Tuesday, August 7, 2012

Another tough quarter for Expeditors International of Washington

Trying times continue for Expeditors International of Washington. Second quarter net revenues declined 4% to $453.7m while total revenue declined 5% to $1.5bn. The company’s largest division, airfreight, continues to suffer, thanks to declining demand and smaller shipments. Its largest geographic region, Asia Pacific, is also suffering due to falling demand in exports from this region. In fact, Expeditors total revenue from this region fell 4.2% during second quarter while net revenues declined almost 10%.

Ocean freight fared a bit better although yields dipped a bit which, according to the company, is typical for second quarter due to the time lag between when carrier rates increases during annual May contract negotiations and on a year over year basis.
Volume-wise, airfreight declined 10% during the quarter. The quarter started a bit rough with April volumes declining 17% but by June the decline was 6%. Ocean freight volume increased 1% thanks to strong growth in June at 3%.

Customs brokerage and other services posted positive growth due to the international roll out of its domestic time definite product – Transcon Services. In late 2011, Expeditors noted plans to expand this service into Europe and Asia. Little information is available for this service but it appears to be a bundled cross-border solution that utilizes all modes of transportation, but in particular road services. Perhaps not only the success along the US – Canada – Mexico borders along with increases in intra-regional freight movements but also airfreight declines, prompted the company to expand this solution abroad.
According to the company, the focus continues to be on customer retention and profitable market share expansion. During the quarter, Expeditors opened an office in Montevideo, Uruguay and a satellite office in Xuzhou, China. Its Colombo, Sri Lanka office was closed.

Regionally, North America continues to post both positive net revenue and total revenue, 16.4% and 3.3% respectively. Again, this appears to be due to its cross-border solution, particularly along the US-Mexico border. All other regions-Latin America, Asia Pacific, Europe & Africa and Middle East and India all posted negative net revenue and total revenue. The US region posted a 4% decline in total revenue but a slight increase in net revenue.
Little guidance for the rest of the year was provided, however, CEO Peter Rose noted there is still uncertainty in the global economy and expects similar market trends to continue for the short to medium term. Until then, he said, “These tough times too will pass and it should go without saying at the end of the day, we’d rather be us, than anyone else inside or outside this industry.”