Canada trucking firm TFI hit by tariff war, walks away from deal

TFI International Inc., one of North America’s largest trucking companies, says US President Donald Trump’s trade war is exacerbating the freight industry’s difficult outlook, and that it was forced to abandon a deal because of it.

“Our industrial end market is exposed to tariff-related uncertainty, which was evident during the first quarter before the April 2 announcement” of new US tariffs on dozens of countries, Chief Executive Officer Alain Bedard said in a conference call with analysts Thursday.

“Our industrial-based customers are just waiting,” he said, using the example of US farmers that are unable to sell to China right now. “Our customers are manufacturing tractors, they’re manufacturing agricultural equipment, et cetera, and those guys don’t sell a lot because their customers, the farmers, are insecure right now.”

Revenue of $1.96 billion in the first quarter was 5% higher than the same period last year, mainly due to acquisitions, but adjusted and diluted earnings were 76 cents per share, missing estimates by about 18 cents, according to data compiled by Bloomberg. TFI also missed estimates in the previous two quarters.

On transborder transport, Bedard explained that while truckload volumes heading to the US haven’t changed significantly, “there’s nothing coming back to Canada right now, so it’s an issue. The backhaul is killing us right now.”

US imports of Canadian steel are down due to the 25% duties imposed in March, but aluminum imports remain high, according to Bedard.

M&A Slowdown

TFI grew primarily by acquisition over the past decade, buying firms in the US, Canada and Mexico. But the trade war is now halting larger deals. “We have one transaction that we really liked, but because of all this uncertainty on tariffs, we had to walk away from that deal,” Bedard said.

He also committed to fix or get rid of non-performing units. Last year, TFI purchased Texas-based Daseke Inc. for an enterprise value of $1.1 billion, but the company has since struggled to boost its new owner’s operating performance.

Bedard said TFI expects earnings per share to be between $1.25 and $1.40 for the second quarter on an adjusted diluted basis, assuming no major changes in the macro environment. Analysts had expected $1.41 for the quarter, according to data compiled by Bloomberg.

TFI shares traded almost 5% higher on Thursday, reaching C$113.78 as of 12:22 p.m. in Toronto. They’re still down more than 40% over the past year, but across five years, they’ve more than tripled.

TFI created controversy in February when it proposed moving its headquarters to the US, earning criticism from one of its largest shareholders, the Caisse de Depot et Placement du Quebec. The firm reversed its decision a few days later.

— By Mathieu Dion (Bloomberg)