Titanium Transportation Group (TSX-V:TTR) plans to grow its U.S. brokerage business after the Canadian company’s first international office “exceeded revenue targets by an outstanding 40 to 50 percent,” CEO Ted Daniel said.
“We see significant growth in the future. It’s a behemoth of a market,” Daniel said.
Daniel made the comments during a call with financial analysts on August 14 after the Ontario-based transportation firm released weaker second-quarter results. Second-quarter revenue dropped by 19 percent and net income fell by 77 percent compared to 2018 due to a weaker freight market.
Titanium expects that its first U.S. brokerage office in Charlotte, North Carolina, which opened in May, will begin adding to operating profits in the fourth quarter. Meanwhile, the company plans to open one to two additional offices in the United States, with the first coming by the first quarter of 2020.
“It’s just started to really get going,” Daniel said of the Charlotte office.
He also signaled a willingness to do U.S. acquisitions. “Now we’re establishing a level of comfort in the U.S., I’m not averse to an asset-based acquisition in the U.S.”
The U.S. brokerage would boost Titanium’s logistics segment. The business, which includes cross-border brokerage services, saw revenue drop by 36 percent in large part because of its exposure to the spot market.
Weakness in Canadian freight, but an opportunity for acquisitions
Daniel gave a weak assessment of the Canadian freight environment. He said a combination of overcapacity on Canada’s largest load board, LoadLink, and an abundance of used trucks for sale suggest that the market is still correcting itself.
“Until I see those ingredients flip, I’m not seeing a turnaround,” Daniel said.
Titanium’s trucking business has been relatively stable because it’s primarily exposed to contracted rates. Chief Operating Officer Marilyn Daniel said lower spot rates could “slightly affect” the company’s contracted rates going forward.
Despite the challenging environment, the company is continuing to seek acquisitions in Canada.
“I’m actually very positive about M&A opportunities,” Ted Daniel said.
