NEWS\\\


Issue 5 2012


19


Forwarders maintain profits in face of recession, says new report


The freight forwarding industry has come through the recession with its profitability relatively intact, but it has been a volatile and difficult year, say consultants Transport Intelligence (Ti) in a new report. Global Freight Forwarding 2012, published on 12 July


and one of the few surveys dedicated to the industry, found that overall freight forwarding volume bounced back in 2010 from the low point reached following the bank collapses and global credit crisis in 2009, although it had stagnated since then.


Overall, the top freight forwarders’ profit margins were also maintained, although


there was widespread


variation in profitability between different companies. Freight forwarders are affected by the wider shipping and airfreight


Recession shakes world trade patterns


The dynamics of global trade have been changed in the past year by the depressed state of consumer demand in western markets, the Ti report also found. Up to 2008- 9, product moving from Chinese assembly lines to retail markets in the west was the main driving force behind air and sea trade, and while this has certainly not disappeared, its growth has reduced. The picture has been particularly depressed in European markets, although the US one is more optimistic. In China itself, the huge leaps in


export growth have moderated to single figure percentages, although there is some – as yet inconclusive – evidence that some of the gap left by exports to the Eurozone is being filled by exports to other emerging markets. Exports from Germany tailed off


during the first few months of 2012, culminating in a fall in volume in April – mainly because of the problems in the Eurozone. The US however has continued to see growth in exports through 2012 as a high proportion of its trade is with Asia-Pacific and South America, which have been less affected by the Euro problems. That said, the China-to-EU and China-to-US sea trade lanes remained


by far the most important in the world, at 50m and 49m tonnes respectively, according to preliminary figures for 2011. They were followed at some distance by Brazil to EU (33mt) and Argentina and Russia to EU (both 28mt). Sea trade moving from the EU


and US to emerging markets has grown significantly over the past six years, the report continues. From the EU to China it is now 34mt, followed by EU to Turkey’s 28mt and US to China’s 23mt. Surprisingly perhaps, EU to Algeria is the fourth largest of the ‘emerging market’ trades (15mt), while EU to Egypt and to Morocco are also both around 9-10mt. Middle East exports to the EU and


US also figure among some of the world’s fastest-growing seafreight trade lanes. In airfreight, China dominates


global trade, at least in tonnage terms, with China to the EU (1.1mt) and China to the US (977,000t) combined accounting for more than twice the next eight trade lanes combined (India-EU is 212,000t and Kenya-EU 156,000t). Along with Kenya, some other relatively small emerging countries figure in the top


Panalpina outperforms


The Panalpina Group said it had outperformed the market in the second quarter of 2012, achieving a gross profit of CHF 363 million, only2% below the previous year despite a globally receding air freight market and several rate increases by ocean carriers that put pressure on margins. Panalpina said its volume growth in both ocean and air freight was above the average market growth. There was continued growth in Latin America but gross profit in Asia Pacific decreased by 3.8% due to slowing exports to mature markets. In the EMEA region, strong exports only partly offset weak imports resulting in a decrease in gross profit. Gross profit also decreased in North America by 5.7%.


ten, including Colombia, Chile and Peru as they export a large amount of perishables. Kenyan exports by air to the EU increased 134% between 2005 and 2011. Global Freight Forwarding 2012


by Transport Intelligence examines the state of the air and sea forwarding market, key trends and developments in 2011 and the first half of 2012 and the structure and drivers of the market and their implications for the future. It also provides an exclusive


and wholly independent source of market shares for the leading players and ranking of the largest air and sea freight forwarders in terms of revenues, air tonnage and teus shipped. The report includes market


sizing and five year forecasts by sector (air and sea) for the six main world. It also contains air and sea freight forwarding market sizing and forecasts for 40 individual countries including all major and developing economies. Priced £1095/$1850,


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purchased online at: http://www. transportintelligence.com/market- reports/report-global-freight- forwarding-2012/293/


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Ceva: revenue up, earnings down


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markets, but the market is “counter- cyclical”, says Ti, in that profits can actually be higher during economic downturns. Rates offered by sea and air carriers can be driven down by excess capacity in the market but forwarders may not pass the whole of these reductions on to their customers, thus increasing their profit margins. On the other hand, as the economy picks up and capacity starts to tighten, forwarders may find it hard to pass on carriers’ rate increases to their clients – although they may still benefit overall from the increased volumes. However, the market for freight capacity is often complex and can be affected by outside events. The researchers point out, though,


that accurate data on the forwarding market is hard to come by, although what there is tends to support the theory that it is a counter-cyclical industry.


133x170_FBJ_2012.pdf The 12 largest freight forwarders’


profits have also been “remarkably resilient”, remaining at around 4-5% over the past six years, says Ti. This however is an average - there is a considerable range in the profitability of the leading forwarders, ranging from Expeditors’ margin of over 10% down to around 2-4% at the other end of the scale. Other higher-profit margin forwarders include CH Robinson (8%), DSV (just over 7%) and Kuehne & Nagel (about 5%). Those at the lower end of the profitability scale included Toll and Agility (around 1-2%). DHL, although it had the largest revenue, had a profit margin of only about 3%. Schenker, Panalpina, UTI and Damco were also at about this level, but with lower revenues. Ceva was at around 4%.


In revenue terms, DHL Global 28/02/2012 12:38:53


Forwarding was marginally ahead of Kuehne & Nagel with around €11bn


each, DB Schenker was third at €7bn, followed by Sinotrans, Panalpina and Expeditors at around €4.5bn each. The top ten forwarders between them accounted for 44% of the market but below them there were “huge levels of fragmentation”. The report said that it was difficult


to identify a single specific reason why some forwarders were more profitable than others – quality of management, buying power and overheads were all possible factors. The global freight forwarding market


stagnated in 2011, at around €122 billion, although it has recovered from the sharp downturn that reduced it from €120bn in 2008 to only €92bn in 2009. The European debt crisis and slowing US economy reduced the market by 0.4% between 2010 and 2011. Asia-Pacific overtook Europe as


the largest region in 2010 and retained that position in 2011.


Ceva Logistics reported revenue up 5.5% to €1,808 million in second quarter, led by growth in ocean freight but earnings before interest, taxes, depreciation and amortisation (EBITDA) fell from €81m to €70 million as improvements in Asia were offset by weakness in Southern Europe and Americas. CEO John Pattullo, CEO, said it had been a difficult quarter, with flat markets and customer caution, partially offset by our efficiency programs, global footprint and robust business model. Transpacific volume and weakness in Southern Europe remain a concern and Ceva has intensified its cost management.


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