Logistics Report: Profiting from Logistics; Postal Delivery Drop; China’s Nontariff Barriers

Date: Thursday, May 2, 2019
Source: The Wall Street Journal

The freight market isn’t boosting logistics companies’ profits much so far this year. XPO Logistics Inc. reported declining revenue and net profit in the first quarter, the WSJ Logistics Report’s Jennifer Smith writes, the latest in a string of reports signaling transportation and logistics companies are wrestling with weaker shipping demand to start 2019. XPO’s overall revenue fell 1.7% in the quarter, and net income attributable to common shareholders declined 35.8% to $43 million. Other measures showed some improvement, however, and Chief Executive Bradley Jacobs trumpeted record earnings before interest, taxation, depreciation and amortization. Still, growth in the market looks harder to find. Freight brokerage giant C.H. Robinson Worldwide Inc. reported strong gains in net profit and net revenue despite declining overall gross revenue. The companies are flexing their ability to adjust to a changing market, but they could also use more shipments moving through their networks.

Members of Congress want the U.S. Postal Service to fix its finances without touching services. The contradictory directions came as Postmaster General Megan Brennan told lawmakers that cutting traditional mail delivery to five days while expanding package delivery to seven days is among options postal governors may consider. The WSJ’s Paul Ziobro reports the proposal would be aimed at helping stem billions of dollars in annual losses by shifting the focus from dwindling letter traffic to growing e-commerce volumes. The idea is rooted in the fundamental changes in postal business. Since 2007, the volume of highly profitable first-class mail has plummeted 41%. Online shopping, meantime, is pushing some 20 million packages daily through postal delivery networks. Ms. Brennan has other ideas for closing the USPS budget gap and she’ll likely have to turn to them, with Democrats and Republicans largely agreeing they don’t want to wait for their letters.

 

E-Commerce

The Middle East’s burgeoning market for online sales is about to get more competitive. Amazon.com Inc. is launching the first Arabic-language site under its own brand in the United Arab Emirates, the WSJ’s Rory Jones reports, banking it can turn around some of its troubled international business in a country better known for glitzy malls.The e-commerce giant’s move comes amid heightened competition for online retailers in the Persian Gulf with the rise of Noon.com, a startup formed in 2017 with backing from Saudi Arabia’s oil-rich sovereign wealth fund. Amazon’s bigger push comes through the Souq.com business it operates in other Middle East countries, including Egypt and Saudi Arabia. Amazon otherwise has only a small presence in the region. The Middle East's online sales are meager compared with more industrialized regions, but the market is rapidly expanding and boasts a tech-savvy and young population.

Economy & Trade

Canada’s troubles with China over canola seeds may be spreading to other agriculture products. Canadian officials have been told of stepped-up customs inspections of other Canadian agriculture products at several Chinese ports, the WSJ’s Paul Vieira reports, suggesting a trans-Pacific diplomatic and commercial showdown could be escalating. The moves on unspecified products come as Canada extends financial help to canola-seed producers affected by China’s import ban on the product, part of an effort to dull the impacts of China’s retaliation for the arrest of a Huawei Technologies Co. executive. Canada’s agriculture secretary says there are reports that Chinese importers are “slowing down” their orders of Canadian goods, and other officials say they are hearing of other “nontariff barriers” including denial of import permits. Such moves may continue as long as Canada holds Meng Wanzhou, Huawei’s chief financial officer.

 

 

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