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TFI not in deep M&A discussions with Arcbest, TFI chief says

TFI International Inc. Chairman, President and CEO Alain Bédard said Monday that the Montreal-based transport conglomerate has not discussed a merger or acquisition with the U.S.-based less-than-truckload carrier Arcbest Corp. (NASDAQ: ARCB), though Bédard said that TFI owns a small percentage of Arcbest shares and sees opportunities to collaborate operationally.

Bédard said the Arcbest holdings represent a strategic investment for TFI (NYSE: TFII). For example, as TFI purges some of the unprofitable U.S. LTL business it acquired when it bought UPS Freight in early 2021, Fort Smith, Arkansas-based ArcBest is the first company that TFI would consider selling terminal land to, he said.

Interestingly, Arcbest shares spiked 4.6% in after-hours trading. TFI shares were unchanged in after hours trading after being down during the regular trading session.

Bèdard said that TFI continues to winnow out volumes that came with the UPS Freight acquisition. About 30% of the freight that it initially received “didn’t fit at all,” he said.

His comments came as TFI reported $1.72 in fourth-quarter adjusted diluted earnings per share, up 14% from the same period in 2021 and about in line with analysts’ estimates. Revenue before the company’s fuel surcharge fell to $1.95 billion from $2.14 billion. 

The drop was partly due to the absence of volume after the sale of the company’s U.S. truckload, temperature-controlled and Mexican non-asset-based logistics businesses last August. It was also due to reduced U.S. volumes due to weaker end market demand and the elimination of unprofitable freight, TFI said.

Fourth-quarter revenue before fuel surcharge fell in all four TFI segments compared with the 2021 period, the company said. Operating income rose in all segments except LTL, which was down 15%.

Bèdard told analysts that companywide volumes would be soft in the first half of 2023 and hopefully improve in the second half. TFI will play its cards conservatively through the year because the second half, while looking better, will not be gangbusters, Bédard said.

TFI reported fourth-quarter operating income of $216 million, up slightly from the same period in 2021. Net income rose to $153.5 million from $144.1 million.

TFI continues to grapple with service and efficiency issues at T-Force Freight, the U.S. LTL business which is the rebranded name of the old UPS Freight. T-Force Freight is hampered by the perception that it lacks the same service reputation as its U.S.-based counterparts, according to Bédard.

He also said that inventory levels in North America remain “too high” as supply chains still cope with a deluge of orders from months back.

Bédard said that the company will do a modest number of mergers and acquisitions, and that it remains opportunistic as potential sellers panic due to what has become a difficult operating environment.