TFI International expects to benefit from Yellow Corp.’s bankruptcy proceedings, potentially adding thousands of daily shipments at a time when its own overall income has plunged.
TForce Freight — formed through the acquisition of UPS Freight — completes about 23,000 shipments a day, and that daily volume could expand above 26,000 shipments, chairman, president and CEO Alain Bedard said in a call with analysts to discuss second-quarter financial results.
“We have the capital, we have the equipment, we have the employees, we have the real estate to benefit,” Bedard said, noting that TForce Freight was running 28,000 shipments per day just a year ago.
“This is going to be really, really good for the industry in general.”
While the TForce Freight network could handle more than 40,000 shipments a day, it currently has about 4,000 more freight doors than it needs, he said, stressing a focus on profitable business.
“We’re going to be really strategic in what we take on as customers.”
Five-year labor deal
The opportunity also comes in the wake of a new five-year deal with Teamsters-represented employees, which will see TForce Freight wages increase US$1.70 per hour on Aug. 6, and add 3% to annual costs after that. But those employees will also be asked to work in a way that helps reduce costs per shipment.
It isn’t the only change coming to the U.S.-based LTL operation. Managers will soon be tracking profit and losses by terminal, like their Canadian peers. “The main reason why we’re doing so well in Canada is our guys have the financial information. They can’t sit on their hands,” Bedard said.
There is room to improve. Canadian trucks travel five miles between stops, about half the distance covered in the U.S., he said. Gains south of the border have been realized in high-density areas, but challenges remain in rural surroundings.
“We can’t run a P&D operation in the U.S. with 10 miles between each and every stop,” he said.
As promising as the new business will be, current operations have seen revenue plunge.
“Everybody is going through some very tough soft patch in the freight environment,” Bedard said, referring to factors such as high inventory levels throughout the industry and “a stupid strike in Vancouver” that affected the Canadian operation.
TFI International’s $192.4 million in second-quarter operating income falls short of the $391 million in Q2 2022, while net income of $128.2 million compares to $276.8 million in the same periods.
“Despite a difficult freight market and reduced volumes industrywide, our results reflect the quality of our operations and our team’s skill in responding to rapidly changing market conditions. We produced solid operating ratios across all our business segments while again generating more than $200 million in net cash from operating activities,” Bedard said in a press release.
“During challenging times for our industry, TFI International’s relentless focus on our longstanding operating principles, our business line diversity and niche positioning, and our ongoing progress on multiple self-help initiatives are what differentiates our performance and future potential.”
Package and courier revenue was down 15%, while less-than-truckload dropped 27%, and truckload revenue was down 32%, due in part to a $153.5-million drop linked to the sale of CFI. Operating income decreased 26% for package and courier, 57% for LTL, 48% for truckload, and 22% for logistics businesses. CFI contributed $22.8 million in operating income in the same period last year.
TFI International sold its U.S.-based CFI truckload and temperature-controlled fleets, as well as its Mexican logistics business, to Heartland Express for US$525 million.
Less-than-truckload operating income — specifically the amount linked to U.S. activity – included $53.7 million of gains from sold land, building and assets.
Mergers and acquisitions
But the fleet remains active in mergers and acquisitions – completing seven of them since the beginning of the year, Bedard added. Deals in the past year alone have included Siemens Transportation Group, Hot Line Freight Systems, and Groupe Boutin, and others.
TFI International also expects to add another two mid-sized trucking operations – each representing more than $150 million in annual revenue – before the end of the year, Bedard told analysts.
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