TFI International is looking at ways to improve margins, while not counting on the general freight markets to help.

Total revenue for the quarter came in at $2.26 billion (all figures US), up from $1.79 billion in Q2 2023 thanks to contributions from acquisitions, most notably Daseke Group. However, lower freight volumes and a “continued weaker transportation environment” weighed on those gains, Alain Bedard, chairman and CEO of TFI said.

Net income slid to $117.8 million, compared to $128.2 million in the prior year period. That reflected a one-time charge of $19.7 million related to the Daseke acquisition.

Revenue was up across all segments, including 78% in truckload thanks to the Daseke acquisition and 24% in logistics.

But Bedard said on a call with analysts there’s still work to be done, and he’s not counting on a sharp improvement in freight conditions to make things easy.

Freight environment to remain tough

“Still more of the same,” is how Bedard described current market conditions. “It’s still a very, very difficult market right now.”

This is especially true in the U.S. truckload space, Bedard said, where there’s still significant pressure on pricing. “I’d say 2024 is going to be a difficult year. This is why we have not changed our guidance.”

The bankruptcy of YRC late last year gave a momentary reprieve to LTL carriers in the U.S., but Bedard said it now feels as it did before they were removed from the market.

“Now, in terms of, have we hit the bottom? That is probably right,” he said. “I mean, can we see this thing getting worse? I don’t think so. But I don’t see that major improvement in 2024. I think it’s going to be more of the same for the rest of the year.”

Focus on cost reduction

Since he’s not counting on market conditions to come roaring back, the company is laser focused on cost control, Bedard said.

“Our costs are way too high,” he said of LTL operations. “Our admin costs are way too high, our fleet costs is too high. And for us, our focus at TForce Freight is to be more lean and mean, to be more efficient.”

Bedard said in the U.S., the company remains “too fat” relative to peers. “So, we have to attack the costs. Our IT costs are too high, our fleet management costs, maintenance costs are too high, etc…Is the market going to help us? I don’t think so.”

Strategic approach

TFI International has a multipronged strategy to improve margins in its U.S. LTL segment. This includes: improving weight per shipment; picking up more shipments per stop; growing its Ground Freight Pricing – former UPS freight — revenue; and focusing more on customers located close to the company’s terminals.

“Let’s not try to get a shipment outbound from a guy that’s 85 miles away from my terminal,” Bedard reasoned.

Potential rail strike

Talk of a major rail strike in Canada could result in freight shifts but no large gains for TFI International since it moves much of its freight intermodally. A rail strike that shifts freight from rail to truck will boost TFI’s LTL volumes but at the expense of intermodal.

“So, for us, it’s not that good to have a strike with the rail guys,” he said. “Hopefully these guys can settle and get this thing behind us.”

However, Bedard said TFI does have a plan in the event of a rail strike. “Hopefully this will not happen. And I think that the federal government will get in fast, because this is going to be terrible for the Canadian economy,” he said of any strike action.

M&A and potential spinout

Don’t expect any major deals from TFI International as it continues to digest and optimize its $1.1-billion acquisition of Daseke. Smaller tuck-ins are always in play, especially in Canada, Bedard said.

In late 2025, the company could be well positioned for another major acquisition, even as large as $3-5 billion, Bedard said.

But a previously discussed spinout of TFI’s U.S. truckload division is also likely going to have to wait until the integration work with Daseke is complete. This also means Bedard has no plans to retire in his near future.

“I’m in here at least for another five years, so sorry for the guys that want to take over the CEO position at TFI,” he said. “I’m here for at least another five years because this [spinout] is going to have to happen under my watch and it’s not going to happen now because we have Daseke to digest.”