Titanium eyes further growth in the U.S.
BOLTON, Ont. – Titanium Transportation Group reported its trucking segment achieved record first quarter revenue and EBITDA, but its logistics segment was hurt by changing market dynamics.
However, it expects a steady 2019 and for its recently launched U.S.-based logistics division to be profitable by the end of the year.
Titanium recorded $39 million in Q1 revenue, its second strongest Q1 in history. The trucking segment had its best first quarter ever with $28 million in revenue, up 7.9%. Logistics revenue declined by 40.9% to $12.1 million, which the company attributed to a softening market and difficult comparables from a booming 2018.
The company’s net income was $540,000, down from $1.08 million in the first quarter of 2018.
“We are pleased with the strong start to 2019 in our truck transportation segment, which delivered another record quarter as we continued to build market share,” said Ted Daniel, CEO of Titanium. “After an extraordinary 2018, our logistics segment performance was largely reflective of changing market fundamentals, however remained significantly ahead of 2017 results.”
Speaking to analysts during a conference call this morning, Daniel said he expects a gradual improvement in market conditions for the logistics business through the rest of the year. The trucking segment should remain “relatively stable,” he said. He also noted a softening market could present some attractive acquisition opportunities.
“We do believe the softening marketplace will make 2019 more conducive for rational merger and acquisition opportunities,” he said.
On the trucking side, the company anticipates a stable rate environment and will achieve some organic growth this year. The company added 14 trucks in the first quarter and will add five more in the second quarter. It has secured build slots for another 40 trucks in the third and fourth quarters, which will be filled if demand exists. The company says all its trucks are seated and that it isn’t currently affected by a driver shortage.
“Our recruiting right now is very strong,” Daniel said. “We seem to have a very attractive company to a lot of drivers in the industry. We are not experiencing a shortage of applicants. We don’t have any empty trucks at this point in time, so we’re able to grow organically.”
Daniel said Titanium offered drivers a “really good raise” in 2018, and has other perks, such as a share purchase plan. There is some overcapacity in the marketplace, but Marilyn Daniel, chief operating officer, expects that to change later in the year as the Canadian electronic logging device (ELD) mandate is implemented.
She noted many carriers running Montreal-Toronto (Titanium’s busiest lane) are not yet using ELDs.
While the logistics segment was down sharply y-o-y in the first quarter, Ted Daniel said it could still turn out to be the second best year in company history for the segment. The company recently set up its first U.S. division, a logistics operation based in Charlotte, N.C. It was able to leverage the technology it built at its head office to minimize the cost of expansion. Daniel expects this division to be profitable by the end of this year. He also envisions expanding the U.S. operation to other cities, and won’t rule out the acquisition of a U.S. fleet.
“We would prefer, just as a matter of comfort and convenience, to buy a Canadian carrier. But having said that, given that we’ve opened a U.S. brokerage, we are also not averse to considering a U.S. opportunity,” Daniel said. “There are going to be some interesting opportunities this year, for sure.”
The biggest attraction of the U.S. market is its size, Marilyn Daniel explained.
“The biggest difference in the U.S. is the size of it. The $1.4-trillion-dollar business that the trucking industry is in the U.S. is enormous, and gives us a huge breadth of opportunity. Our opening of the Charlotte office is the beginning of many; we hope to go throughout the U.S. and make our footprint in the U.S. fairly substantial in a fairly short period of time.”
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