Canada’s Titanium Transportation Group reported record revenue in the third quarter as executives told financial analysts that the cross-border transportation and logistics firm is working to negotiate higher rates with its customers.
“Nobody is shocked — and not a lot of pushback,” Chief Operating Officer Marilyn Daniel said during a conference call with analysts Wednesday. “Now it’s coupled with, ‘OK, can you do it?’ more than how much it is — no different than the way we buy our groceries today. It’s there, we buy it. We don’t even look at the price anymore.”
Ontario-based Titanium (TSX-V:TTR), one of Canada’s larger carriers, is increasing rates largely in response to higher costs amid “inflationary pressures,” CEO Ted Daniel said. The comments made by Titanium executives echo what Murray Mullen, the CEO of Alberta-based Mullen Group, put more bluntly in October: “Prices must rise.”
Rates in the Canadian freight market, dominated by cross-border operations, have lagged behind the surge in the U.S. But in a tight-capacity environment with high freight demand and rising costs, significant rate increases appear inevitable.
Ted Daniel said the company is approaching the conversations with customers carefully.
“We’re not showing up and saying … ‘Hey, I’m going to give you a rate increase. And by the way, I know it’s Friday afternoon, and if you don’t give me the rate increase by Tuesday morning, I’m going to pull my trucks.’ That’s not happening,” Daniel said. “So we are working very closely and very respectfully with all of our customers to get through this.”
Titanium had a strong quarter in terms of growth, with revenue rising over 90% to CA$101.7 million ($81.8 million) and earnings before interest, taxes, depreciation and amortization increasing by nearly 8% to CA$7.2 million. But the EBITDA margin fell from 13.5% to 7.8%.
Titanium’s 2-year-old U.S. brokerage business continued to lead the company’s growth, driving a nearly 129% increase in revenue in the company’s logistics segment to CA$59.4 million. Logistics EBITDA rose by over 70% to CA$3.4 million.
The company plans to add brokerage offices in the U.S, with a fifth coming by the end of the year. Ted Daniel said he hopes to open at least two offices per year going forward.
Meanwhile, Titanium is continuing to integrate ITS, the Ontario cross-border carrier that it acquired earlier this year. The addition of ITS helped boost trucking revenue by over 55% to CA$42.8. EBITDA fell by 10.2% to CA$4.6 million.
Daniel said he expects costs from the acquisition and integration will continue to fall.
“We do expect to continue to see margin improvements as operating efficiencies and synergies are realized,” he said.