Overcapacity remains, but ELD mandate will help: Titanium

BOLTON, Ont. – Overcapacity and pressure on pricing made 2016 a challenging year for Titanium Transportation, but the stage is now set for it to resume its growth.

Ted Daniel, CEO of Titanium, addressed analysts last week to discuss 2016 year-end and Q4 results. He said in 2016, the company moved into a state-of-the-art headquarters with an eight-acre yard – consolidating five locations – and added a strategically placed terminal in Windsor, near the future Gordie Howe International Bridge. It also completed its integration of Pro North Transportation.

Now the company is poised to continue its growth through acquisition strategy, though Daniel said he’s more focused on the quality of those pursuits than the number.

“It’s not about getting a good deal, it’s about getting a fair deal and making sure everyone is happy,” he said. “We are very active and I think there are some very good opportunities out there, where we’re a good buyer who makes sense for certain people and they’re a good seller for us, so it’s a good fit. Not every acquisition out there is a good fit. It has to make sense.”

Traditionally, Titanium targeted two acquisitions per year. Daniel said on the call he’s more focused now, not on the number of deals, but on the quality of the fit. The goal remains to become a $500-million per year revenue transportation company. But Daniel pointed out there remains some excess capacity in the marketplace, which is putting pressure on rates.

“There are a lot of challenges in this industry, still. I think it’s still a market where there is overcapacity,” Daniel said. “There is still pressure on rates and that’s really the indicator internally that lets me know whether or not the capacity issue has resolved and, quite frankly, it hasn’t.”

But Daniel thinks the new Trump administration in the US could benefit the transportation industry, and especially the 60% of Titanium’s business that crosses the border.

“We do have a flatbed division that is very excited about the type of economic beliefs Mr. Trump has,” Daniel said. “He believes in infrastructure, we have a Windsor location and we believe in the new bridge and we’re actually very excited about Trump’s direction economically. When the US does well, industrially-speaking, Ontario does well and Quebec does well…When you invest in infrastructure, that creates jobs and jobs create demand for trucks.”

Asked if the ELD mandate set to take effect in the US this December will drive out capacity and improve pricing, operations manager Marilyn Daniel said she feels it will – eventually.

“ELDs are a major factor in the upcoming year for sure,” she said. “What we are seeing in the marketplace – and certainly through our M&A targets – is a lot of hesitation to embrace the ELD mandate and a lot of uncertainty around it. We have seen through our own experience, the effect of ELDs and the learning curve required. I’m very much for ELDs, but there’s definitely a bit of an adjustment across the fleet and carriers are likely unprepared. So, I definitely think there’s going to be a capacity crunch in the marketplace as a result of the ELDs. I think we’ll start seeing it in the next few months. We’re seeing it now from customers requesting ELD implementation proof, asking us how long we’ve been on it, in recognition of the learning curve that’s involved. I think the true effect will be seen in the fourth quarter of 2017 and in 2018.”

Ted Daniel said the impending ELD mandate could also drive more consolidation within the industry.

“There are some companies out there that have had some great years, but perhaps they’re more in the concluding chapters of their life-cycle,” he said. “They’re not going to make the investment in ELDs.”


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James Menzies is editorial director of Today's Trucking and TruckNews.com. He has been covering the Canadian trucking industry for more than 24 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies.

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