Third-party logistics giant C.H. Robinson Worldwide shipped more goods in the first quarter, but its transportation revenue decreased thanks to higher operating costs that rose more quickly than its ability to raise pricing.
C.H. Robinson’s total revenue was up 22.9 percent, hitting $2.1 billion, but its net transportation revenue declined 4.3 percent to $284.9 million from a year ago.
The company’s net income declined 1.6 percent for the quarter to $84 million.
The first quarter represented "the most challenging external environment" for C.H. Robinson's third-party, non-asset business environment, said R.W. Baird & Co. investment analyst Jon A. Langenfeld. "The first half will be the most challenging part of the freight cycle for CHRW given rising freight rates and tightening capacity."
However, he said the company should "thrive in a capacity constrained environment," which will eventually push its own rates higher.
The Minneapolis-based non-asset logistics provider reported revenue decline of 5.7 percent in trucking, 12 percent in ocean shipping and 13.3 percent in intermodal.
Those declines were partially balanced by a 34.6 gain in customs brokerage and transportation management revenue and a 20.4 percent boost in air freight sales.
Transportation net revenue declined and margins tightened in spite of higher volumes in all modes.
In trucking, which accounts for 84 percent of C.H. Robinson’s transportation business, less-than-truckload volume shot up 40 percent and truckload shipments 22 percent. The company reported higher volumes in intermodal, ocean and air freight as well.
But higher costs and weak pricing combined to sap the value from those volumes.
Excluding fuel surcharges, “our truckload pricing to our customers decreased approximately 3 percent,” the company said in its earnings statement.
Excluding the impact of higher fuel prices, truckload costs rose at about the same rate.
A 20 percent increase in LTL net revenue and higher volumes were “partially offset by decreased net revenue margin and lower revenue per shipment,” the company said.
Revenue per LTL shipment declined due to a drop in pricing and lower average weight per shipment, said C.H. Robinson.
“Net revenue margin fluctuations are a part of our business model that we believe we are very capable of managing, but are difficult to predict and can have a significant impact on our results in the short term,” said John P. Wiehoff, chairman and CEO.
“The trends of margin compression and strong volume growth during the first quarter of 2010 have continued into the first three weeks of April, with our total net revenue activity approximating that of the first quarter,” Wiehoff said.
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