Logistics margins flatline in 2011

Brinkworth, Wiltshire: The revenues of 20 of the world’s leading listed transport and logistics companies flattened in 2011, according to a new report.

The 2012 Transport & Logistics Financial Ratio Report, show the top company’s operating margins that have been under 5% on average for the past five years have improved over the past two years but remain below 2007 levels for 12 of the group.

Despite this, half of the companies covered have managed to significantly improve their return on assets, an indication of improved asset management, but some are so indebted that returns are barely covering large loans taken out to make pre-crisis acquisitions.

Freight forwarding divisions have maintained margins above 4.4% throughout the crisis despite a sharp drop in revenues in 2009. The sector average has now moved above 5%.

The report’s author, senior analyst David Bagshaw, Transport Intelligence, says: “Despite a slight revenue decline in 2011, operating margins held firm, seemingly resilient to economic uncertainty: a trait also noted during the 2008-09 economic crisis.”

“Freight forwarders don’t have much equipment and manage to make up to 8% margin year-on-year. You would expect contract logistics to make even bigger margins to pay for assets: that isn’t happening.

“More generally, a lot of companies have a lot borrowings run up before the crisis to pay for acquisitions. If you take CEVA as an example, they’re delivering relatively low margins which is fine when interest rates are low but will barely cover borrowing costs when they eventually rise. You hope margins will have improved by then.”

“If you look at the figures, some of these companies are no better off than they were before the recession.”

Transport Intelligence chief executive, John Manners-Bell says: “Average margins recorded by the leading players in the industry are very low – contract logistics companies’ margins briefly fell below 2% in the recession.

“It must however be questioned whether the average 4% margins which are now being reached are sufficient to sustain an industry which is so important to competitive supply chains.”

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