TFI International, a major player in the North American transportation and logistics sector, is proactively implementing significant cost reduction measures across its Less-Than-Truckload (LTL) and Truckload divisions. This strategic move comes as CEO Alain Bédard paints a realistic picture of a persistently challenging freight environment, signaling that the industry may not see substantial improvements until late 2025 at the earliest.
The image displays a TForce Freight truck, highlighting the company’s Less-Than-Truckload (LTL) operations which are currently undergoing significant cost optimization efforts.
The company’s Q2 2024 financial results, released on July 25th, revealed a net income of $117.8 million, a slight decrease from the $128.2 million reported in the same quarter last year. Despite this dip in net income, TFI International showcased robust revenue growth, reaching $2.265 billion, a substantial 26.5% increase year-over-year. This revenue surge was largely fueled by strategic acquisitions, most notably the significant acquisition of flatbed specialist Daseke Inc. in December 2023. However, this positive revenue trend was partially tempered by reduced freight volumes reflecting the current sluggish market and a decrease in fuel surcharge revenues.
Diving Deeper into TFI’s Q2 Performance
Several factors beyond the challenging freight market impacted TFI’s Q2 bottom line. These included a $19.7 million restructuring charge and a $24 million increase in interest expenses directly linked to financing the Daseke acquisition. Despite these financial headwinds, TFI International’s strategic positioning in the transportation landscape remains strong. The company currently holds the 4th position on the Transport Topics Top 100 list of largest for-hire carriers in North America and has ascended to the top spot in the flatbed sector following the Daseke acquisition, underscoring its expanding influence in specialized transport topics.
LTL Division: Balancing Growth and Efficiency
TFI’s LTL division demonstrated resilience in Q2, with revenue reaching $794.2 million, a marginal increase from $787.7 million in the prior year. This division contributes a significant 40% to the company’s overall revenue. Growth in this sector was attributed to higher revenue per shipment in the US, strategic acquisitions, and effective cost management strategies implemented across both US and Canadian operations. Although legacy U.S. LTL operations experienced a revenue decline of $24.4 million, the division saw a positive trend in LTL revenue per shipment in the U.S., excluding fuel surcharges, which rose by 7.6% year-over-year to $337.35. The U.S. LTL unit also improved its operating ratio to 90.8, compared to 91.5 in Q2 2023, indicating enhanced operational efficiency in key transport topics.
However, CEO Bédard expressed concerns about the light freight loads within TForce Freight, the company’s LTL division, echoing sentiments from the Q1 earnings call. He emphasized the urgent need for substantial cost reductions within this division to enhance profitability and competitiveness in the current market.
“Our costs are too high. Our focus at TForce Freight is to be lean and mean,” Bédard stated, highlighting that IT and linehaul costs are under intense scrutiny. He further indicated that the company is meticulously analyzing the financial performance of each terminal and is prepared to make personnel changes if necessary to ensure optimal efficiency. Bédard pointed out that TForce Freight is currently operating with excess capacity estimated at 35%, signaling significant room for operational streamlining within these critical transport topics.
Truckload Division: Daseke Acquisition Drives Revenue Surge
The Truckload division experienced remarkable growth in Q2, with revenue totaling $737.7 million, a substantial 78% increase compared to $410.7 million in the same period last year. This surge is primarily attributed to the Daseke acquisition, which contributed $329 million to the Q2 revenue, alongside strong operational execution across the division. Within the Truckload segment, the Specialized Truckload unit witnessed an impressive 94% revenue increase, reaching $565.9 million. While the operating ratio for this unit slightly increased to 88.7 from 83.9, Bédard considered it “impressive” given the current phase of the freight cycle, indicating effective management in challenging transport topics.
This image promotes the RoadSigns podcast by Transport Topics, featuring Jeff Loftus of FMCSA discussing the impact of ADAS technology on truck safety and the broader transportation industry.
Despite the revenue growth in the Truckload division, Bédard emphasized that cost reduction efforts are equally crucial in this segment. He reiterated the commitment to aggressively cutting costs, aiming to halve Daseke’s IT expenses to align with the legacy truckload operation’s cost structure. This underlines the company’s broader strategy to enhance profitability across all transport topics through stringent cost management.
Market Outlook: Navigating Uncertainty
Looking ahead, CEO Bédard expressed a cautious, if not pessimistic, outlook regarding near-term improvements in the freight market. While acknowledging that the market might have reached its lowest point, he does not foresee any significant market-driven recovery in 2024 or 2025. Bédard emphasized that TFI’s performance will largely depend on internal improvements and cost optimization rather than external market tailwinds.
“For us, I don’t see the market in ’24, ’25 helping at all. It’s all us,” Bédard stated, reinforcing the company’s focus on internal strategies to navigate the current economic landscape. He anticipates continued market challenges through Q3 and Q4 of 2024, with potential for change in 2025, although he remains uncertain. This forward-looking perspective underscores the critical importance of TFI International’s proactive cost-cutting measures and strategic operational adjustments in response to the evolving dynamics of transport topics and the broader freight market.
