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Challenges, yes, but CEOs see light in the distance

Posted: August 1, 2014

TORONTO — Chief executives in the global transport and logistics industry admit they are less optimistic about growing their business than they were last year, according to a survey by PricewaterhouseCoopers (PWC).

Only a third of the 67 CEOs interviewed for PwC’s Annual Global CEO Survey said they are confident about increasing their companies’ revenues over the next 12 months, compared to over 90 percent of respondents last year.

Execs from all sectors, airline, rail, container shipping and trucking all said they’re hit hard from low North American freight demand and a major decline in exports from Asia.

Still, about 75 percent are somewhat or very confident that the transport industry as a whole will pick up over the next three years.

However there are a number of challenges. Some transport and logistics companies may find it harder to extract payment for their services as a growing number of their customers experience difficulties, the survey reveals.

Rail and container shipping have been most
affected by a drop in Asian export demand

"This would affect their cash flows, but it might also have long-term implications."

At the other end of the supply chain, local subcontractors — an inherent part of the industry’s business model — may become more financially vulnerable.

Also, "energy remains a key concern for transport and logistics CEOs," says Klaus-Dieter Ruske, PwC global transportation and logistics leader. "Fuel hedging is common practice in much of the industry but, given the extreme volatility in oil prices in 2008, many companies may want to scrutinize their hedging strategies more closely."

Some companies are now paying over market prices for jet fuel and diesel as a result of their hedging positions.

Although the economic slowdown is hurting every area of the transport industry, Todd Thornton, PwC Canada’s Transportation and Logistics Practice Leader says, "none can afford to ignore the need to build a business that is agile enough to respond to new situations as they emerge."

 

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