CN and CP announce first quarter 2018 results

Both of Canada’s major railways felt the effects of a weak economy, and capacity constraints, exacerbated by bad weather, and produced somewhat disappointing financial results. Both carriers restated the financials pertaining to the first quarter of 2017, but we chose to maintain them as originally presented. As is evident from the table, net income as a percentage of revenues tumbled from 34 per cent in 2016 to 21 per cent in 2018 at CP, while at CN net income as a percentage of revenues dropped from 26.7 per cent in 2016 to 23.2 per cent in 2018. Both carriers have spent vast sums of cash repurchasing their own shares over the past few years, with CN in particular picking up the pace of these repurchases. Stock repurchases help maintain earnings per share numbers, as the company’s earnings are divided by a reduced number of outstanding shares. On the other hand, as is evident from the numbers, one could argue that share repurchases were financed entirely or in part through borrowed funds, and for that reason, have the effect of weakening the balance sheet, compared to what it would look like without the repurchases. (more…)

Prince Rupert launches export development fund to explore new trade opportunities

Prince Rupert Port Authority has launched a new $250,000 funding initiative to help communities and economic development agencies in Western Canada assess new export opportunities in the Asia-Pacific region. The Export Development Fund was created to assist eligible organizations in developing new export opportunities across Canada’s northwest trade corridor. Opportunities could be related to an existing industry entering new markets, new or expanded industries that would be viable for export, or existing export industries that are not currently using the port of Prince Rupert. (more…)

ONE unveils strategy for billion-dollar cost savings and million-dollar profits

By Mike Wackett

Japanese shipping groups K Line, MOL and NYK, now operating as the Ocean Network Express (ONE) joint-venture, have unveiled their business plan, identifying more than $1 billion a year in expected synergy cost savings. The three carriers have signed off their final annual accounts covering the period before the transfer of their container businesses on 1 April. Henceforth, the Japanese trio will record container earnings through their equity in ONE, in which NYK holds a 38 per cent stake and K Line and MOL a 31 per cent share each. (more…)

Rents go through the roof as U.S. e-commerce boom overruns warehouse space

By Ian Putzger

Warehouse rents in the U.S. are rising rapidly as e-commerce gobbles up space faster than it can be replenished. In some cases, the urge to bring on new capacity seems strangely muted: when it comes to cargo facilities at U.S. airports, there seems to be no hurry to add new or overhaul existing cargo infrastructure, despite serious bottlenecks exposed in last year’s peak season.

Real estate firm CBRE’s Industrial Availability Index was down to 7.3 per cent in the first quarter, which marked 31 consecutive quarters of decline. On a more granular level, available space was down in 31 U.S. markets, up in 25 and flat in eight. (more…)

Customers angry as ‘capacity-hobbled’ UPS quietly pushes up fuel surcharges

By Alexander Whiteman

UPS has denied claims it has been forced to increase fuel surcharges to offset costs associated with wet leases as it struggles for capacity amid surging e-commerce volumes. The U.S. integrator was accused of not properly informing customers it had split its domestic and international air freight fuel surcharges.

Chief Executive of Spend Management Experts John Haber said the Export index is almost 18 per cent higher than the U.S. Domestic Air Index. “Talking to many of our customers, we found they were not formally notified of the fuel surcharge change/ increase,” Mr. Haber told The Loadstar. “We understand costs are rising in the shipping world, but we’d like an explanation on why there is such a difference between export and domestic air in order to logically explain to our clients.” (more…)

International business on the up for UPS, but domestic profits slump

By Alexander Whiteman

Cross-border operations continued to gain ground during UPS’s first quarter as revenue and operating profits grew. However, a 10 per cent upturn in overall revenue – more than $17 billion for the three-month period – failed to prevent a 6 per cent drop in group operating profits, to $1.5 billion.

The success in international operations continues a trend seen last year, with the latest results showing cross-border revenue of $2.5 billion and profits of $594 million (up 14.6 per cent). “Our focused business strategies are producing strong results in both the international and supply chain segments,” said Chief Financial Officer Richard Peretz. “The benefits from our investments, new multi-year transformation efficiencies and stronger pricing position us well for shareowner value creation.” (more…)