TransForce Suffers Frostbitten Profit
MONTREAL, QC — Harsh weather bit into trucking companies’ profit this winter, but there’s good news for the industry, too: the manufacturing sector seems to be slowly reviving thanks to the decline of the Canadian dollar.
The largest Canadian carrier, TransForce, announced lower year-over-year financial results, citing bad weather and the closure of its oil rig moving business in Western Canada and severance costs as profit fell to $12.3-million in the fourth quarter from $36.1-million a year earlier.
"Although the fourth quarter produced lower year-over-year results, factors affecting profitability were mostly related to harsh weather. In addition, initiatives to reduce our costs and our asset base in several divisions resulted in additional expenses of about $7.0 million,” said Alain Bédard, chairman, president and CEO of TransForce.
"At the end of 2013, we shut down our Canadian rig moving operations, given low prospects for generating a satisfactory return on assets in the foreseeable future, and we further scaled down corresponding U.S. activities due to much lower revenue. This situation resulted in a non-cash $63.1 million intangible asset impairment charge. We are orderly disposing of assets and proceeds will be used to invest in projects that generate a superior return and a solid cash flow," Bédard said.
Earnings per share decreased to 13 cents from 37 cents even though revenue increased to $792.6-million from $778.4-million. And the 1.8 percent increase in revenue in the fourth quarter was due to higher revenue in its package and courier segment as a result of its enhanced same-day delivery network in the United States.
Bédard said TransForce has seen the impact of Canada’s dwindling manufacturing sector, including in Ontario’s auto industry.
“Five years ago in Ontario we had lots of industrial customers ... today we’re down 50 to 60 percentof what we were serving. Those guys are all shut down, closed, gone,” Bédard said.
But now that the Canadian dollar’s value has dropped – it’s been less than the US dollar for about a year and stands at around 90 US cents – it will help Canadian exports.
“Maybe it’s going to be short term but we’re starting to see a little bit more activity in our truckload sector right now,” Bédard said Thursday during a TransForce conference call.
The cost of bad weather
Notwithstanding the currency change, Bédard said he doesn’t foresee economic or market conditions changing significantly in early 2014, so TransForce will continue to cut expenses by closing operations and jobs.
TransForce has been auctioning off its Canadian rig-moving equipment – used in the oil and gas industry – and is also planning on reducing its US rig-moving operations.
“If things don’t improve, then we’ll probably have to [look again] because we’re in the business of making money, not losing any, and if we cannot support a profitable operation, we’re just going to walk away, sell the assets and do something else.”
Plus the weather has been merciless on people and businesses alike.
Extreme weather disrupted operations in Canada and the US. Operations, especially in Toronto, were disrupted for several days in December when an ice storm caused many trees to fall, breaking electricity wires and leaving many in the city without power.
“When it hits Toronto, it’s the worst for us because everything comes out of Toronto at 75 percent to feed the network,” Bédard said.
Despite the setbacks, the company expects to benefit from its recent acquisition of Clarke Transport and Clarke Road Transport, as well as from the pending acquisition of Vitran.