2011 was a memorable year for a few reasons. The Arab Spring began, a Prince got married and, perhaps most significantly, the global economy supposedly returned to some sense of normality following the turbulence of the 2008 recession. Yes 2011 was an optimistic time and the feeling that better things were to come extended to the logistics industry. In the pits of the recession, the industry lost over 15% of its revenues and profit margins fell as low as 2.2% in December 2009, but the recovery of revenues seen in 2010 led to stability in 2011, and when this was followed by another uptick in 2012, it finally seemed as though phrases like “in the current economic climate” would forever slip from our collective lexicon. According to Ti’s newly released Global Transport and Logistics Financial Analysis 2014 report, however, it appears that the situation within the global logistics industry may not be as normal as hoped.
The report suggests the situation facing many in the industry is far removed from that of the period leading up to the recession. Revenues in 2013 fell back to levels only marginally above those seen pre-2008, while operating margins have yet to recover to the levels seen before the crunch. Just as was the case with the recession proper, it seems very few have escaped the downward pressures, even two years into the ‘normal’ period. Indeed, Ti analysts’ look at twenty of the world’s largest logistics providers revealed growing total logistics revenue at just three in 2013, with each of these companies doing so at the expense of operating margin. More worryingly, nine of the remaining 17 providers experienced falling operating margins as well as declining revenues. At the end of 2013, only six of the twenty companies featured in the report made operating profits of more than 5% of revenue.
The examples covered in the report seem emblematic of an industry still trying to find out what normal is. Recessions are pretty awful things, but they have a way of driving out change and breaking down old barriers, inevitably with winners and losers along the way. In the six years that have passed since 2008, structural changes have occurred in the logistics industry, there have been declines and recoveries and providers have benefitted and suffered.
Speaking on the situation facing those in the logistics industry, Ti’s lead analyst on the report, Dave Bagshaw, said, “Much of the logistics industry is already evolving and adapting to new conditions but despite an upturn in trade, the industry collectively has seen a downturn in revenue and profitability in 2013. The sustainability of some elements of the industry must again come into question and more radical changes cannot be ruled out.”
Perhaps a case of finding another new normal for the logistics industry in 2014.
Global Transport and Logistics Financial Analysis 2014 is the first in a two part report series analysing the performance of twenty of the world’s largest logistics providers. You can purchase this part, or both parts for a special bundle price, by clicking here.