Textainer Group Holdings Ltd. and CAI International both improved profits in 2017 compared to the prior year.
Container lessors Textainer Group Holdings Ltd. and CAI International both improved their profits in 2017 from a year prior. However, while CAI’s revenues had surged, Textainer experienced a decline in revenues compared to 2016. Both companies made substantial investments in containers during the year, with Textainer holding a much larger overall container fleet. Despite Textainer CEO Philip K. Brewer noting how 2017 was a challenging year, both companies appear optimistic for the future.
Textainer Group Holdings Ltd. The company had a profit attributable to its common shareholders of $143.9 million in 2017 compared with $26.2 million in 2016. Net income per diluted share stood at $19.4 million in 2017 compared to a net loss of $52.5 million in 2016.
However, total revenues had slipped, falling from $496 million in 2016 to $491 million in 2017.
“We continue to see strong operating results and positive momentum leading into the new year,” Textainer President and CEO Philip K. Brewer said.
“Rental income increased for the fourth consecutive quarter and is up 8 percent compared to the first quarter of the year as we benefit from new container investments and further improvements in utilization,” he said. “The impact of these investments will grow going forward as more new containers are delivered and picked up by our customers.”
In a phone call with investment analysts, he said 2017 was challenging due to the decline in container prices in 2016 and the bankruptcy of Hanjin. He added the company had overcome those challenges, was pleased with its fourth quarter and full year financial results, as well as its prospects for 2018.
The company invested $625 million for 300,000 TEUs of containers in 2017, nearly all of which he said are on lease, while another 125,000 TEUs are expected to go on lease during the first quarter of 2018.
Textainer’s fleet totaled 3.28 million TEUs at the end of 2017, 78.9 percent of which were owned by the company, while the other containers it manages for other companies. Those managed containers include 182,999 TEUs acquired by Buss Global last August from the insolvent Magellan Maritime Services. Brewer said those containers are now integrated into the Textainer fleet.
Brewer said he expects favorable market conditions to continue into 2018, “mostly driven by solid trade growth, shipping lines preference to lease, and minimal depot inventory. Yields on new leases have moderated slightly, but remain attractive and container prices are holding stable at approximately $2,200.”
He said container inventory at factories – most containers are made in China – has risen to about 700,000 TEUs. However, much of this inventory is committed to leases and the remainder is appropriate to meet upcoming second quarter demand. In addition, he said resale prices have remained high as expected, given stable new box prices as well as low depot inventory and container turn-ins.
CAI International. The company had a net profit of $72.1 million in 2017 compared with a profit of $6 million in 2016.
Meanwhile, total revenues in 2017 reached $348.4 million, a sharp increase from $294.4 million in 2016.
CAI’s fleet includes 1.23 million TEUs of containers, 93.4 percent of which are owned, and the remainder of which are managed for other companies.
“Our results were driven by the ongoing momentum in our container leasing business, which reported average utilization of 99 percent during the quarter,” CAI President and CEO Victor Garcia said. “We benefited from continued investment during the quarter at lease rates that remained attractive, and also from gains on the sale of containers as we looked to maximize the sale price of our available idle equipment. For the full year, we invested $569 million on equipment, of which $487 million was related to containers.”
In 2017, 67.6 percent of CAI’s revenues came from container leasing, 9.3 percent from railcar leasing and 23.1 percent from logistics.
Garcia said CAI’s rail segment continues to work through a challenging market environment. However, he said CAI experienced increased momentum in railcar leasing during the fourth quarter. “During the quarter, we leased out 243 new railcars and have commitments to lease out a further 564 new cars in the first half of 2018,” he said.
The company’s railcar leasing fleet encompasses 7,172 railcars.
Garcia said CAI is seeing increased inquiry for railcars across various equipment categories, but lease rates remain below the company’s targeted levels due to continued aggressive pricing from competitors.
“We believe rail velocity amongst Class 1 railroads has decreased and that customers are looking for additional equipment due to economic growth in the United States and the slowing of rail velocity in the United States rail network,” he said.
“We are becoming more optimistic about the opportunities for our rail segment due to the expected increased economic growth in the United States in 2018,” he added. “We also believe that our rail segment will benefit if there is increased level of manufacturing and distribution activity as a result of companies increasing their investment in the United States due to the regulatory and tax changes that have been enacted.”
Meanwhile, CAI’s logistics business reported a loss in the fourth quarter, which Garcia attributed to lost productivity from hurricanes, and reduced activity with some of its truck brokerage customers.
He said the logistics business had continued to work through the integration of the intermodal and truck brokerage operation during the quarter.
“Nonetheless, our international NVOCC and freight forwarding business had growing profitability in the quarter and full year as compared to the same periods in 2016,” he said. “We are proceeding with the integration of our domestic logistics operations and are seeing increased momentum as we gain new customers and increase volumes with existing customers.”
Garcia noted how trucking capacity remains very tight in the United States due to the implementation of the electronic logging device mandate and continued strength of the U.S. economy. Looking ahead, he believes the tightness in capacity will continue this year. Garcia also said the company continues to see opportunities to cross-market assets and customers between its container leasing, rail and logistics segments.
