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A net loss and a drop-off in revenue marked Ryder System Inc.’s second-quarter results.
In the period ended June 30, Ryder reported a net loss of $74.1 million, or minus $1.42 per diluted share, compared with net income of $75.2 million, or $1.43 a year earlier.
Revenue fell 16% to $1.9 billion compared with $2.2 billion a year earlier.
Ryder provides supply chain, dedicated transportation and commercial fleet management services.
“Market conditions related to COVID-19 troughed in April for Ryder’s rental, supply chain automotive and used-vehicle sales businesses, and conditions improved sequentially thereafter,” Ryder Chairman and CEO Robert Sanchez said in a release.
“The total estimated pre-tax earnings impact was $45 million in the quarter, driven by lower commercial rental demand and reduced automotive activity in supply chain, partially offset by lower overhead costs,” he said. “In addition, the impact of COVID-19 on current and expected used-vehicle market conditions triggered a review of Ryder’s residual value estimates, resulting in increased depreciation and valuation adjustments totaling approximately $49 million in the second quarter. The earnings headwind from this higher depreciation is expected to decline over time.”
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Its three business segments each experienced lower revenue and earnings before tax, including a loss in one case.
The Fleet Management Solutions segment, Ryder’s largest, saw revenue fall 14% to $1.2 billion compared with the year-earlier period. The decline was driven by a 33% decrease in commercial rental revenue. FMS posted a loss before tax of $104 million compared with earnings before tax of $58 million in 2019 due to $154 million of additional depreciation expense from the vehicle residual value estimate changes in 2019 and 2020, resulting in a year-over-year earnings impact of $119 million.
Revenue at its Supply Chain Solutions unit fell 20% to $519 million. Earnings before tax of $37 million decreased 19% compared with $46 million in 2019.
In the Dedicated Transportation Solutions business segment, total revenue was down 19% to $294 million. Earnings before tax of $21 million decreased 22% compared with $27 million in 2019.
Ryder Supply Chain Solutions ranks No. 10 on the Transport Topics Top 100 list of the largest for-hire carriers in North America, and No. 5 on the Transport Topics Top 50 list of the largest logistics companies in North America.
The company noted rental utilization percentage on power vehicles in the second quarter was 55.9% compared with historical levels in the mid-70s. The company reduced the rental fleet size resulting in a decline in 8,600 vehicles or 19% from the prior year. Based on the rental fleet size at the end of the second quarter, it noted in the release, every percentage point change in utilization is estimated to impact monthly pre-tax earnings by about $1 million until the rental fleet size can be aligned with market demand.
After April’s novel coronavirus pandemic-related shutdowns, the Supply Chain Solutions unit’s automotive customer activity increased starting in mid-May as manufacturers ramped up production.
“We ended the second quarter at pre-COVID-19 activity levels and, assuming no additional disruption, we expect activity to remain at approximately these levels during the third quarter,” the company reported in the release.
In April, Ryder furloughed employees and reduced discretionary spending. In addition, the company incurred lower medical costs during the quarter. These items resulted in an estimated $35 million savings in the second quarter.
More recently, in July the company transitioned from furloughs to permanent headcount reductions, primarily in its fleet management solutions unit.
Looking ahead, Sanchez said, “We are launching a national advertising campaign aimed at increasing market awareness of Ryder’s broad range of logistics capabilities and promoting RyderShare, our visibility and collaborative logistics platform.”
In the six-month period, Ryder posted a net loss of $183.7 million, or a loss of $3.52 per share, compared with net income of $120.5 million, or $2.28, in the 2019 period. Revenue dropped to $4 billion compared with $4.4 billion a year earlier.
The company reported its liquidity position remains strong with $700 million in cash in the U.S., $1.2 billion in available revolving [credit] borrowings and $100 million of availability under its receivable-backed financing facility as of July 27.
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