Rising motor carrier costs hurting profit margins

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OTTAWA, Ont. — Costs rising much faster than revenues cut into profit margins for Canada’s for-hire carriers in the fourth quarter.

The operating ratio (operating expenses divided by operating revenues) for Canada’s for-hire motor carriers earning at least one million in annual revenues rose to 0.94, according to a report released this morning by Statistics Canada.

The increase in expenses was driven by higher wages and salaries, combined with depreciation, fuel and maintenance expenditures. However, average costs per carrier were lower for payments to owners and operators (-8.8%) and purchased transportation services (-10.1%). Average expenses were $1.69 million, compared with $1.67 million in the same period of 2001.

The cost increases overshadowed impressive revenue gains during the last three months of 2002. For-hire trucking transportation revenues from international movements increased 21.1% to more than $1.92 billion from $1.59 billion in the fourth quarter of 2001. Revenues from outbound movements were up 19.0%, and revenues from inbound movements increased by more than 23%.

Overall, operating revenues totalled $5.15 billion, an increase of 0.1% from the fourth quarter of 2001, and operating expenses reached $4.83 billion, up 1.0%.

There were an estimated 2,855 for-hire trucking companies based in Canada with annual revenues of $1 million or more in the fourth quarter of 2002, down from 2,862 carriers in the fourth quarter of 2001. The decline of carriers in this revenue bracket may reflect the closures and consolidation that some industry experts expect will affect trucking the rest of the year as the industry adjusts to higher costs.

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