Cargojet revenue up 46 percent in first quarter

by Christopher Reynolds THE CANADIAN PRESS

Cargojet Inc. beat revenue expectations in its first quarter despite plateauing e-commerce demand, as the air cargo carrier looks to bolster its fleet and ramp up domestic deliveries this year.

The company, which provides time-sensitive overnight air freight services as well as aircraft leases, garnered 46 percent year-over-year revenue growth in the quarter ended March 31.

Nonetheless, Cargojet swung to an unexpected net earnings loss owing to a “fair value” adjustment of stock warrants, which the company attributed to an increase in share price. Its stock rose 13 percent to $189.71 from $167.30 between Dec. 31 and March 31, but was at $154.54 in midday trading on the Toronto Stock Exchange.

Demand for Cargojet’s charter delivery service stayed strong as the Canadian government relied on it to transport COVID-19 test kits from Asia, the company said.

Charter trips to China nearly tripled to drive the company’s revenue gains, said chief strategy officer Jamie Porteous.

E-commerce levelling off

While e-commerce purchases from consumers may be levelling off, business-to-business deliveries remain robust, chief executive Ajay Virmani told analysts on a conference call Monday.

“Our customers have not told us that they have any plans of scaling down any time soon on the e-commerce side,” he said.

“We’ve seen announcements by Amazon and others saying they’re finding certain slowness,” Virmani said. “People are flocking to the stores, definitely.”

However, swaths of consumers continue to purchase some basic items via laptop and smartphone rather than over the counter, he added.

“They’re buying the daily essentials and supplies more on e-commerce than they used to … I always use the words toothpaste and toothbrushes,” Virmani said.

“If we find there’s slowness, we can also redirect aircraft into other segments that have high demand.”

A new$2.3-billion, seven-year agreement signed last week with DHL to provide cargo services across four continents expanded on an existing deal with the German courier.

“We were contracted by DHL to fly six flights a week into China as of April 1. And because China closed down, they said, ‘OK, take this aircraft and go Europe.’ So we didn’t miss a beat,” Virmani said.

The company plans to increase its fleet to 39 by year’s end and to 48 before 2025 from 32 currently.

Virmani said Cargojet owns 93 percent of its existing fleet – worth more than $1 billion – following a deleveraging plan rolled out in January 2021, leaving it better protected against rising interest rates and inflation.

He said the company has heard no concerns about the skyrocketing price of oil, “because everybody’s hoping that this fuel phenomenon is going to be a bit short-term or medium-term.”

Cost climbing

Potential rival modes of transport, including trucks and container ships, have also seen costs shoot up as labour expenses, vehicle prices and shipping fees rise, he said.

On Monday, Cargojet announced that its board of directors has approved a 10 percent increase to its quarterly dividend, to be declared in June at 28.6 cents per share.

The Mississauga, Ont.-based company reported a loss of $56.4 million or $3.26 per diluted share last quarter compared with a profit of $89.4 million or $5.24 per diluted share a year earlier.

Excluding a warrant valuation loss, Cargojet said it earned $30.4 million in its latest quarter compared with a profit of $7.5 million excluding a warrant valuation gain in the same quarter last year.

Revenue totalled $233.6 million compared with $160.3 million in the first quarter of last year.

Analysts had expected $208 million in revenue, according to financial data firm Refinitiv.