Asset Light, Profit Rich

Operating without its own equipment on the road appears to make C.H. Robinson Worldwide a tough target for the economic downturn. Although it took a 15.6 percent decline in total revenue, the company expanded its net profit 2 percent to $95.5 million. Its overall transportation revenue fell 20 percent to $1.6 billion, but net transportation revenue — what it keeps after direct spending on carrier capacity — was down just 0.2 percent to $309.8 million.

C.H. Robinson “continues to out-execute its peers,” particularly asset-based transportation operators, Robert W. Baird analysts Jon A. Langenfeld and Benjamin J. Hartford said in a note to investors. They attributed the third-party logistics company’s success to its “non-asset-based, variable cost structure.”

“CHRW is one of the only transports to grow earnings,” Langenfeld and Hartford said. But its also one of several third-party logistics operators to report resilient, if not expanding earnings in a period when many operators of planes, trucks and ships are struggling to maintain cash flow as capacity outweighs demand in many markets. C.H. Robinson pins its strength on its model.

“One primary way we’ve responded to the recession is to remain very focused on sales and trying to grow our market share,” John Wiehoff, chairman and CEO said in a conference call with investment analysts. “We feel like our business model and strong foundation is something we can leverage in this environment.”

The company maintained the momentum it built in the second quarter, when it increased its net profit 2 percent, after profit dipped 1.1 percent in the first quarter. Some of the Minneapolis-based company’s success came through cost cutting. Operating expenses dropped 2.6 percent to $197.8 million.

C.H. Robinson’s net third-quarter truck revenue, which includes truckload and less-than-truckload services, actually rose 2.1 percent at a time when many asset-based truckload and LTL carriers reported double-digit declines in sales. C.H. Robinson reported $268.1 million in truck net revenue, compared with $262.5 million a year earlier.

“We feel positive about our truckload volumes being roughly flat for the quarter, we feel positive about our volume growth in LTL transactions,” Wiehoff said.

Lower fuel costs and lower cost of capacity boosted truckload net margins, while LTL margins remained stable despite pressure on truckload and LTL rates, the company said. Truckload rates were down about 7 percent from a year earlier.

Trucking represented about 87 percent of the company’s net transportation revenue, followed by ocean, intermodal and air. Intermodal net revenue declined 30.1 percent, driven by price cuts and volume decreases, the company said. Ocean transportation was down 21.9 percent, and air transportation 1.9 percent.

Pricing came under pressure in all modes, Wiehoff said, primarily because of the loss of fuel surcharge revenue but also because of intense discounting and competition in the overall freight market and weak demand.

The company saw the depth of the recession as a good time to go shopping, completing several acquisitions in the past two quarters. Earlier this year it purchased Walker Logistics Overseas, which pumped up volume and revenue in its ocean and air transportation segments and International Trade & Commerce, a U.S. customs brokerage. In the third quarter, the acquisition of Rosemont Farms and Quality Logistics helped drive up sourcing net revenue 9.3 percent to $30.1 million.

“We continue to invest in expanding all our capabilities,” Wiehoff said.

Contact William B. Cassidy at wcassidy@joc.com.