TFI International Is Well Placed to Weather Freight Recession in Q3


Canada-based logistics, last mile delivery and freight company TFI International has reported a 14.8% y-o-y drop in revenues and a 13.1% in operating profit in Q3 2023. Revenues dropped to US $1,911m and adjusted operating profit, down to $302.5m.

The company has a spread of interests and as such hasn’t been so heavily exposed to the freight recession in North America. Logistics represents 9.8% of TFI International’s revenues and where the segment saw a 1.9% drop in revenues, it also saw a 41% growth in operating profit to $40.9m. This went a long way to helping the business weather the freight recession that has ultimately been led by softer consumer demand.

By contrast, the Truckload segment (12.5% of its overall revenues) saw a 25% drop in revenue compared to Q3, 2022 and a 48% drop in profit to $50.1m. Pure play trucking companies in the US have recently seen drops in earnings across the board, but TFI International’s spread of interests have insulated it from this.

For its last mile Package and Courier business, that makes up 22.6% of its revenues, TFI International saw a 12% drop in revenues and a 26% drop in operating profits to $25.2m. With LTL, a 15% drop in revenues and almost 0% change in operating profit to $100.4m.

As a whole, CEO Alain Bedard is pleased with the way the company has performed given the economic conditions. He said, “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.”

Though based in Canada, almost 67% of its revenues stem from the USA. Until 2022, the company also operated in Mexico. In August 2022 TFI International divested its CFI truckload, temperature control and Mexican business. This generated $107.6m of revenues in the third quarter of that year. Representing just 5% of its revenues the Mexico business was small divestment but helped the company improve its overall profitability.

Looking forward, Bedard is confident the company can capitalise on the expected recovery from current softness in consumer market, “given our efficient platform, our team’s focus on profitability and cash flow, and our solid financial foundation.”

The coming North America peak season is set to be smaller than previous years, especially the peak seasons of 2020 and 2021 when the pandemic drove e-commerce sales to record levels. Inflation and other macroeconomic factors are likely to lead to fewer e-commerce deliveries and a lower demand for cargo. Those businesses like TFI International not so heavily exposed to truck transport and final mile deliveries will have an easier time ahead than those that are more so.

Author: Richard Shrubb

Source: Ti Insights

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