TORONTO, Feb. 13 /CNW/ - CEOs in the global transport and logistics
industry are less optimistic about growing their business than they were last
year, according to PricewaterhouseCoopers. (PwC) 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% of respondents in PwC's CEO survey at the same time last year.
The fall in confidence comes as no surprise given that the airline sector
is experiencing falling demand from consumers and business travellers as well
as being hard hit by the decline in exports from Asia. The railway sector,
which makes much of its revenues from the transportation of steel and cars, is
likewise gearing up for a massive drop in cargo volumes. Container shipping
has nosedived, with freight rates for dry-bulk shipping plummeting by as much
as 90%, and the trucking sector is also feeling the pinch.
Despite this reduction in demand, transport and logistics CEOs are more
positive about the medium-term outlook - 75% are somewhat or very confident
that the industry as a whole will pick up over the next three years. Leaders
are banking primarily on better penetration of their existing markets to
achieve that growth. Twenty-two percent also have their eyes on new geographic
markets for expansion.
However there are a number of challenges on the horizon. While 40% of
respondents plan to increase the number of people they employ over the next 12
months, over 30% anticipate having to downsize.
Some transport and logistics companies may find it harder to extract
payment for their services as a growing number of their customers experience
financial difficulties. This would affect their cash flows, but it might also
have long-term implications.
At the other end of the supply chain, local subcontractors may become
more financially vulnerable - and the use of such partners is an inherent part
of the industry's business model. Transport and logistics CEOs may therefore
need to develop contingency plans to cope with insolvencies or other sudden
changes in their supply chains.
Non-renewable energy tops the list of issues about which transport and
logistics CEOs worry. Eighty-four per cent are looking for operational
improvements to reduce energy consumption; 52% are turning to alternative
energy sources and 33% are investing in energy-efficient technologies.
"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 scrutinise their
hedging strategies more closely. Some airlines, for example, are now paying
well over market prices for jet fuel, as a result of their hedging positions.
Todd Thornton, PwC Canada's Transportation and Logistics Practice Leader
comments: "The global economic slowdown is hurting every area of the transport
and logistics industry. Every CEO will have to make tough decisions about what
actions are required to ensure his or her company's short-term survival. Yet
none can afford to ignore the need to build a business that is agile enough to
respond to new situations as they emerge, durable enough to grow over the long
term and responsive to the requirements of all its stakeholders."
PwC Economic and Credit Crisis Task Force
PwC recognizes that a global crisis requires a global and coordinated
The PwC Economic and Credit Crisis Task Force (the "PwC Task Force")
brings together a Canadian team of senior cross-functional experienced
practitioners who understand market volatility and the diverse challenges
facing companies today. By leveraging knowledge, experience and networks, the
PwC Task Force can advise and guide Canadian companies through a multitude of
capital market and economic crisis issues.
For more information please visit: www.pwc.com/ca/managinginadownturn or
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