TFI Third-Quarter Profit Dives 45.6% on Weak Freight Market
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TFI International profits in the third quarter slumped 45.6% year-over-year, with the Montreal-based company primarily citing weaker market conditions, especially in the truckload market.
The for-hire carrier posted net income of $133.3 million, or $1.54 earnings per diluted share, in the most recent three-month period, compared with $245.2 million, or $2.72 , in the year-ago period.
TFI reported revenue of $1.91 billion in the most recent quarter, compared with $2.24 billion in the year-ago period, it said, adding that revenue before fuel surcharge totaled $1.63 billion, versus $1.86 billion in the year-ago period.
The company blamed the decline in revenue primarily on weaker end market demand, which it said resulted in a fall in volumes, as well as the sale of its CFI truckload, temperature-control and Mexican non-asset logistics business in August 2022.
Companywide revenue fell just short of consensus analyst expectations of $1.93 billion, according to Zacks Equity Research.
TFI ranks No. 4 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 6 on the TT less-than-truckload carriers list. So far in 2023, TFI has carried out 11 acquisitions.
“We executed well during this stretch of weaker demand, as our team was able to quickly adapt to changing market conditions while further streamlining operations,” CEO Alain Bédard said. “As a result, we were able to post solid results, including close to $280 million of net cash from operating activities.”
The company’s LTL operations — TForce Freight — posted revenue before fuel surcharge of $717.7 million, a 12.2% decline compared with $817.2 million in the year-ago period. The segment reported an operating margin of 14% in Q3, compared with 12.3% a year earlier.
Tonnage at TForce Freight fell 0.8% year-over-year to 904,000 metric tons from 911,000 metric tons a year earlier, TFI said. Adjusted operating ratio at the unit’s U.S. operations was unchanged year-on-year at 90.8. The operating ratio of its Canadian operations weakened to 77.2 from 72.8 a year earlier.
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Operating ratio provides insight on how a company is doing in balancing its costs and revenue generation. The lower the ratio, the better a company’s performance.
TFI’s truckload unit saw Q3 revenue before surcharge slump 21.3% to $401.5 million from $510.2 million a year earlier, due in part to a $107.6 million decrease from the divestiture of CFI. The segment saw an operating margin of 12.5% in the most recent quarter, compared with 18.9% a year earlier.
The operating ratio of the unit’s specialized operations weakened to 87.8 from 79.9 a year earlier. The operating ratio of its conventional Canadian truckload operations weakened to 87.8 from 75.5 a year earlier.
TFI ranks No. 7 on the TT Truckload sector list.
Revenues at the company’s logistics unit totaled $416.2 million in the most recent three-month period, compared with $424.1 million in the year-ago period. The unit posted an operating margin of 9.8% in the third quarter, compared with 6.8% in the year-ago period.
TFI’s package and courier unit reported revenue before surcharge of $111.7 million, a 7% decrease compared with $120.2 million in the year-ago period. The unit posted an operating margin of 22.6 in the most recent quarter, compared with 28.2 a year earlier.
The unit transported 141,000 metric tons in Q3, a 7.2% decrease compared with 152,000 in the year-ago period.
Looking forward, TFI said the North American economic growth forecast remains subdued and uncertain because of a variety of factors, including elevated interest rates, high inflation, escalating geopolitical conflicts, labor shortages, global supply chain challenges and slower growth in many international markets.
The company said it remains vigilant on new potential risks that could cause further economic disruption, resulting in additional rounds of declining freight volumes and higher costs. Lower diesel prices in the months ahead could cause a continued earnings headwind, it added.
“Looking ahead, we’re well positioned to capitalize on the eventual pickup in demand given our efficient platform,” Bédard said.
