MONTREAL, Que. – TFI International delivered a mixed bag for its Q4 and 2017 full-year results, but chairman and CEO Alain Bedard is confident the U.S. truckload division has turned the corner.
The company’s 2016 acquisition of CFI has not been without its challenges, but Bedard, on a conference call with analysts Feb. 20, said stability has been returned to the organization. It had undergone several ownership changes before its acquisition by TFI International. Now, Bedard said, stability has improved along with improving U.S. truckload market conditions.
“We are optimistic that the attention we paid to this segment has set the stage for a turnaround,” Bedard said. “We’re excited about the outlook for 2018 with North American economic growth on the rise, led by strong consumer spending that’s driving a recovery in trade volumes and rates. This inflection point should be most evident in our U.S. truckload operation going forward.”
Bedard said the right leadership team is now in place at CFI, and that the group’s January performance was “very encouraging.”
“These guys are on plan,” he said.
The electronic logging device (ELD) mandate in the U.S., which came into effect in December 2017 but won’t be fully enforced until April, has not yet had an impact on the market, Bedard noted. But freight rates are improving, and with them, the quality of revenue.
“The U.S. economy is really, really strong,” Bedard said. “I feel very good about the quality of rates and then the quality of revenue in 2018.”
However, a strengthening market also means greater cost pressures, including rising driver compensation.
“We’ve increased salaries for our drivers during the year, because we want to be very competitive with the rest of the industry,” said Bedard.
Strengthening U.S. truckload fundamentals also put more pressure on TFI’s logistics division, which saw declining margins.
“Adjusting is always difficult when the market starts to tighten up, because truckers will ask for more money, and this is exactly what’s going on right now,” Bedard said. “So, all the brokers’ operations are suffering to a certain degree because the truckload guys are saying ‘I need more money’ and then you have to get in touch with the customer and say, ‘Hey, Mr. Customer, the market has changed, we need more money.’ So, there’s a lag there. So, this is why results were negatively affected in Q4 and it’s still going on now.”
Meanwhile, on the truckload side, customers are trying to lock in multi-year contracts with their carriers.
“I don’t know any truckers that are stupid enough to say (yes to) two to three years,” Bedard said.
As for the domestic market, Bedard said TFI International will be building a hub in Calgary, and relocating a Vancouver facility. He sees a stronger market in Alberta and Saskatchewan, but weaker conditions in the Ontario and Quebec LTL markets, because brick-and-motor retailers are losing share to e-commerce.
“If you’re not in the package and courier (P&C) business, and you’re only an LTL guy in Canada, good luck,” Bedard said.
TFI International remains bullish on the P&C segment, though some e-tailers are taking delivery in-house.
“My competition, in the U.S., has been the e-tailer that decided to do it themselves,” Bedard said, noting most other competitors are small. The focus at TFI International will continue to be on achieving strong margins, not just capturing market share.
“Our culture is that we are in business to make money, we are not in business just to practice delivery,” Bedard said. “P&C in 2018 will definitely do way better, way better.”
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