Deliver to Survive: Road Carriers and Their Dwindling Profits
Market Monday - Week 23 - Overview of profit declines in 2024 for major publicly traded road carriers
It is not a secret that the European road and intermodal freight sector is struggling, with many of the industry outlets and communications from major carriers mentioning hardships in meeting their ends. Today I want to dive deeper into the financials of some major transport companies active on the European scale to see what is the extent of their recent struggles (and if there are any). To do that I analyzed yearly financial reports from 2021 to 2024 of 5 major publicly traded companies.
It became immediately clear that while top-line revenues for major carriers often held steady or saw modest increases, operating margins came under pressure. A dangerous mix of slowing macroeconomic activity across key European markets, persistent cost inflation (+2.6% increase in 2024, according to Transporeon Market Costs Index) and a competitive freight rate environment were the primary architects of this downturn. It became clear that 2024 presented distinct challenges compared to the preceding three years for most players on the market.
The 2024 scorecards for leading publicly-traded carriers paint a picture of widespread profit erosion. Giants like DSV (Road segment EBIT margin of ~4.8%) and Kuehne + Nagel (Road Logistics EBIT margin down to ~2.8%) saw their profitability decline. Even DHL’s broader Global Forwarding division, which includes significant road and intermodal activity in Europe along with other modes of transport, also reported a margin contraction to ~5.5%.
Asset-based mid-size and smaller carriers likely face even more severe margin compression. While more agile in their business approach and somewhat more eager to cut costs quickly, they generally have significantly less bargaining power to increase rates. They are also less able to absorb sustained cost increases compared to larger operators with greater economies of scale and can not enjoy the safety net of diversified businesses of global transport solution providers. The widespread inability to fully pass on increased costs is definitely amplified for asset based and smaller entities.
Looking to 2025, the outlooks are cautionary. The current market creates favorable conditions for mergers and acquisitions in the sector, with mid-sized companies becoming lucrative targets for giants to increase their market share. While specific forecasts vary, the overarching sentiment is that the agility demonstrated through cost management, technology adoption, and service diversification will be most important in the nearest future to restore healthier profit margins for the industry.
For shippers this situation created an environment of stagnant or depressed rates through 2024 and beginning of 2025. However, as was foreseen, declines in carrier profitability for an extended period already led to underinvestment in capacity and technology, as we could see from latest new fleet registration figures.
Ultimately, carrier bankruptcies, market consolidation and fleet reductions would reduce capacity competition and lead to significant rate increases in the medium to long term. Adjustments for carriers are no longer optional, but existential. The companies that emerge stronger will be those that prioritize ruthless cost management, embrace digital transformation for operational efficiency, and strategically diversify their service offerings or consolidate their market position. The current market presents a simple choice: innovate and thrive, or face decline.
Oleksandr Kulish
Senior Consultant