Cargojet sees double digit revenue growth in third quarter

by The Canadian Press (CPSTF)

Cargojet Inc. credits its new strategy for a high performing third quarter, as the company adapts to uncertain customer demands while keeping a close eye on the economy.

The Mississauga, Ont.-based company, which provides time-sensitive overnight air freight services and aircraft leases, said it will continue to focus on long-term commercial contracts to protect against tightening consumer demand.

The company on Monday reported a 20 percent revenue growth for the quarter ended Sept. 30 even as the effects of inflation weighed on consumer demand.

Cargojet will continue to “monitor various macro risks including a potential recession, which may have an impact on consumer spending,” chief executive officer Ajay Virmani said in a statement accompanying the results.

The company reported a profit of $83.4 million compared with a loss in the same quarter a year ago as the demand for e-commerce goods persists.

“As inflation continues to signal a potential recession and a decrease in consumer spending, the company continues to carefully move forward with its strategy to supply the capacity required to keep up with customer demand,” said Virmani in the news release.

Cargojet said it will focus future planning around business transactions, in part, due to the success of business-to-business volumes this quarter.

Virmani said he expects “greater endurance” for Cargojet by focusing on long-term commercial interests, protecting the company even if consumer spending declines as the company enters its fourth and generally highest performing quarter.

During a call with analysts Monday, Virmani said that its long-term agreements will maintain Cargojet’s resiliency even if cargo numbers were to decline significantly.

In March, Cargojet said it signed a deal with German logistics company DHL to bring in an estimated $2.3 billion in business volume over seven years.

“DHL is utilizing Cargojet as a core component of their international capacity, with a new route, Halifax to Los Angeles, having much longer stage length than in prior contracts,” said Walter Spracklin, an analyst for RBC Dominion Securities, in a note to clients.

Spracklin said that Cargojet’s contractual revenue should provide support even if a recession is to occur.

Virmani reported an on-time performance of 99.7 percent for the quarter ended Sept. 30.

He said the company “continues to carefully manage its strategy to match the capacity required with actual customer demand.”

The result compared with a net loss of $12.9 million or 74 cents per diluted share in the same quarter last year.

Revenue totalled $232.7 million, up from $189.5 million in the third quarter of 2021.

On an adjusted basis, Cargojet says it earned $2.18 per share, up from an adjusted profit of $1.39 per share a year earlier.

The company said its net income amounted to $4.77 per diluted share, $5.51 higher than the same quarter last year that surpassed median forecasts of $1.74 per share according to financial data firm Refinitiv.

Cargojet provides air cargo services to major cities across North America with a fleet of 34 aircraft.

The company’s share price gained more than five per cent in midday trading, with the stock up $6.67 at $136.68.