Profits Decline at Most LTLs As Surcharges Lag Fuel Hikes
By Rip Watson, Senior Reporter
This story appears in the July 28 print edition of Transport Topics.
Most public less-than-truckload companies’ second-quarter profits fell as fleets were pounded by record diesel prices and flagging economic demand, but some executives said they thought the overall pricing environment had improved, or at least stabilized.
Most carriers said that despite higher revenue due to fuel surcharges, the added inflow failed to keep up with rapidly rising diesel prices and other costs. Meanwhile, operating ratios deteriorated across the board.
Old Dominion Freight Line was the lone exception to the LTL sector’s lower profits, as it raised net income 6% to $23.9 million, powered by an industry-leading 16% revenue increase.
“Rising fuel prices and an uncertain economic environment created challenging industry conditions,” Earl Congdon, Old Dominion’s executive chairman, said. “The overall pricing environment has somewhat stabilized but remains challenging.”
Congdon said Old Dominion had increased market share and its revenue gain to $417.8 million reflected 10% more tonnage, weight per shipment gained 7% and revenue per hundredweight increased 5.4%.
Agreeing with Congdon about the rate situation, Doug Stotlar, Con-way Inc.’s chief executive officer, said his carrier “began to see indications of a more stable pricing environment.”
But Robert Davidson, Arkansas Best Corp.’s CEO, wasn’t as upbeat, saying on a conference call, “It’s competitive out there and you’ve got some carriers who have had large tonnage losses and they are trying to take some business based on price [and] with some success.”
Earnings from continuing operations at Con-way nearly kept pace with last year, dropping just 1%. Net income declined the most, 34%, at YRC Worldwide Inc. Profits fell 18% at Arkansas Best and 17% at Vitran Corp.
Con-way boosted operating income in its LTL business by 7% to $77.4 million and achieved a 1% increase in rates, excluding fuel surcharges. Declining earnings at the company’s logistics unit left profit from continuing operations at $47.1 million, compared with $47.7 million last year.
YRC Worldwide earnings — which included 39 cents a share in pension-related gains and 9 cents a share in additional accident costs — slipped to $36.3 million, or 62 cents a share. Last year’s second quarter produced net income of $55.4 million.
While net income was down from last year, YRC returned to profitability after a $45.9 million first-quarter loss as the Roadway, Yellow Transportation and regional units all reported operating profits.
Revenue rose at every fleet except YRC, where it fell 4% to $2.4 billion, including a drop of $70.7 million, or 12%, at the regional unit and $10.6 million, or 0.6%, for the national business.
Revenue growth at Con-way was the second-best at 11% as sales reached $824 million. Total revenue rose 25% to $1.34 billion, reflecting the addition of truckload carrier Contract Freighters Inc. in August of last year. The truckload business produced $12.4 million in operating income, while logistics’ operating income fell nearly 30% to $5 million.
Arkansas Best raised revenue 8% to $498.5 million. At Vitran, revenue rose 15% to $196 million, including a 12% rise in the LTL sector. Net income dropped to $4.6 million from $5.5 million.
Revenue trends were similar at UPS’ freight unit, where sales rose 7% despite a 2.3% decline in shipments. Results of the company’s LTL operations weren’t broken out. Taken together, UPS’ supply chain and freight operating profit rose to $148 million.
The operating ratio at YRC’s regional unit deteriorated to 99.6 from 97.4. YRC’s national operating ratio was 95.6, compared with 94.6 last year.
That key ratio also deteriorated at other carriers.
Con-way’s LTL operating ratio slipped to 90.8 from 90.5, while Old Dominion dipped to 89.7 from 88.7, ABF went to 94.7 from 93.2 and Vitran ended at 94.9, compared with 94.
The overall LTL decline was consistent with the truckload sector. Five of six asset-based carriers, including J.B. Hunt Transport Services and Werner Enterprises, also had lower profits in the face of diesel prices that rose 56% and a U.S. economy that likely grew less than 1% from the 2007 period. Among truckload carriers, only USA Truck raised earnings.
This story appears in the July 28 print edition of Transport Topics.
Most public less-than-truckload companies’ second-quarter profits fell as fleets were pounded by record diesel prices and flagging economic demand, but some executives said they thought the overall pricing environment had improved, or at least stabilized.
Most carriers said that despite higher revenue due to fuel surcharges, the added inflow failed to keep up with rapidly rising diesel prices and other costs. Meanwhile, operating ratios deteriorated across the board.
Old Dominion Freight Line was the lone exception to the LTL sector’s lower profits, as it raised net income 6% to $23.9 million, powered by an industry-leading 16% revenue increase.
“Rising fuel prices and an uncertain economic environment created challenging industry conditions,” Earl Congdon, Old Dominion’s executive chairman, said. “The overall pricing environment has somewhat stabilized but remains challenging.”
Congdon said Old Dominion had increased market share and its revenue gain to $417.8 million reflected 10% more tonnage, weight per shipment gained 7% and revenue per hundredweight increased 5.4%.
Agreeing with Congdon about the rate situation, Doug Stotlar, Con-way Inc.’s chief executive officer, said his carrier “began to see indications of a more stable pricing environment.”
But Robert Davidson, Arkansas Best Corp.’s CEO, wasn’t as upbeat, saying on a conference call, “It’s competitive out there and you’ve got some carriers who have had large tonnage losses and they are trying to take some business based on price [and] with some success.”
Earnings from continuing operations at Con-way nearly kept pace with last year, dropping just 1%. Net income declined the most, 34%, at YRC Worldwide Inc. Profits fell 18% at Arkansas Best and 17% at Vitran Corp.
Con-way boosted operating income in its LTL business by 7% to $77.4 million and achieved a 1% increase in rates, excluding fuel surcharges. Declining earnings at the company’s logistics unit left profit from continuing operations at $47.1 million, compared with $47.7 million last year.
YRC Worldwide earnings — which included 39 cents a share in pension-related gains and 9 cents a share in additional accident costs — slipped to $36.3 million, or 62 cents a share. Last year’s second quarter produced net income of $55.4 million.
While net income was down from last year, YRC returned to profitability after a $45.9 million first-quarter loss as the Roadway, Yellow Transportation and regional units all reported operating profits.
Revenue rose at every fleet except YRC, where it fell 4% to $2.4 billion, including a drop of $70.7 million, or 12%, at the regional unit and $10.6 million, or 0.6%, for the national business.
Revenue growth at Con-way was the second-best at 11% as sales reached $824 million. Total revenue rose 25% to $1.34 billion, reflecting the addition of truckload carrier Contract Freighters Inc. in August of last year. The truckload business produced $12.4 million in operating income, while logistics’ operating income fell nearly 30% to $5 million.
Arkansas Best raised revenue 8% to $498.5 million. At Vitran, revenue rose 15% to $196 million, including a 12% rise in the LTL sector. Net income dropped to $4.6 million from $5.5 million.
Revenue trends were similar at UPS’ freight unit, where sales rose 7% despite a 2.3% decline in shipments. Results of the company’s LTL operations weren’t broken out. Taken together, UPS’ supply chain and freight operating profit rose to $148 million.
The operating ratio at YRC’s regional unit deteriorated to 99.6 from 97.4. YRC’s national operating ratio was 95.6, compared with 94.6 last year.
That key ratio also deteriorated at other carriers.
Con-way’s LTL operating ratio slipped to 90.8 from 90.5, while Old Dominion dipped to 89.7 from 88.7, ABF went to 94.7 from 93.2 and Vitran ended at 94.9, compared with 94.
The overall LTL decline was consistent with the truckload sector. Five of six asset-based carriers, including J.B. Hunt Transport Services and Werner Enterprises, also had lower profits in the face of diesel prices that rose 56% and a U.S. economy that likely grew less than 1% from the 2007 period. Among truckload carriers, only USA Truck raised earnings.
