newsworthy
YRC chief, analysts spar over meaning of YRC’s Q1 results
YRC Worldwide Inc.’s first-quarter results, released on May
6, sparked a sharp division of opinion between the company, which claims the numbers indicate positive sequential
and year-over-year momentum, and analysts who believe
the carrier’s financial situation remains dire.
The Overland Park, Kan.-based carrier reported a first-quarter net loss of $102 million, compared with a net loss of
$274 million in the year-earlier period. YRC posted operating revenue of $1.1 billion and an operating loss of $68 million in 2011’s first quarter. By way of comparison, in the 2010
first quarter, YRC reported operating revenue of $987 million and an operating loss of $233 million. The 2011 results
were adversely affected by extreme winter weather and
included $8 million of “professional fee expenses” related to
the company’s restructuring efforts, YRC said in a statement.
William D. Zollars, YRC’s chairman, president, and CEO,
said the company was pleased with the overall quarterly
results in light of the severe winter weather and the seasonally weak period. In a May 6 analyst call, Zollars said volumes have continued to trend upward into the second
quarter, both on a sequential and year-over-year basis, as
demand improves. Rates on contract renewals are up about
3 percent year to date, Zollars said.
“In all of our channels, we are seeing pricing improvement … on the contractual side and in our GRIs,” Zollars
said, referring to the general rate increases usually
announced once a year and which are imposed on non-contract customers.
Revenue per hundredweight, a closely watched metric of
profitability, rose only about 1. 8 percent year over year for
both YRC’s regional and national less-than-truckload units.
Zollars acknowledged that traffic from large corporate
accounts, which are usually resistant to rate increases, is
growing at a faster rate than traffic from so-called local
accounts, which are traditionally more profitable. He
added, however, that many accounts that YRC captured
from rivals already had low-yielding traffic because their
previous carriers had cut their rates. YRC, by contrast, has
remained relatively constant in its pricing strategy, he said.
A DIFFERENT TAKE
David G. Ross, an analyst for the investment firm Stifel
Nicolaus & Co., wasn’t buying the company’s explanations.
In a research note, Ross said that YRC is “stuck over a barrel” by its big corporate accounts that refuse to give it compensatory pricing.
“These accounts also know that if they pull their volume,
YRC can’t cut costs fast enough and will likely fail, so we
don’t believe YRC has the leverage to make money on
them,” Ross wrote.
The analyst said YRC has three choices: raise rates on these
accounts, watch the freight disappear and go out of business,
or keep rates stable and be stuck with unprofitable freight
that will further hamper its efforts to survive on what Ross
called an “unsustainable long-term business model.”
Another analyst, Jon A. Langenfeld of the investment firm
Robert W. Baird & Co., said the quarterly results reflect YRC’s
“price aggression” in an effort to rebuild freight density.
Langenfeld hinted that the “leniency” shown by YRC’s
lenders in supporting its restructuring efforts have emboldened the carrier to cut prices without worrying about profitability, at least in the short term.
Langenfeld said YRC’s actions remain the greatest obstacles to pricing improvement and greater profitability
among less-than-truckload carriers. While noting that
“industry pricing fundamentals have firmed” in the first
quarter, Langenfeld added that “industry profitability [is]
still well below adequate levels, and improved pricing
remains the primary vehicle to improving margins.” ;
accolades
Steel King Industries Inc., a leading supplier of material
handling solutions, has presented Wisconsin Lift Truck
Corp. of Brookfield, Wis., with its 2010 Most Valuable
Dealer Award. … Chris Norek, founding senior partner of
the consultancy Chain Connectors Inc., was named 2011
NASSTRAC Member of the Year. Norek, who was recog-
nized for his personal leadership, commitment, and dedi-
cation to the industry and the association, is a member of
DC VELOCITY’S editorial advisory board. NASSTRAC also rec-
ognized Martin Mantilla, COO for Special Dispatch of
California, as the 2011 NASSTRAC Associate Member of
the Year. … Pitt Ohio has received Eastman Chemical Co.’s
Supplier Excellence Award for the fifth year in a row. The
award is given to companies that demonstrate outstand-
ing performance as a logistics supplier to Eastman
Chemical Co. … The Raymond Corp. has received the
annual President’s Manufacturing Excellence Award from
Toyota Industries Corp. Raymond’s Muscatine, Iowa, facil-
ity was recognized for exemplary use of the Toyota
Production System.
