<p>Already suffering years of declining margins, small and medium-sized trucking companies face an even more threatening business environment over the next 12 months, says the latest <em>Industry</em> <em>Risk Bulletin</em> from the business reconstruction firm, PPB Chartered Accountants.</p> <p>The report forecasts increasing levels of foreclosures on trucks, equipment and property as margins become even more threadbare.</p> <p>The <em>Industry Risk Bulletin</em> said owner drivers and small freight operators represent almost two-thirds of the road freight industry, but account for less than 12% of total operating income.</p> <p>"Fuel costs in 2005 will be some 40% above those prevailing in 2003," it said. "Vehicle running expenses could rise to 35% of turnover compared with 27% a couple of years ago. </p> <p>"Given that the average profit margin is only 7%, this increase in running expenses will wipe out profit altogether."</p> <p>The report predicts that rising interest rates and decelerating demand for goods and services will lead to lower revenues for the transport sector.</p> <p>"In such an environment, profitability suffers and vehicle repossession rates rise."</p> <p>Smaller operators face additional threats from increasingly complex working practices (in-truck technology and sophisticated loading systems), the possibility of higher road charges, the introduction of compulsory comprehensive insurance, and new laws to improve compliance with regulations governing load weights, vehicle dimensions, speeding and fatigue, the bulletin said.</p> <p>These measures will promote road safety, but increase costs.</p> <p>The Pacific National joint venture between Patrick Corporation and Toll Holdings may lead to a supply chain monopoly to the exclusion of other road, rail and port operators, the bulletin suggested.</p> <p>"(However) the growing power of large firms such as K&S Corporation, Linfox, Toll, Heggies Bulkhaul and Patrick Corporation suggests further downward pressure on the average per unit delivery price, and promises more rationalisation," it said.</p> <p>The <em>Industry Risk Bulletin</em> defines trucking companies as "large small businesses" in that they fail to plan or invest in technology, do not recognise the impact of growth and fail to seek external advice. Neither do they invest in qualified management. </p> <p>Many operators will be vulnerable because they are unable to calculate the real cost per kilometre to run a truck and negotiate effectively with large customers, it said.</p> <br />
