XPO’s operating profit rose 5.7 per cent in the first half of 2019 to $390 million, despite a 2.3 per cent fall in revenue to $8.4 billion.
For the second quarter alone revenue was down 2.9 per cent to $4.2 billion, while operating profit was up 13 per cent to $258m.
The company’s logistics segment generated revenue of $1.53 billion for the second quarter, a 1.2 per cent increase from the same period in 2018. Organic revenue growth was 4.8 per cent. Operating income was $61 million for the quarter, compared with $67 million for the same period in 2018. The change in operating income primarily reflects higher depreciation expense related to prior capital investments in new business wins, a reduction in business from the company’s largest customer and unfavourable foreign currency exchange.
“Segment revenue growth was led by food and beverage, consumer packaged goods, aerospace and healthcare in North America and by e-commerce in Europe, largely offset by unfavourable foreign currency exchange and a reduction in business from the company’s largest customer.”
The company’s transport segment generated revenue of $2.75 billion for the second quarter 2019, compared with $2.89 billion for the same period in 2018. “Segment revenue primarily reflects a reduction in freight brokerage and direct postal injection business from the company’s largest customer, unfavourable foreign currency exchange and lower truckload rates in freight brokerage, offset in part by growth in North American less-than-truckload and managed transport.
Operating income for the transport segment was $243 million for the second quarter 2019, compared with $205 million for the same period in 2018.
The company has cut its revenue target for the year from 3-5 per cent to one per cent, reflecting the expected impact of lower truckload rates in freight brokerage and unfavourable foreign currency exchange. Adjusted EBITDA is forecast to be the same or higher – it is forecasting a range of $1.675bn to $1.725bn.
Bradley Jacobs, chairman and chief executive officer, said: “We beat on EPS, adjusted EBITDA and free cash flow in the second quarter, offsetting a softer operating environment with cost discipline and margin gains. In North American freight brokerage, we improved net revenue margin to 20.4 per cent, up 360 basis points from last year’s second quarter. In North American less-than-truckload, we improved yield by 3.9 per cent and realise a record adjusted operating ratio of 80.3 per cent.”