TFI International grew profits to $153.5 million (all figures US) in the fourth quarter, a 6% jump year over year on lower revenues of $1.96 billion, down from $2.14 billion.
The lower revenue was due to the sale of CFI’s truckload, temperature-controlled and Mexican non-asset logistics business combined with reduced U.S. LTL volumes. The company says the reduced revenue also reflected its continued shedding of unprofitable freight in its TForce Freight division.
By segment, revenues slipped 3% for package and courier, 6% for LTL, 14% for truckload, and 11% for logistics. However, operating income was higher in each segment, except for LTL.
For the full year, TFI International posted total revenue of $8.81 billion, compared to $7.22 billion in 2021. Net income was $823.2 million compared to $754.4 million the year earlier.
“TFI International successfully capped 2022 with strong fourth quarter results, generating slightly higher operating income on significantly improved operating margins, a 53% increase in the full-year adjusted diluted EPS and a 26% increase in the full-year free cash flow, despite macro volatility, fuel-related working capital outlays, and the sale of CFI assets last summer that served to strengthen our overall business mix and returns,” Alain Bedard, chairman, president and CEO said in a release.
‘Conservative’ economic outlook
Bedard said he sees a soft market continuing in the first half of 2023, with conditions strengthening in the second half of the year. However, he added January’s numbers were strong and its 2023 outlook is “conservative.”
He also said TFI International is taking advantage of the soft market to reduce costs and renew the fleet.
“We’re getting all the tucks we ordered,” he said. “Since the end of November we’re just getting flooded with all these new trucks. We have to get them in the network, sell the old ones, improve mpg, save money on maintenance.”
TFI International has improved TForce Freight’s operating ratio (OR) to 90. It was losing money when TFI purchased the operations from UPS a year-and-a-half ago. The improved margins have come from shedding unprofitable business, which has also taken a toll on revenue.
“We had a lot of freight that did not fit the operation,” said Bedard. It has gone from handling about 32,000 shipments a day down to about 23,000 today. With the culling of unprofitable shipments mostly finished, Bedard said it will now grow the division organically to the tune of about 5% this year.
TFI takes stake in ArcBest
TFI also disclosed for the first time in financial filings that it has quietly taken a 4% stake in U.S. publicly traded ArcBest. While this had analysts’ tongues wagging, Bedard downplayed the investment, citing the strategic benefits of two unionized companies working together.
“We really like this company,” he said. “In terms of what we want to do, we would like to have some discussions, some very positive discussion down the road with these guys. We believe, being a unionized carrier like they are, there are some things we could work together and improve on over time.”
An example could be selling unused excess real estate to ArcBest. Bedard noted also it’s not unlike in Canada, where TFI International works with peers such as Mullen Group where it makes sense.
In terms of mergers and acquisitions, Bedard said TFI International expects to close about $300 million in smaller deals by the end of June and conditions are ripe.
“I’ve always said you buy on bad news and sell on good news,” he said. “Right now, for the past eight or nine months, it has all been bad news. A lot of guys are tired. It creates an opportunity for us.”
Larger deals in the $1-billion revenue range take much longer to complete and TFI is still optimizing its large purchase of UPS Freight. Bedard said he likes to do a major deal every three to four years but its last one was around 18 months ago.
“Maybe we can get something done late in 2023 but I think more likely in 2024,” he said of major acquisitions.