Cost-recovery call as profiit squeeze bites


The Victorian Transport Association (VTA) has banged the drum again on cost recovery positioning it as the top issue confronting the road haulage industry this year. The industry must take a closer look at overheads, the cost of which are increasing on every line, threatening already narrow margins, VTA Chief Executive Phil Lovel tells ATN.

By Rob McKay | March 6, 2012

The Victorian Transport Association (VTA) has banged the drum again on cost recovery positioning it as the top issue confronting the road haulage industry this year.

The industry must take a closer look at overheads, the cost of which are increasing on every line, threatening already narrow margins, VTA Chief Executive Phil Lovel tells ATN.

Lovel’s call coincides with the release of two surveys pointing to a squeeze on company profitability.

The Australian Industry Group/Commonwealth Bank Australian Performance of Services Index (PSI) for February shows a contraction of activity in February.

Though seasonal factors impact on activity early in the year, the result follows a patchy performance in the four months leading up to and including December.

Release of the index coincides with Australian Bureau of Statistics (ABS) Business Indicators figures for the December quarter, which show a divergence between wages and profits in the transport, postal and warehousing sector.

The trend estimate for company gross operating profits fell 1.8 percent, with the seasonally adjusted estimate falling 3.4 percent, while the trend estimate for sales of goods and services fell 1.5 percent , with the seasonally adjusted estimate falling 1.6 percent.

However the figures for wage rises were 2.4 percent and 2 percent respectively.

Lovel believes that, while many firms has a sharp focus is on costs related to the trucks themselves, a number of increasing overheads failed to gain the same attention.

"The power costs have gone up so much, the water costs are gone up, the [council] rates are going up, and I don’t think the industry is recovering those costs," he says.

He speaks of a VTA member for whom power makes up 20 percent of his costs but the price of which has risen 30 percent in the last six months "and that’s without the carbon tax".

The VTA believes more detailed information on overheads and other cost inputs is needed.

"Many transport companies have cost index’s based around truck costs – how do we recover our depot/operator/business/management costs?" Lovel says

"Now we are seeing large increases in power, rates and water utilities.

"We are going to work with Pitcher Partners to provide some assistance of recovery of overheads in your business."

One cost input the VTA hopes will ease in the near future relates to pallets.

Pallet suppliers and major retailers are having a final look at a code of conduct and there is hope an agreement will be reached in the coming months.

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