Ryder’s results inspire cautious optimism


Ryder shareholders have enjoyed the ride since the turn of the year, but its recent quarterly trading update should perhaps inspire only cautious optimism.

Ryder’s financials for the three months ended March 31, which were released on 26 April, showed that this US-based supply chain solutions provider is growing rapidly but is still burning cash, albeit at slower pace than in the past. The company’s equity valuation has roared back in recent weeks, boosted by rising stock markets and falling volatility since early February. However, Ryder’s management still has a lot to do to get its house in order, at least financially.

Negative free cash flow of -$63m during the quarter was a significant improvement from -$156m one year earlier, and was boosted by rising operating cash flow of $365m. Ryder will need to do better than that, however, to realise its ambitious full-year free cash flow guidance in 2016, which “remains at $100m”.

Operating revenues are rising at a faster pace than total revenues – the latter, which exclude fuel, rose 4% to $1.6bn year-on-year – at a time when debt increased by $97m year-on-year, primarily due to investments in vehicles aimed at funding growth projects.

Cash and cash equivalents on the books amount to only $56m. Meanwhile, the company’s total debt pile stands at $5.5bn with an average cost of 2.7% in the first quarter, which was some 20 basis points lower than at the end of 2015.

The company’s debt-to-equity ratio at the end of the first quarter was 275%, which compares with 277% one year earlier and with a targeted range of between 225% and 275%. “Based on forecasted leverage, the company anticipates resuming its previously announced two million share anti-dilutive repurchase program in the second quarter,” Ryder said.

Ryder’s core fleet management solutions (FMS) business recorded a 7% growth rate in operating revenues to $962m, but underperformed its smaller transport and supply chain solutions units, which delivered steeper growth rates.

Total FMS revenue in the first quarter, which account for 70% of total group sales, stood at $1.1bn, up a mere 1% year-on-year. The increase in operating revenue was offset by the impact of lower fuel costs passed through to customers.

Full service lease revenues, which represent 56% of FMS total revenues, rose 8% on a reported basis on the back of “fleet growth and higher prices on replacement vehicles”.

Excluding UK trailers, the number of full service lease vehicles increased by 6,500 units from the year-earlier period and grew by 1,700 vehicles from the fourth quarter.

Source: Transport Intelligence, 4th May 2016

Author: Alessando Pasetti