October 23, 2009 / 10:51 AM / 8 years ago

UPDATE 3-TransForce Q3 profit falls, sees weak truckload revenue

* Q3 EPS C$0.19 vs C$0.31 last year

* Revenue down 24 pct to C$451.4 mln

* Says on track to meet debt repayment target (Recasts; Adds conf call details, updates share movement)

By R. Manikandan

BANGALORE, Oct 23 (Reuters) - Canadian transportation and logistics provider TransForce Inc TFI.TO posted a 36 percent drop in third-quarter profit, hurt by weak demand in Alberta’s energy sector, and said it expects competitive pressures to continue in its truckload segment.

Revenue from truckload activities, which contributed 35 percent of total revenue in the third quarter, fell to C$160.1 million from C$215.6 million a year-ago.

“On the truckload side, we are still going to go down and the market is still very very competitive for freight in that sector,” Chief Executive Alain Bedard said on a conference call.

Less-than-truckload revenue, which represents 29 percent of total revenue, declined 24 percent to C$129.3 million. Excluding fuel surcharge, revenue from the segment fell 15 percent to C$115.6 million.

Demand continues to be depressed across Canada, and particularly in Western Canada, where continuing lower levels of activity in Alberta’s energy sector contributed to weaker results in the less-than-truckload segment, CEO Bedard said in a statement.

“Sluggish activity in freight volumes, softness in economy, and then we have the run-up in the Canadian dollar here, which doesn’t help things either for the manufacturing sector,” analyst Jason Granger of BMO Capital Markets told Reuters.

As at Sept. 30, TransForce had a long-term debt of C$673.5 million and projects it to be slightly above C$700 million by the end of 2009.

“We are on track to meet our debt repayment target for 2009,” Bedard said. The company targets to reduce debt by C$100 million in 2009.

TransForce also said it will be in compliance with its covenants throughout 2009.

“The company generates a lot of free cash flow. So debts, I believe, for TransForce is manageable,” Granger said.

He expects a modest increase in debt in the fourth quarter to pay for the acquisition of ATS Andlauer.

In September, TransForce agreed to acquire the retail solutions division of ATS Andlauer Transportation Services Limited Partnership. The division generates about C$120 million in annual revenue.

Analyst Granger said there will be a headwind in the fourth quarter on foreign exchange, with the translation of some of the U.S. dollar revenues.

For 2009, the company said its outlook for net capital expenditures is less than C$50 million and expects it to be almost at the same levels for 2010.

COST SAVINGS HELP Q3

Cost-cutting initiatives including salary and hiring freezes, and lower interest expense helped the company reduce its operating costs and its profit to edge past estimates.

Operating expenses fell 26 percent to C$315 million.

The company posted net income of C$17 million ($16.24 million) or 19 Canadian cents per share, down from C$26.5 million, or 31 Canadian cents per share, last year.

Revenue dropped 24 percent to C$451.4 million. Excluding fuel surcharge, revenue fell 18 percent to C$418.9 million.

Analysts on average expected the company to earn 16 Canadian cents per share on revenue of C$473.4 million, according to Thomson Reuters I/B/E/S.

Interest expense decreased to $8.2 million from $12.3 million last year, primarily as a result of the company’s actions to reduce debt, as well as lower interest rates.

For the quarter, cash flow from operations, before net changes in non-cash working capital balances related to operations, was C$51.9 million, compared with C$66.9 million in the third quarter of 2008. It expects to generate cash flow in excess of C$100 million for 2009.

Shares of the Montreal, Quebec-based TransForce were down 6 Canadian cents at C$8.00 Friday afternoon on the Toronto Stock Exchange. ($1=1.047 Canadian dollar) (Reporting by R. Manikandan in Bangalore; Editing by Ratul Ray Chaudhuri and Unnikrishnan Nair)

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