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Home | Internacional | XPO bounces back with strong start to the year
Postado em 6 de maio de 2019 | 17:00

XPO bounces back with strong start to the year

Logistics group ‘not 100% out of the woods yet from the curveballs at the end of last year, but making excellent progress’, CEO says.

XPO Logistics has made a dynamic start to the year, bouncing back after a poor final quarter in 2018  and reacting strongly to the prospect of losing two-thirds of its business with its biggest customer – understood to be Amazon – the equivalent of $600 million in annual revenue.

Presenting the US-based transportation and logistics company’s first quarter results, chairman and CEO, Bradley Jacobs, said: “I don’t think we’re 100% out of the woods yet from the curveballs we had at the end of last year, but we’re making excellent progress, faster progress than I would’ve expected three months ago.

“Brexit is not going away. France is not going away. Our biggest customer – two thirds of their business – has gone away. So, these are three significant challenges.

“But look at what we did this (first) quarter. A solid beat on EBITDA, an even bigger beat on free cash flow, a record Q1 EBITDA: up 3.9% year-over-year, even after losing the bulk of our largest customer’s business. A record new business win of $1.1 billion, up 15% year-over-year, accelerating from 6% up in the fourth quarter.”

He said XPO’s global sales pipeline had hit a new “high watermark” of over $4 billion, while freight brokerage was growing in terms of actual revenues.

“XPO Connect, our digital freight marketplace, is on fire, having gone from zero to 18,000 US carriers in a year, more downloads in the first quarter than all of 2018. Expanding XPO Connect to last mile in Europe will pay nice dividends over time.”

He noted that yield in the LTL segment was 3%, almost triple what it was up in the fourth quarter.

Asked where all the new business was coming from, Jacobs replied: “It’s all over the place. It’s in Europe, it’s the United States, it’s in every business line. It’s spread throughout. The biggest parts of those would be LTL and managed transportation and brokerage for that matter too. Last mile also has got a rebound. So, what you’re seeing is the resilience of XPO.”

Returning to the major loss of business with its biggest customer, Jacobs intimated that this had prompted reflection on the company’s client concentration.

“We made a mistake letting one customer get $900 million of business with us. Previously, if you looked at our top five customers, it was about 11% of revenue, and then the biggest one was a little more than half of that. So, it was just too much concentration.

“Going forward, we’re going to be much more diversified. Our top five customers this year should be something around 7% of revenue, and no customer will be more than 2% of revenue.”

Focusing on XPO’s activities in Europe, Jacobs highlighted that the transportation unit generated organic growth in revenue in Q1 of 6.3%, despite modest GDP growth in France, its largest European market where “the operating environment is still volatile. On the plus side, our UK operations posted solid growth and significant market share gains.”

In logistics, organic growth in revenue was 6.6%. “We’re continuing to see strong consumer-oriented demand for e-fulfilment in Europe, punctuated by stellar performance from our e-commerce franchise.”

Asked whether XPO was seeing any negative impact from the crisis surrounding Boeing’s B737 MAX, the US aircraft manufacturer being a major customer, Jacobs said: “Boeing is a top-20, long-term customer for us. The issues they’ve got with their various products have not affected us for the time being.

“We’re going to see how it develops, but it wouldn’t be material to our overall results. It might affect that particular contract or that particular account, but in terms of our whole company, it’s not enough money to move the needle.”

 

Source: lloyd’s


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