Amid a persistently weak freight environment, TFI International is undertaking significant cost-cutting measures across its Less-Than-Truckload (LTL) and Truckload businesses. CEO Alain Bédard announced these measures during the company’s second-quarter earnings call, forecasting that challenging market conditions will continue through the latter half of 2024 and into 2025.
Financial Performance and Challenges
TFI reported a Q2 net income of $117.8 million, or $1.38 per diluted share, marking an 8.1% decline from $128.2 million, or $1.47 per share, in Q2 2023. Despite a revenue increase of 26.5% to $2.265 billion, driven by acquisitions like the $1 billion purchase of flatbed specialist Daseke Inc., the gains were offset by lower freight volumes and reduced fuel surcharge revenue. Additionally, a $19.7 million restructuring charge and a $24 million hike in interest expenses related to the Daseke acquisition further impacted profitability.
Division Performance
- LTL Division: Revenue rose slightly to $794.2 million, with U.S. operations showing a 7.6% year-over-year increase in revenue per shipment (excluding fuel). However, legacy U.S. operations saw a $24.4 million decline in revenue. The U.S. LTL unit posted an operating ratio of 90.8, slightly improving from 91.5 a year earlier.
- Truckload Division: Revenue surged 78% to $737.7 million, largely due to the Daseke acquisition and strong operational execution. Daseke alone contributed $329 million to Q2 revenue. The Specialized Truckload unit saw a 94% revenue increase, but the operating ratio fell to 88.7 from 83.9.
Cost-Cutting Measures
Bédard emphasized the need for significant cost reductions, particularly in the TForce Freight division, which is running at 35% excess capacity. The company plans to cut IT and linehaul costs and is closely monitoring terminal financials, with underperforming managers at risk of removal. Bédard also indicated that Daseke’s IT costs need to be halved to align with TFI’s legacy truckload operations.
Outlook
Bédard remains pessimistic about a near-term recovery in the freight market. He anticipates continued difficulties through 2024, with a potential turnaround in 2025 being uncertain. Despite the challenges, TFI is committed to aggressive cost-cutting to navigate the tough market conditions.
Source:
https://www.ttnews.com/articles/tfi-earnings-q2-2024
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