Largest motor carriers defy economy; improve performance

by Canadian Shipper

The country’s largest for-hire motor carriers managed to improve their financial performance in the second quarter, despite the many setbacks suffered by the Canadian economy.

Top carriers (the 90 Canada-based firms earning $25 million or more annually) posted an operating ratio of 0.95 in the second quarter, compared with 0.96 in 2002, according to Statistics Canada. Operating ratio is a measure of operating expenses divided by operating revenues. The lower the number the better the financial performance. Essentially, a firm with a 0.95 operating ratio is making five cents on the dollar. A ratio of greater than 1.00 represents an operating loss.

The improved performance is welcomed news for the country’s top carriers as the trucking industry overall suffered from declines in transportation shipments for each month of the second quarter. Trucking companies, who make 50% of their revenues from cross-border hauls, also took a hit in the second quarter from the sharply rising value of the Canadian dollar. Payments in U.S. dollars were suddenly not as lucrative as they once were.

And there is more good news. The third quarter started off with a 1.7% increase in manufacturing shipments, key to motor carrier revenues, after a dismal second quarter. Led by motor vehicle manufacturing, 16 of 21 industries, representing three-quarters of total shipments, reported increases in July.

It’s not all good news, however. The top 90 for-hire motor carriers of freight generated operating revenues of $1.91 billion and expenses of $1.82 billion in the second quarter. Average per-carrier revenue decreased 1.3% from the second quarter of 2002, reaching $21.2 million. But average per-carrier expenses also decreased 1.7% to $20.2 million.

Also, to put the financial performance in perspective, trucking’s rail competitors, the Canadian operations of CN and CP, posted a 0.75 operating ratio for 2002. In other words, they are making 25 cents on the dollar, five times better than the average performance of the country’s largest motor carriers. Regional railways and short-line railways have an operating ratio of around 0.90 while Air Canada is operating in the red.

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