Motor carrier profit margins remain healthy despite increase in expenses

by Canadian Shipper

Operating expenses climbed faster than revenues in the second quarter for Canada’s for-hire motor carriers earning at least $1 million in annual revenues, figures released by Statistics Canada reveal.

The estimated 3,186 motor carriers in this category increased their operating revenues by 18.9% to $6.31 billion but operating expenses were up 21.9% to $6.02 billion from the second quarter of 2003.

Both average operating revenues (+7.8%) and expenses (+10.5%) were up in the second quarter compared with the same quarter of 2003.

Motor carriers, however, are still enjoying one of their best financial performances in recent memory. Their overall average operating ratio (operating expenses divided by operating revenues) improved at 0.92 compared to 0.93 for the same quarter in 2003 and 0.96 for the entire of 2003, a year marked by rising costs combined with economic shocks which hurt freight volumes. Any ratio over 1.00 represents an operating loss and, arguably, a ratio of 0.95 is considered the minimum requirement for a healthy trucking company.

Average expenses were at $1.89 million compared with $1.71 million in the same period in 2003.

The increase in expenses was driven by higher costs for purchased transportation, maintenance expenses, and other expenses, combined with smaller increases in salaries and wages, as well as payments to owners and operators.

For-hire trucking transportation revenues from domestic movements increased by 24.2% to $3.98 billion from $3.20 billion one year ago. Revenues from international movements followed a similar pattern, up by 21.0%, with inbound movements up by 19.8%.

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