How much longer can hauliers keep it up?
SA’s logistics sector has outperformed the overall market so far this year. But don’t hold your breath for the second half
● It might come as a surprise that SA’s listed logistics sector, including hauliers, has so far outperformed the JSE all share index this year — despite surging fuel prices and higher wages.
And while the bulk of SA’s trucking companies are privately held, the performance of the handful of listed players may indicate that the sector is overcoming some big obstacles.
The first is clearly the cost of diesel. This has ballooned from R17.28 a litre on January 5 to R23.22/l by June 1 — a 34% jump in less than five months, thanks to rocketing global oil prices. In SA the retail price of diesel isn’t regulated like petrol. Being the largest expense for hauliers, many freight truckers had to tighten their belts to remain profitable.
Hauliers with longer-term contracts are luckier. Unitrans, for example, a division of listed KAP Holdings, can pass on the higher fuel prices.
“Unitrans operates primarily in the contractual logistics market, where fuel fluctuations, both up and down, are mostly absorbed by customers,” Gavin van der Merwe, an executive at KAP Holdings, tells the FM. “We are exposed to ad hoc linehaul road freight to a limited extent, in which area it is sometimes challenging to recover the impact of increased fuel costs from the market.”
Unitrans, the largest revenue-spinner for KAP, had an 8% increase in sales in the six months through December 31 while its SA business delivered an 11% jump in operating profit, partially offsetting a 27% slump in Unitrans Africa’s operating profit. KAP’s share price is also up 6.2% since the begin
ning of the year.
In a March 29 trading statement, KAP said it expects with reasonable certainty that its fullyear earnings for continuing operations to end-June will increase by more than 50%.
Super Group, which operates in Sub-Saharan Africa, Australasia, the EU and the UK, declined to comment for this article as its closed period starts on June 30. But, unlike KAP, the company’s share price is down 9.7% since the beginning of the year. In its year-end report released on September 30, the company said 46 of its vehicles were severely damaged in last year’s unrest in KwaZuluNatal, with stock and vehicle losses amounting to R45.7m and forgone revenue at R97.5m.
The recent blockade of the N3 logistics corridor, which stretches from SA’s economic heartland of Gauteng to Africa’s busiest port, Durban, has worsened many of the issues faced by hauliers. These include delays at the Durban port and sluggish repairs to roads after the floods.
The N3 blockade, where truck drivers affiliated with the All Truck Drivers Forum and Allied SA protested against the employment of foreign nationals by haulier companies, was decried by Road Freight Association CEO Gavin Kelly. In an open letter to President Cyril Ramaphosa on June 16, Kelly implied that the reason for the protests lay elsewhere: “Road freight companies (transporters) find themselves being targeted, attacked and prevented from plying their business by forces under the pretext of foreign nationals ‘taking jobs away from citizens’.”
Hauliers will enjoy no respite from rising prices. By June 24, the average underrecovery on the price of diesel was R1.65/l, according to the Central Energy Fund. It means only the most efficient hauliers are likely to ride out the fuel price shock.
“We invest heavily in technology in our vehicles, trailers and operational centres which is designed to monitor vehicles, optimise routes and improve efficiency levels, thereby reducing costs and improving service levels to our customers,” says Van der Merwe.
He says there are still “numerous untapped opportunities” to drive efficiencies. These include “elimination of empty trips, reduction in idling time, improved fuel procurement, improved route planning and payload optimisation.”
Still, despite increasing efficiencies, the biggest determinant for road freight growth remains SA’s GDP. The monthly transport and freight index for Ctrack, compiled by the late economist Mike Schüssler, found that SA’s economy had lost momentum in the second quarter, after a stronger than expected 1.9% increase in GDP in the first quarter.