REVENUES RISE BY 48.3% IN THIRD QUARTER. COMPANY IS BULLISH ON TECHNOLOGY, BUT EXPECTS SUPPLY CHAIN TO REMAIN TROUBLED AWHILE LONGER.
C.H. Robinson Worldwide (chrobinson.com), Eden Prairie, Minn., cited increased use of technology and other key factors for its robust third-quarter operating results.
In an Oct. 26 conference call with securities analysts, president and CEO Robert Biesterfeld said that in the company’s North American truckload business, “We’ve made steady progress in a sustained tight capacity environment. Through the continued re-pricing of our contractual portfolio and higher volumes of spot business, our adjusted gross profit or AGP per truckload returned to our five-year average and our AGP per mile in the third quarter exceeded both our 5 year and 10-year averages. We accomplished this while growing our truckload volume 4.5% year-over-year and 3.5% on a sequential basis.”
REVENUES HIT $6.3B
Companywide, total revenues for the quarter increased 48.3% to $6.3 billion, with gross profits up by 43.5% to $839.0 million. Income from operations climbed by 84.7% to $310.8 million.
“Within the quarter, we saw an acceleration of truckload volume per business day in each month of the quarter with 7% year-over-year growth in September and that growth trend has continued into October,” Biesterfeld said. “For the quarter, NAST (North American Surface Transportation) grew AGP (average gross profit) by $83 million or 36% year-over-year through a 4.5% increase in volume and a 30% increase in AGP per load. This included a 14% increase in spot market volume year-over-year due in part to an 85% increase in volume that was driven through our proprietary dynamic pricing engine, which is now on pace to generate $1 billion in spot truckload freight for the year. Nearly half of our spot or transactional business was priced via integrations with our dynamic pricing engine in the third quarter, delivering real time pricing capacity assurance and the largest network of truckload capacity in North America.”
In answer to one analyst’s question, Biesterfeld noted that some contract terms seem to be changing in the industry. “I think two-thirds of our business is still on 12-month terms, but a third of our contractual business being on something other than 12-month terms is new to us. And I think it’s relatively new to the industry… But that annual contract still has held up to be the main mechanism for us to price contractual freight and the main mechanism in which customers are requesting it.”
C.H. Robinson closed the quarter with a mix of about 60% contractual volume and 40% transactional volume. Its average truckload linehaul cost per mile paid to carriers (excluding fuel surcharges) increased 26% versus the year-ago period. The average linehaul rate billed to its customers (again excluding fuel surcharges) increased 27% year-over-year. This resulted in the highest cost and price per mile on record and a 33% year-over-year increase in its NAST truckload adjusted gross profit per mile. This, combined with a 2% decrease in the average length of haul, resulted in a 30% increase in AGP per truckload.
Biesterfeld also commented on the company’s new partnership with SPS Commerce (spscommerce.com), the Minneapolis-based provider of cloud-based supply chain management software to retailers, suppliers and third-party logistics providers.
He noted that SPS Commerce is a leader in its space, with more than 95,000 customers on its platform “that they’re connecting directly into the retail ecosystem and managing the flow of information. It’s such a natural marriage and a natural partnership… So our ability to be the LTL provider and help the shipper customers of SPS Commerce access that LTL marketplace in a fully automated way, is a real win for the customers of SPS. It’s an incremental opportunity for us.
But the supply chain as a whole will remain troubled awhile longer, Biesterfeld noted: “None of us know exactly when the cycle is going to begin to turn or how long it will last. But with everything that we see today, we believe that the cycle will in fact extend due to the global constraints around adding capacity and labor while demand remains strong. I certainly don’t believe that having 70 ships anchored in Los Angeles is by any stretch the new normal, but I also don’t see us reverting to a market resembling 2019 anytime soon.”
Biesterfeld said labor shortages permeate the entire supply chain, contributing a great deal to backups. “You look at inventory to sales ratios and clearly there is a lot of pent-up demand behind that in order to get to more normalized levels there.”
Here are selected highlights from the conference call:
—Digital investments, such as the company’s new Market Rate IQ, are spurring growth. This program lets shippers compare their rates to the market averages and identify savings opportunities.
—Volume being delivered through real time dynamic pricing tools has grown significantly. The company is also accelerating the addition of digital connections, with 100 new customers added via TMS and ERP connections in the third quarter of 2021.
—The number of daily and monthly average users across the customer- and carrier-facing platforms continues to grow. C.H. Robinson is delivering new capabilities to carriers through web and mobile versions of Navisphere Carrier and Driver. During the quarter, it had more than 340,000 fully automated bookings in its mass truckload business — an increase of nearly 80% year-over-year.
LINEAGE OPENS VA. WAREHOUSE
Revenues rise by 48.3% in third quarter. Company is bullish on technology, but expects supply chain to remain troubled awhile longer.
Lineage Logistics (lineagelogistics.com), Novi, Mich., opened its newest fully automated facility near the Port of Virginia’s Virginia International Gateway, in Portsmouth, Va., on Oct. 27. The location is amid an integrated network of highways, air, rail and sea services.
The 167,264-square-foot cold storage warehouse, with 26,000 pallet positions and blast-freezing capabilities, represents an $84 million investment. It joins Lineage’s network of more than 22 fully automated facilities worldwide.
COLD SUMMIT PROJECT SET FOR CHICAGO IN ’22
Sun Valley, Idaho-based Cold Summit Development (coldsummit.com) has begun construction of Cold Summit Chicago I, a multi-tenant speculative cold storage project in the Chicago metro area. Opening is planned for next August. The 213,600-square-foot development includes 7,000 square feet of office and fully convertible temperature-controlled suites. The project follows developments by Cold Summit in Dallas and Phoenix.
Chicago’s cold storage is tight on supply, with a high barrier to entry for users and investors. This makes it an attractive candidate for development, according to the company.
“Chicago is a premier market for industrial real estate, serving last-mile distribution to the third-largest metro population in the U.S., as well as filling its role as a national intermodal logistics hub,” according to Alex Langerman, co-founder and COO of Cold Summit Development.
The project is at 5020 W. 73rd St. in Bedford Park, Ill., less than 15 miles from downtown Chicago and three miles from Midway Airport. It is adjacent to the CSX intermodal terminal, the largest in the CSX network.