XPO | XPO latest LTL carrier to profit past lower volume, revenue

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XPO latest LTL carrier to profit past lower volume, revenue
William B. Cassidy, Senior Editor | May 04, 2016 8:41AM EDT


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A slower economy has not necessarily driven less-than-truckload carriers off the road. XPO Logistics is the latest LTL operator to boost profits and increase base rates despite lower shipping volumes and revenue. That indicates XPO is bringing a sharp focus on profitability and cost control to the former Con-way Freight LTL business, which it acquired late last year.

XPO’s LTL operating revenue in North America dropped 4.2 percent year-over-year in the quarter to $820 million, but operating profit increased 54 percent to $58.3 million. Revenue per hundredweight, or LTL yield, was flat, but if fuel surcharges are excluded, yield rose 4.2 percent. That indicates XPO was able to raise base rates and remove less-profitable accounts from its books.

“The LTL operation was one of our brightest stars in the quarter,” Bradley S. Jacobs, chairman and CEO of the $15 billion logistics company, said in an interview. “Our operating ratio improved 270 basis points, from 95.6 to 92.9.” The former Con-way LTL unit had the best operating profit of any public LTL carrier to report first-quarter earnings except Old Dominion Freight Line.

LTL carriers in the U.S. have had better luck raising their rates in early 2016 than their truckload counterparts, and some — though not all — are improving their profitability as well.

XPO’s performance in the first quarter, raising organic revenue almost 12 percent while expanding freight brokerage and last-mile logistics business in the U.S. and transportation and contract logistics in Europe, should ease some market concerns about the logistics operator’s multi-billion-dollar purchases of asset-based companies Con-way and Norbert Dentressangle.

“All those who thought, ‘This is a non-asset company, how can they manage this asset business?’ They be should be rethinking their views,” said Satish Jindel, president of the transportation research firm SJ Consulting Group. “They managed cost and focused on basics.”

XPO Logistics is on course to challenge FedEx Freight for its prime place atop the U.S. LTL market, Jindel said. “They are the closest carrier in terms of transit time to FedEx Freight’s priority service, and they also do both regional and long-haul freight with one network.”

Jacobs said XPO is well on its way to meeting its target of improving LTL profitability by $170 million to $210 million by late 2017. The North American LTL operation has a $90 million six-month run rate of improved profitability dating back to the acquisition of Con-way in November. Part of that improvement comes from tightening back-office operations, he said.

XPO also saved “tens of millions of dollars” by putting $550 million of outsourced LTL linehaul transportation up for bid in the first quarter — just when truckload rates came under greater pressure because of excess capacity in that sector. “We put that linehaul out to rebid and while we kept most of the same carriers, the market has come down quite a bit,” Jacobs said.

XPO’s strong quarter for trucking extended across the Atlantic. “In Europe, our transportation business experienced strong shipment growth in the first quarter, and that trend continued into April,” Jacobs said. “France had good full truckload growth and our European LTL business performed consistently well.” XPO reported $595.4 million in European trucking revenue.

Total transportation revenue, including freight brokerage, reached $2.3 billion. Logistics revenue, buoyed by acquisitions, increased nearly 800 percent with gross revenue of $1.3 billion and net revenue of $950 million. First-quarter operating profit totaled $75.4 million for transportation and $31.9 million for logistics. Overall, XPO had total revenue of $3.5 billion and a net loss of $23.2 million in the quarter driven by acquisition-related costs.

XPO’s increased trucking profit follows strong profit growth at YRC Worldwide’s two main divisions, national carrier YRC Freight, which raised profit from $200,000 a year ago to $4.1 million, and the YRC regional carrier group, which increased combined profit 169 percent to $12.4 million. XPO increased its yield despite a 5.5 percent drop in shipment volume. “We’ve been focused on growing small and medium-sized accounts as well as 3PL business and shedding some national account business that was losing money,” Jacobs said.

“This should give thought to other LTL carriers,” Jindel said. “If this new kid on the block can make this happen, then we should be able to get our operating ratios into the low 90s too.”

Contact William B. Cassidy at [email protected] and follow him on Twitter: @wbcassidy_joc.
http://www.joc.com/international-lo...rofit-past-lower-volume-revenue_20160504.html
 
"saved “tens of millions of dollars” by putting $550 million of outsourced LTL linehaul transportation up for bid in the first quarter"

You Linehaul Drivers make too much money!
 
"saved “tens of millions of dollars” by putting $550 million of outsourced LTL linehaul transportation up for bid in the first quarter"

You Linehaul Drivers make too much money!

This was a rebidding of $550 million of already subbed out purchase transportation. The earnings call said they will now handle that volume for $500 million. Apartently the company had been over paying. Which is horrific considering for fantastic ( sarcasm ) service we got for that money.
 
This was a rebidding of $550 million of already subbed out purchase transportation. The earnings call said they will now handle that volume for $500 million. Apartently the company had been over paying. Which is horrific considering for fantastic ( sarcasm ) service we got for that money.

Why not use XPO Drivers to move the freight and cut even more costs?!
 
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