Cargojet revenue down 8% YoY in Q3

Canadian air cargo carrier Cargojet reported CA$214 million ($155.3 million) in revenue for the third quarter, a decrease of 8% year over year. “ Despite the backdrop of macro headwinds and market conditions, I’m very pleased with our results,” Cargojet Chief Executive Ajay Virmani said during Tuesday’s earnings call. “Our diversified business model continues to show resilience.” [caption id="attachment_57131679" align="alignright" width="300"] (Photo/HIAA)[/caption] THE BIG PICTURE: Although there was a reduction in revenue, Cargojet fared better in Q3 than many other cargo operations. Industrywide, declines in revenue in Q3 and throughout the year have been attributed to high capacity and low demand. Many carriers also struggled with rising fuel prices . “The third quarter was a challenging quarter as jet fuel prices increased over 30% throughout the quarter,” Cargojet Chief Financial Officer Scott Calver said in the call. BY THE NUMBERS: Cargojet reported that in Q3: EBIT was $7.3 million, down 88.3% YoY; Net earnings per share were 61 cents, down from $4.84 in Q3 2022; and Revenue from air cargo services, as opposed to all other services, was $140.2 million, down 13% YoY. WHAT THEY’RE SAYING: Cargojet attributes decent Q3 numbers to rising demand for daily essentials. “We are seeing an interesting mix of transactions in the market,” Virmani said. “As many retailers have already stated in their earnings reports, the spending on discretionary goods is slowing down, but more of the household dollars are being spent on daily essential goods. For us, it’s the number of packages that drive our business. So further growth in household essential goods is offsetting the declines in the discretionary goods transactions.” STATE OF PLAY: Cargojet has made cash flow management its priority, according to Virmani. “We have continuously found ways to defer or cancel several aspects of our CapEx plan,” Virmani said. “All of our fleet decisions had optionality, which allowed us to delay or cancel certain aircraft purchases. As a result, we have significantly reduced our planned CapEx and there may be more opportunities.” Cargojet has reduced capital expenditures by $326.5 million this year, according to Calver. “The original plan included eight Boeing 777s, the first four to support growth with strategic customers and the last four for what we refer to as general growth,” Calver said. “What has been canceled is the last four 777s. The sale of the remaining feedstock was completed in the third quarter. “It should be noted that we continue to hold the conversion slots for the 777s designated for general growth, conversions that could take place in 2025 and 2026,” he added. “This allows for additional optionality in the event the market turns and Cargojet is successful in securing long-term contractual revenue. We have also listed four Boeing 757s for sale.” FLASHBACK: Cargojet landed spot No. 46 on Air Cargo Next ’s Freight 50 list of top carriers this year, falling four spots from the previous year. In 2022, Cargojet transported 1.1 billion cargo tonne kilometers. FUTURE LOOK: Cargojet executives expect a slight bump in business in Q4, but say they are prepared should that not materialize. “As management prepares for any lift in revenue for the fourth-quarter peak season — any potential lift — we are confident that we will continue to manage costs in any scenario,” Calver said. THE BOTTOM LINE: “Despite new entrants in the air cargo [market], we feel confident in our competitive position, in both domestic and international markets,” Virmani said. “We do not see much of an impact any of these new entrants have made in the Canadian cargo scene.” MARKET REACTION: Shares of Cargojet (OTCMKTS: CGJTF) were up 0.42% from market open to$63.03 as of market close yesterday. Cargojet has a market capitalization of $1.1 billion. Editor’s note: All amounts have been converted to U.S. dollars.

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