Dive Brief:
- C.H. Robinson said in its Q4 2017 earnings call that "LTL pricing and cost increased in the quarter as a result of larger shipment sizes, higher purchase transportation cost and increased fuel prices versus last year's fourth quarter."
- CEO John Wiehoff said the price increases were "significant," clocking in at a 15% rise YoY.
- Wiehoff also praised the new tax reform law, which he said "will be a benefit to our business" and said he expects the benefits to allow for "continued investment" and to remain "globally competitive."
Dive Insight:
As the trucking capacity continues to tighten, it's starting to have a notable effect on 3PLs.
Even though C.H. Robinson's Q4 net income increased 24.7% YoY in Q4 2017, this late year increase could not offset a 1.7% decline for the year overall. The price hike could adversely affect Q1 2018 — or 2018 as a whole — if the capacity crunch continues to haunt the industry.
With the truck driver turnover rate at almost 100%, it doesn't look good for the industry going forward. CFO Andrew Clarke said the ELD implementation in December didn't help, despite a strong holiday season.
"Given the healthy economy, high freight demand and tight capacity environment, we do expect prices to increase in 2018," Wiehoff said.
That said, it seems as though tax reform is treating C.H. Robinson — and other companies of its size — well. Clarke said the company currently has an "active M&A pipeline," which could mean the 3PL is looking to acquire smaller companies and ramp up the competition with XPO Logistics.
He also said the passage of the tax reform bill "lowered our fourth quarter provision for income tax by $31.8 million."
That's a boon for a company like C.H. Robinson, although the company did note in the earnings call that its debt increased YoY, and its balance sheet indicated that total liabilities increased 15.6% YoY, which could be a warning sign. The new tax law now limits interest expense deductions up to 30% of earnings before interest, taxes, depreciation and amortization (EBITDA), which means companies carrying more debt may need to restructure in 2018 to remain competitive.
C.H. Robinson was not immediately available for further comment.
