'Extreme, unprecedented' trucking market changes hit CH Robinson

Dive Brief:

C.H. Robinson CEO Bob Biesterfeld blamed "extreme, if not unprecedented, cyclical changes in our North American trucking market" for below-target revenue and margins in the fourth quarter of 2019. "We are not immune to large swings in the freight market," Biesterfeld said on the 3PL's Wednesday earnings call. "No one party has the power to control the market pricing dynamics."
To combat the effects of market fluctuations, C.H. Robinson will double down on technology, Biesterfeld said. Last September, the company announced a commitment to invest $1 billion in technology over the next five years.
C.H. Robinson also announced plans this week to acquire Prime Distribution Services from Roadrunner for $225 million, adding 2.6 million square feet to C.H.'s warehouse network along with additional lane density.

Dive Insight:

C.H. Robinson forecasted in October the market would remain favorable to shippers through the first half of 2020, and so far, the data shows the 3PL's prediction to be true.

Throughout 2019, spot and contract pricing dropped sharply compared to 2018. Price per mile billed to C.H.'s customers fell 11% in the fourth quarter, Biesterfeld said. Compounding the situation for carriers, average fuel prices have been on a steady increase for the last decade.

"With all the ups and downs, truckload pricing has been more inflationary than the broader U.S. economy," Biesterfeld said on the call. The 3PL's North American Surface Transportation saw net revenues decrease 23.2% during the fourth quarter, which Biesterfeld attributed primarily to truckload declines.

C.H.'s expansion of capabilities outside of trucking services shows a strategic move toward customer-centric options, catering to shippers who want end-to-end supply chain offerings from their 3PLs.

The investment in warehousing and technology also allows C.H. to hedge against uncertainty in the trucking sector with additional business lines to keep the overall balance sheet healthy.

Biesterfeld emphasized the freight market is cyclical and the market could flip back to a carriers' market (some analysts say by early to mid 2020), which is why C.H. doesn't "believe in the idea of chasing freight," the CEO said. "Prices reset annually ... and freight is distributed to those providers that give the best in most comprehensive service," he said.