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Universal Logistics seeks to reduce the expenses of its customers

By on October 29, 2021 0

Start-up costs associated with a new business conquest at an automaker’s plant depressed Universal Logistics Holdings’ third quarter results.

The Warren, Mich.-Based light asset transportation and logistics provider reported a loss of $ 7.1 million on new business during the period, which in part lowered profit by 24% year-on-year share to 38 cents, well below the consensus estimate of 64 cents.

A total of $ 12.9 million in start-up and litigation costs weighed on Universal (NASDAQ: ULH). The net result was a 36 cent hit to EPS.

Universal Key Performance Indicators – Consolidated

“The continued shortage of chips and supply chain disruptions hampered North American automotive production throughout the quarter, which negatively impacted our contract logistics business,” said CEO Tim Phillips in a press release.

Modest start-up costs contractual logistics unit

Start-up costs landed in the contract logistics segment, which saw a 48% year-over-year decline in operating profit, even as revenue grew 23%. The segment’s 3.8% operating margin was 530 basis points lower than in the last year quarter, with 460 basis points of contract-related reduction.

Universal key performance indicators – contract logistics

As weakness in the auto manufacturing complex continues to limit results, management remains optimistic.

“We continue to remain bullish on demand for Class 8 cars and trucks in 2022, but there is no end in sight to the headwinds the industry is currently facing,” Phillips commented on. a call with analysts on Friday.

Universal has placed 1,000 workers in the new facility and the trucks that support it. He hired the full rate of labor for the site even though it is only operating at 60% of its capacity. About $ 5 million of the loss in the quarter was associated with a shortfall in revenue and increased labor expenses, as well as an additional $ 2 million in downtime related charges and errors made during launch.

The impact was felt on value-added services revenue per employee, down 7% year-on-year.

Universal talks with the company to correct conditions and fight wage inflation.

“We will not let this particular opportunity weigh on the organization for an extended period,” added Phillips. “We want this to happen quickly and if we can’t do it, we need to find a way that both of us, as partners, can come up with a transition strategy for the business. “

Universal also asks its other clients to help it on the pay line. Management said that while the major Class 8 auto and truck manufacturing facilities it serves have experienced limited production or intermittent shutdowns, most contracts are working.

Congestion, costs hamper intermodality

The company’s intermodal segment saw loads drop 13% year-over-year due to “unprecedented congestion at ports and railroads, as well as a labor shortage. ‘work and equipment available,’ said Phillips.

He noted that most of the headwinds for Universal’s intermodal operations were related to southern California ports. He said the rush to land cargo at ports pushed ancillary costs (detention, demurrage and storage) more than twice as high during the quarter and he will have to deal with the extra costs with his customers. .

Intermodal revenue increased 28% during the period to $ 121 million, as revenue per load excluding fuel surcharges increased 21%. However, network congestion and $ 5.8 million in pending litigation costs (a 480 basis point impact on margin) caused the operating margin to drop to 1.6%, or 780 basis points. less year-on-year.

Universal Key Performance Indicators – Intermodal

Universal’s trucking operations posted 29% revenue growth to $ 107 million with a 60 basis point margin improvement to 6.4%

The corporate-run brokerage segment continued to eliminate less desirable freight and re-price the volume of business. Revenue was stable year over year at $ 59 million. Expenses were down 17%, but revenue per charge increased 19%. The division reversed a loss from a year ago, posting a profit of $ 1.8 million (3% operating margin).

Universal plans to review the pricing of 40% of its brokerage business in the fourth quarter.

Universal Key Performance Indicators – Trucking and Brokerage

Research orientation 2022

Company expects fourth quarter revenue to be between $ 400 million and $ 425 million, up 7% year-on-year in the middle of the range, with a consolidated operating margin of 4-6% , lower than the 6.1% recorded in the fourth quarter of 2020.

The forecast for the year 2022 calls for revenues of between $ 1.8 billion and $ 1.9 billion, an increase of 9% over the implied revenues of 2021 and ahead of the current consensus estimate of 1.77 billion dollars. The 2022 consolidated operating margin is expected to be between 7% and 9%, which is ahead of the 5.9% margin expected for 2021.

Click for more FreightWaves articles by Todd Maiden.

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