According to the CEO, airfreight tonnage spiked late in fourth quarter resulting in carriers quickly imposing rate increases. Expeditors was not able to respond quick enough to adjust its sell rates. Still, for the quarter, the airfreight tonnage increased 5% while total air freight revenues declined slightly 0.7% to $700.8m. For the year, air freight revenues declined 9.5% to $2.6bn.
Ocean freight tonnage continued its negative trend in the quarter, declining 6%. Revenue, however, increased 7% for the quarter to $472.3m and 5% for the year to $1.9bn.
Lastly, customs brokerage & other revenue increased 1.3% in the fourth quarter to $359.9m and 1.9% for the year to $1.4bn.
For the year, all reporting geographies reported declines in total revenue except for Other North America which recorded a 5.5% annual increase to $54.4m. This is probably due to the increase in cross-border trade among the US, Canada and Mexico. Europe and Africa had the biggest revenue decline for the year at 8.4% to $220.3m which probably is due to the challenging economic climate Europe experienced.
For the fourth quarter, Other North America, Latin America and Asia-Pacific noted increases in revenue of 5.7%, 3.3% and 5.3% respectively.
CEO, Pete Rose, noted that for 2013, the company has developed a strategy to retain existing customers while attracting new business. Included in this strategy is refining its pricing structure to ensure the company is focused on market share expansion through more timely and efficient rate quotation; Continue with its successful customer-facing network engineering offerings that assist in customer supply chain optimization initiatives and finally emphasis on customer service.
Expeditors International of Washington’s earnings illustrates the troubles the freight forwarding market experienced throughout the year. Tradelane shifts, declines and shifts in demand, increased competition and reduced capacity highlight some of the market issues. Financially, Expeditors still remains heavily exposed to the airfreight market despite its attempts to balance its portfolio more evenly. In 2011, airfreight revenue was responsible for 47% of total revenue whereas in 2012 it was responsible for 43.5% of total revenue. The shift to ocean freight was evident as it made up 33% of total revenue, a 2.5% increase from 2011.
Geographically, Expeditors remains too exposed to the Asia Pacific region which is responsible for over 50% of the company’s total revenue. As manufacturing relocates closer to customers, this exposure will weigh negatively on the company’s revenues unless it expands further in the intra-Asia trade.
A bit of optimism, however, for Expeditors as well as other freight forwarders as air cargo volumes were particularly strong from Asia leading up to the Chinese New Year. But the rest of the year may not be quite as positive.