year, as well as earlier acquisitions, especially  the $635 million acquisition of forwarder Phoenix International in 2012, that expanded its scale and footprint in North America and globally.

Freightquote contributed about 33 percentage points to last quarter’s 38.6 percent LTL net revenue growth, and about 3 percentage points to the 7 percent increase in truckload net revenue, C.H. Robinson said. Freightquote also brought higher margin business with smaller customers that $11.9 billion C.H. Robinson, the fourth largest 3PL globally, is pursuing.

Net intermodal revenue dropped 4 percent from a year ago to $10.2 million, reflecting some mode switching, C.H. Robinson said Oct. 27. “The intermodal volume continues to be impacted by lower fuel prices and a looser capacity in the truckload environment with some shippers converting freight back over the road,” Clarke said in a conference call transcribed by Seeking Alpha.

The latest shipper survey from Wolfe Research, a New York-based transportation investment research firm, shows some freight beginning to flow back to intermodal rail after three quarters of diversion, though the pace of share gain remains slow.

On the domestic side, C.H. Robinson drove deeper into the small business market, thanks in part to its acquisition of Freightquote.com last year. The 3PL also added more than 3,000 trucking companies to its network, and those carriers moved more than 20,000 shipments. Year-to-date, C.H. Robinson has added approximately 9,000 new contracted carriers, Clarke said.

As the pace of the U.S. economy slows, “capacity is available and there are minimal disruptions to the procurement plans of shippers,” Clarke said. “The trucking industry continues to be a cyclical industry,” Wiehoff said. The trucking market in North America continues to be a little bit soft from a demand standpoint.” That means the cycle is turning in the shipper’s favor, in terms of pricing.

“There's no question as you look at our results and look at the industry that the price increases and the rate of growth have tapered off during the year as the market has softened,” Wiehoff said.

In the long-haul, however, Wiehoff and Clarke expect truckload pricing to continue rising, partly because of higher equipment costs and higher expenses associated with truck drivers.

Net revenue for C.H. Robinson’s global freight forwarding business increased 1.8 percent in the quarter, with net ocean revenue rising 1.6 percent to $58.3 million. Net air freight revenue dropped 1.3 percent to $20.3 million as rates fell despite an increase in volume.

Increased international  transaction volumes pushed Customs revenue up 8.1 percent from a year ago to $12 million, while revenue from other logistics services, including warehousing and managed transportation, rose 7.3 percent to $20.4 million in the quarter, C.H. Robinson said.  

C.H. Robinson is “harvesting the efficiencies” it hoped to gain by acquiring Phoenix, Wiehoff and Clarke said. “Where we are today in year three (after purchasing Phoenix) is, quite frankly, where we thought we’d be in year five,” Clarke said. Cross-selling North American 3PL services to legacy Phoenix forwarding customers “has gone extremely well,” and C.H. Robinson is putting more emphasis on selling global forwarding services to its trucking and rail customers.