Geodis, the French logistics giant, has published its annual results showing a big recovery in both profits and revenue growth. Revenue increased 5.3% over the year to €3.8bn, but operating profits increased 24.6% to €106.4m whilst net income increased by a third to €48.4m.

Cost cutting played a substantial part in the increased profitability of the company, with the previously loss-making business in Italy breaking even. In positive terms, Geodis’ growth businesses are its transport activities - LTL, Express and Freight Forwarding. The tough French road transport market is delivering growth, whilst Geodis Express activities are being helped by its new relationship with FedEx. Geodis is also experiencing growth outside Europe, particularly through its Freight Forwarding business, although the exposure to East Asia should not be exaggerated as it accounts for only €200m of revenue. Contract logistics appears to be doing less well with falls in revenue over the year and the company stating that both the core high tech and automotive sectors were doing poorly.

In announcing this year’s results, Geodis’ management restated a target of 40% growth in revenue by 2007 and a profit margin target of 4%. The revenue target will be helped by its purchase of TNT’s Freight Forwarding operations in the last quarter of 2006. Geodis is now one of the world’s top ten Freight Forwarders with revenues of €1.6bn. However what this will do for return on capital is unclear as Geodis paid a generous €460m to buy it.

Chief Executive Pierre Blayau has successfully turned Geodis into a viable business. However the company does suffer from a lack of differentiation and lacks global presence compared to its bigger German rivals. Normally this might lead Geodis to be vulnerable to takeover - possibly from a group as openly acquisitive as Deutsche Bahn or even from a Private Equity group which could inject capital in order to expand through acquisition. But this is unlikely to happen. Geodis is part owned by SNCF, the French state owned railway company and although SNCF may well be willing to sell its 44% stake in part or in its entirety, any buyer would have to be approved at the political level. The government has in the past opposed the sale of French businesses to acquisitive foreign rivals, majorly reducing the number of companies which could be interested.

Source: Transport Intelligence

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