Constant Investment Supports Transportation SectorWed, 05/08/2019 - 15:31
Q: What is Traxión’s strategy to grow in the transportation industry?
A: The two most important transportation segments we cover are cargo and logistics, on the one hand, and personnel and student transportation services, on the other. Traxión takes advantage of new business opportunities in these and other segments covered by our seven subsidiaries to continue growing in the Mexican market. In 2019, we plan to invest approximately MX$1.8 billion (US$94 million). This will help us expand our revenue by 20 percent and our EBITDA by 25 percent. Around 75 percent of our capital expenditure will go to the personnel and school transportation segment and the remaining 25 percent will focus on the renewal of our cargo and logistics fleet.
Q: What segments do you expect will experience the most significant growth?
A: We project great demand for student and personnel transportation services in industrialized areas such as northern Mexico, the Bajio region and the Mexico City metropolitan area. Traxión plans to increase its share in these markets and create new opportunities as industrial regions develop a taste for competitive transportation services. Our size enables us to make strong investments in the acquisition of new units and to close large contracts for large clients in this specific transportation format. In 1Q19, we invested MX$350 million (US$18.3 million) to purchase 100 Hyundai CNG bus units to meet specific client requirements.
In the cargo and logistics segment, we expect reasonable growth in demand in 2019. Traxión plans to adopt an asset-light business model to attack more logistics segments such as last-mile delivery, e-commerce and freight-forwarding. To grow our logistics umbrella service and offer a one-stop solution to clients, Traxión is strengthening the management, fleet and infrastructure of its Redpack subsidiary. By adopting an end-to-end, integrated logistics solution, clients will no longer need to hire four or five suppliers to cover different logistics needs.
Q: What factors could hamper Traxión’s growth in the transportation industry?
A: The transportation industry is a pillar of the Mexican economy as all consumption products are transported by truck at some point. This means transportation is deeply intertwined with Mexico’s domestic consumption, disposable income and the country’s growing middle class and demographic bonus.
Macroeconomic trends could pose the biggest challenges for growth. Although we cannot control exchange rates, interest rates or political risks, we need to have contingency strategies for each of these macroeconomic trends to mitigate risks and maintain continuous and profitable growth.
Q: How is Traxión reducing operating costs to counter the impact of rising diesel prices?
A: Grupo Traxión negotiates a wholesale price for diesel with fuel importers from the US that deliver diesel at the company’s yards and terminals. We also apply passthroughs of fuel price increases to our clients. Traxión also reduces operating costs by centralizing the noncore, back-office areas of its seven subsidiaries and concentrating regional operations of its companies in less facilities.
These efficiency strategies have yielded positive results. In 2018, Traxión added 71,210m2 of storage to its installed capacity and increased the efficiency and productivity of its cargo fleet. Despite having 1.7 percent fewer trucks than in 2017, our fleet covered 16.5 million kilometers more. In other words, Traxión covered 9.5 percent more kilometers with fewer trucks and increased its revenue per kilometer by 10 percent, while only increasing its costs per kilometer by 5.3 percent in 2018, which translates into more productivity, output and efficiency.