C.H. Robinson revenue drops 35% amid compressed rates

Multimodal transport company C.H. Robinson continued its downward trend in the second quarter of 2023, earning revenue of $4.4 billion, a year-over-year drop of 35%. [caption id="attachment_57137530" align="alignright" width="300"] (Photo/C.H. Robinson)[/caption] THE BIG PICTURE: Reporting similar Q2 figures as others in the industry, C.H. Robinson executives said that Q2 global freight markets continued to be impacted by weak demand, high inventories and excess capacity, which resulted in a more competitive marketplace with suppressed transportation rates. “While the near-term freight environment presents some challenges, the strength of our people, scaled network, financial model and investments in improving efficiency position us well for the eventual rebound,” President and Chief Executive Dave Bozeman said in Wednesday’s earnings call. This was Bozeman’s first earnings call with the company; he became CEO in June. BY THE NUMBERS: Q2 saw reduced profitability, driven largely by decreased revenue in the Global Forwarding division: Gross profits decreased 35.9% YoY to $656.7 million; Personnel expenses decreased 15.2% YoY to $377.3 million and average headcount declined 10.1%; Global Forwarding division revenue was $779.9 million, down 62.7% YoY; and Adjusted gross profits by air were $33.7 million, down 40.7% YoY. The company reported the following figures for H1 2023: Revenue decreased 33.6% to $9 billion; Global Forwarding division revenue was $1.6 billion, down 63.4% YoY; and Adjusted gross profits by air were $65 million, down 45% YoY. WHAT THEY’RE SAYING: Even with a weak market, C.H. Robinson executives said air volume increased in Q2. “Market conditions in our global forwarding business were also soft behind weak demand and plenty of capacity,” Chief Financial Officer Mike Zechmeister said in the earnings call. “Despite that, our ocean and air volume each grew sequentially, exhibiting the progress our global forwarding team has made through adding new customers, diversifying trade lanes and verticals, and leveraging investments in technology and talent over the past several years.” Cash generated from operations totaled $224.8 million in the second quarter, an 18% YoY decline. “Our capital allocation strategy is grounded in maintaining an investment-grade credit rating, which allows us to optimize our weighted average cost of capital,” Zechmeister said. “With a year-over-year earnings reduction and the half a billion dollars of debt paid down, we’ll continue to manage our capital structure to maintain our investment-grade credit rating. As you would expect, the cash that we use to reduce debt generally reduces the amount of cash available for share repurchases.” NOTEWORTHY: The company is looking to expand its use of technology. “I’m excited about the potential benefits from generative AI in conjunction with the machine learning and artificial intelligence that the company has already been utilizing,” Bozeman said. “With more data and history to leverage than any other 3PL, we have opportunities to harness the power that these advanced technologies now offer to further capitalize on our information advantage. And we’ll continue to look for and pursue those opportunities.” The company uses “shipments per person per day” to measure productivity improvements and it recorded a 12% YoY bump in this area year-to-date, according to Chief Operating Officer Arun Rajan . The goal is a 15% YoY increase in this metric by the end of 2023, and enhanced technology is expected to play a key role in this. “Over the last six months, we’ve increased our focus on opportunities to streamline processes that are core to improving the customer and carrier experience, and enabling us to decouple volume and headcount growth, and drive increased productivity,” Rajan said in the earnings call. “To reach our 2023 goal, we have accelerated the digital execution of critical touch points in the lifecycle of a load, thereby reducing the number of manual tasks per shipment and the time per task. A few areas that will give seamless progress include increasing the automatio n of in-transit tracking, case management tasks and appointment-related tasks. “We’ve also been using machine learning, artificial intelligence and our large data state to improve outcomes for our customers and carriers,” he continued. MARKET REACTION: C.H. Robinson stock ( NASDAQ: CHRW ) remained relatively unchanged following the company’s earnings call. It ended today at $98.22 per share, a 0.8% increase from market open. Citigroup maintained coverage of C.H. Robinson with a “neutral” recommendation. FUTURE LOOK: With the planned tech enhancements, C.H. Robinson executives believe the company’s services will improve, leading to increased profitability. “I’m incredibly excited about the direction we are headed, in our ability to build on the productivity and cost control progress that we’ve made,” Zechmeister said. “By leveraging lean principles to reduce waste and the emerging benefits of our combination of machine learning and generative AI across our skilled model, we are positioned well to deliver greater efficiency and improved competitiveness in the marketplace to generate greater value for Robinson shareholders.” Join Air Cargo Next for the second annual Air Cargo Tech Summit on Monday, Sept. 18, and Tuesday, Sept. 19, at the Brussels Marriott Hotel Grand Place in Belgium. For more information on the summit and to register, click here .

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