There was less freight for many less-than-truckload carriers to haul in the second quarter, as a slower economy stemmed year-over-year tonnage and shipment growth and in some cases left carriers moving fewer pallets than a year earlier.
However, higher rates and a disciplined pricing market, along with better control over operating costs, kept most of those carriers in the black, and in fact led to increased profitability at many of the largest LTL trucking companies.
One of the most astounding profit gains came from multiregional carrier Saia, which increased second quarter net profit by a stunning 253 percent year-over-year, to $11.9 million, despite a 2.1 percent shortfall in shipments.
The 10th-largest LTL carrier increased revenue 8.1 percent to $288 million on what amounted to only a 1.1 percent rise in tonnage, as average shipment weight climbed 3.3 percent. President and CEO Rick O’Dell credited Saia’s gains to “refinements in pricing” as well as “industrial engineering initiatives.”
It’s been a long time since “YRC Worldwide” and “profit” could be mentioned in the same breath. And although the troubled company is still far from being in the black, its $15.5 million second quarter operating profit is a milestone worth noting.
The $4.9 billion LTL operator, which has suffered more than $3 billion in losses since 2006, hasn’t had a consolidated operating profit attributable to actual results from its freight operations since the third quarter of 2008.
YRC Worldwide narrowed its net loss by 47 percent to $22.6 million. The company reported a $48.8 million net loss in the first quarter, a 35 percent reduction from the same period in 2011. “We’re doing better, but we’re still not satisfied with the overall results,” CEO James Welch said. “Our regional carriers are performing very well. That really drove a lot of our improvement” in the second quarter.
The regional carrier group increased its operating profit by 55 percent from a year earlier to $22.9 million, on a 7 percent increase in revenue to $429.8 million. Tonnage and shipments rose 4.4 percent and
2.5 percent, respectively.
“I can’t say enough about how the regionals have performed,” Welch said. Long-haul YRC Freight, however, “while getting better, is still not performing like we want it to,” he said. “We’re continuing to push change at the company.”
YRC Freight re-engineered its LTL network late in the first quarter, speeding transit times in about 24,000 lanes and reducing freight handling in transit. “I’m pleased with the effort but just not satisfied we’re doing it quick enough,” Welch said.
Revenue at the nation’s third-largest LTL carrier declined 0.7 percent year-over-year in the quarter to $821.1 million as tonnage dropped 3.3 percent, shipments fell 2.1 percent and weight per shipment decreased 1.2 percent.
YRC Freight posted an operating loss of $5.1 million, compared with a $6.6 million operating profit a year earlier. The company had expenses, such as pension payments, it didn’t have in the second quarter of 2011, putting pressure on its bottom line, Welch said.
YRC Freight and the regional carriers improved their revenue per hundredweight, or yield, a measure of pricing and surcharges. YRC Freight’s yield rose 2.9 percent year-over-year and the regional group’s yield increased 2.4 percent.
YRC Freight was one of several carriers to raise general tariff rates on non-contract business between 4.9 and 6.9 percent on average this summer. Price increases to date in 2012 “seem to be sticking pretty well,” Welch said. The company implemented a new pricing and costing system in March that Welch hopes will help it increase profitability over time.
“It’s still a pretty stable pricing environment,” Welch said. “We’re not seeing irrational activity on the part of our competition, and that bodes well for the industry.”
Shipments and tonnage also dropped at ABF Freight System, but the nation’s sixth-largest LTL carrier returned to profitability, posting a $7.7 million operating profit, compared with a $22 million first quarter loss. ABF’s operating profit was up 1 percent from a year earlier, but LTL yield rose 4.7 percent year-over-year to $27.88 per hundredweight.
ABF said it has taken aim at what it calls “inadequate pricing” over the past year to improve profitability. The company lost $198.5 million cumulatively from the fourth quarter of 2008 through the first quarter of 2011, posting a $6.8 million profit for all 2011. Second quarter contract rates were at “favorable levels,” the company said.
Tonnage in the quarter increased 0.9 percent from a year earlier at Con-way Freight. A 3.2 percent increase in yield helped push the second-largest LTL carrier’s operating profit up 36.5 percent year-over-year to
$53.4 million. Con-way Freight’s second quarter revenue climbed 4.6 percent year-over-year to $878.5 million.
Old Dominion Freight Line broke the pattern of low shipment growth and higher profit by increasing LTL shipments 8.6 percent and tonnage 9 percent while boosting net earnings 21.5 percent year-over-year to $47.8 million.
The fifth-largest LTL carrier increased revenue 12.8 percent to $541.5 million. That strong performance indicates ODFL isn’t just profiting in a weak economy, but also taking market share. ODFL’s quarterly operating ratio dropped to 84.7, a level reached by some truckload carriers but rarely by terminal-driven LTL trucking companies.
The company’s consistent profitability — it was the only billion-dollar publicly owned LTL carrier to report a profit in 2009 — is fueling expansion. ODFL spent $120.6 million on capital expenditures in the second quarter and $210 million in the first half of 2012. So far in the third quarter, the company has opened service centers in California, Florida and Minnesota, bringing its total to 218.
“We continue to anticipate that our capital expenditures in 2012 will range between $300 million to $350 million,” CEO David S. Congdon said. That’s evidence that higher profits, instead of rate discounts, can be a steady route to greater market share. JOC
Contact William B. Cassidy at email@example.com.