Operating income margin was down 2.3 percentage points y-o-y at US and Canadian trucking giant TFI International in the first quarter of 2025. Across the company, revenues improved by 5.0% to $1,964.4m operating income fell 24.4% y-o-y to $114.6m. While revenue grew by 66.7% y-o-y and operating income was up 17.6% in the Truckload division, operating income was down 44.6% and revenue was down 13.3% in the LTL business. CEO of TFI International Alain Bédard said, “Our strong financial footing enables us to take a strategic approach to seasonality.”
Uncertainty dogs Truckload division
In previous earnings calls, Bédard has spoken of ‘cutting the fat’ at specialised truckload acquisition Daseke. This appears to be yielding results. Revenue was up 66.7% y-o-y to $662.9m and operating income was up 17.6% to $48.8m, though this meant that operating income margin was down 3.0 percentage points to 7.4%.
Bédard observed fall in demand for specialised truckload but no fall in rates. He said, “If you are a U.S. farmer right now, you don’t feel pretty good because your main customer, China is just saying, we don’t want your product. So one of our customers are industrial based. So our customers are manufacturing tractors, they’re manufacturing agricultural equipment, et cetera. Those guys don’t sell a lot because their customer, the farmer are insecure right now. They don’t know what’s going to happen, right? So that’s just one small example of what we’re going through right now in our U.S. speciality truckload operation, which is a lot of it is flatbed, our industrial base customers are just waiting, okay, because their customers don’t know what’s going to happen, right? So this is – if you look at our miles, okay, Q1 in the industrial sector in our flatbed operation, in Q1, we were down like 10% to 15% depending on the week.”
Regarding the rate per mile, Bédard continued, “Now the only good thing that we’re seeing so far is the rate per mile, has improved, okay? Strange to say that in a difficult environment, normally, okay, you would say that the rate per mile will also be under pressure, but we’re not seeing that.”
LTL – ‘stupid’ decisions cost margins
Operating income was down 44.6% y-o-y to $47.1m and revenue was down 13.3% to $679.0m for the LTL division. Where some of this was due to cyclicality, Bédard blamed the LTL’s former leadership for a lot of the falls. He continued, “Q1 results are very disappointing. We made some change in leadership in mid February. From March and April I could see some very important change.”
The outgoing leadership, in the CEO’s opinion had allowed small and medium clients to go in favour of lower margin corporate clients. Bédard said bluntly, “This is a little bit stupid in this kind of an environment,” adding, “We’re replacing the big accounts, the corporate account with the small account, which is completely the opposite of what we were doing in Q3 and in Q4 of last year.” This strategy, it is hoped, will improve margins and profitability in the coming quarters.
Overall TFI’s leadership “continues to navigate industry-wide demand weakness”, according to Bédard, and until that demand weakness eases in an up-cycle, the company can only avoid making ‘stupid’ decisions to improve its profitability.
Author – Richard Shrubb
Source: Ti Insight
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