Carriers’ rates of return improve despite tight credit

The Transport Capital Partners (TCP) fourth-quarter 2013 industry survey indicates more carriers getting adequate rates of return, but tight credit and static accessorials remain issues of concern.
With a continued lack of rate increases in the trucking industry, some carriers may have hoped to raise income through renegotiating accessorials. Unfortunately, 42% of carriers surveyed in Q4 2013 indicated they do not expect to be able to renegotiate. This is down slightly from the past two quarters. Over the past two years, the number of carriers able to raise fuel surcharges has dropped from 30% to 11%.
Pessimism about accessorials is greater among smaller carriers than larger carriers (50% vs 38%). Carriers are more positive about renegotiating detention times, with 43% now expecting to renegotiate. While renegotiating detention times does not necessarily raise cash, it can make equipment more productive. Approximately 30% of larger carriers think they will be able to renegotiate miles paid (ie, move from shortest route to practical route). This change—should it materialize —would have a significant impact on revenues, even with stagnant rates.
Despite the lack of rate increases and static accessorials, slightly more than half (54%) of carriers indicated they are getting an adequate rate of return—the highest level yet for this survey. While positive, the numbers are not entirely encouraging. Forty-three percent of carriers still believe they are not getting an adequate return. The issue may lie in how carriers define “an adequate rate of return.” What is adequate for one carrier may be inadequate for another.
“For the industry to thrive, and not just survive, a large percentage of carriers must be making adequate rates of return to afford the investment in equipment and support services required by modern supply chains,” said Richard Mikes, TCP partner.
Carriers are also not seeing improvement in credit availability. Approximately 75% expect credit availability to remain the same, a similar number to one year ago. It appears carriers believe tighter requirements for credit is the new normal.
“Credit availability and carrier profitability go hand–in-hand,” said Steven Dutro, TCP partner. “Both are essential to replace aging fleet assets and to grow capacity. Carriers with stronger profitability and cash flows will find credit available and affordable and will be better positioned to gain market share.”
TCP’s Business Expectations Survey, now in its sixth year, has given forward-looking guidance from industry leaders through both sides of the economic cycle. Mikes and Dutro both have senior-level experience advising carriers on strategic and operational issues as well as in mergers and acquisitions in the trucking industry.
The next Business Expectations Survey will launch in February 2014. Carriers interested in participating should visit www.transportcap.com/industry-survey for more details.
For more information, go to www.transportcap.com.

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