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TFI International more than doubled its first-quarter profit as it capitalized on solid freight demand and the integration of the UPS Freight operations it acquired last year.
The Montreal-based transportation and logistics company said first-quarter net income rose 120.8% to $147.7 million compared with $66.9 million in the same period a year earlier. Diluted earnings per share rose to $1.57 compared to 70 cents a year earlier. Operating income increased 116.1% to $219.8 million from $101.7 million.
Revenue increased 90.4% to $2.19 billion from $1.15 billion. Although based in Canada, TFI reports financial results in U.S. currency.
“We entered 2022 in the best position in our company’s history, and the year is off to a very strong start,” Alain Bédard, TFI’s CEO, said in an April 29 conference call with industry analysts and investors.
Bédard said despite industry concerns about trucking falling into a slump, he believed there are multiple indicators that TFI and many freight segments have good prospects this year.
“We believe that something is different from the last 40 years” of freight cycles, he said.
Shortages of both drivers and trucks are crimping capacity and will support pricing and the companies that can execute efficiently, according to Bédard.
“Yes, the spot rates are down a bit. But when we talk to customers, we don’t really talk too much about price right now. We talk more about, can you provide the service,” he said.
Moreover, he said TFI isn’t as sensitive to spot rates as other carriers.
“The contract rate is where our business is… We run about 1,300 trucks in our U.S. van division, 1,300 trucks that are dedicated, which is a medium- to long-term contract,” Bédard said.
During the first quarter, TFI’s less-than-truckload segment revenue before fuel surcharges soared 534.8% to $835.4 million from $131.6 million a year earlier. Operating income increased 329% to $94.8 million from $22.1 million. Bédard said the large increase came from the UPS acquisition. TFI combined that freight operation with its U.S operations and branded the division TForce Freight.
TFI continues to integrate the acquisition and make changes to match the company’s operational strategy and improve efficiency. Bédard said he believes the division will achieve an operating ratio — the percentage expenses represent of revenue — in the 80 range within two years, down from in the 90s now.
“We are going to get this operation lean and mean so we have drivers pick up up more freight and driving less miles,” he said.
That requires a new focus on booking loads in a much smaller radius from TFI’s depots. He said that a daily set of deliveries for one driver shouldn’t require 300 miles of driving.
TFI’s truckload segment posted a 21.5% gain in revenue before fuel surcharges of $515.9 million compared with $424.6 million a year earlier. Q1 operating income increased 42% to $71.0 million from $50.0 million. That included a $19.3 million gain on the sale of rolling stock and equipment.
TFI’s logistics segment revenue increased 15.1% before fuel surcharges to $435.4 million from $378.4 million, and operating income increased 19.9% to $34.9 million from $29.1 million.
The package and courier segment’s revenue before fuel surcharges fell 5.2% to $124.6 million from $131.5 million. But operating income increased 42.6% to $26.1 million from $18.3 million.
Bédard said the loss of market share and a shift in consumer buying patterns contributed to the revenue decline. As the Canadian economy began to open up as the pandemic eased, consumers started to go back to malls and brick-and-mortar retailers, relying less on e-commerce.
TFI is responding by shifting its operations from business-to-consumer deliveries to business-to-business deliveries, which are more profitable, he said.
TFI said it spent $90.4 million during the first quarter on equipment, up from $37.4 million the prior year. The company spent heavily to renew its fleet, primarily for its TForce division. Equipment spending also was lower a year ago because of the difficulty in obtaining equipment caused by manufacturing and supply chain disruptions, the company said.
Updating its fleet is one of TFI’s top priorities, Bédard said.
The company took delivery of 500 new trucks last year and expects to get at least 800 and possibly 1,000 this year. It also has split its ordering between three manufacturers, so if one encounters supply chain and production issues TFI will still have new trucks coming in from the others. The new equipment will help improve driver morale and retention, improve customer service because of fewer breakdowns and reduce fuel and maintenance expenses, Bédard said. Maintenance for tractors coming off the road now is 45 cents a mile, he said — pricier than new trucks.
“The new ones are five to six to seven a mile,” he said. “It’s just crazy the amount of money that we’re spending, and the customer service the trucks bring down. It’s a domino effect.”
TFI ranks No. 5 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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