As carriers report revenues and earnings for the third quarter, one thing is becoming abundantly clear. High fuel prices are taking a big bite out of profits.
“The high price of fuel cost us five cents a share this quarter in terms of earnings,” Bill Reilly, executive vp of Phoenix, AZ-based truckload carrier Swift Transportation, told Fleet Owner.
“The main bad guy we dealt with this quarter was fuel prices,” added Jerry Moyes, Swift’s chairman & CEO. “Our average cost per gallon for fuel was 30% higher in this quarter than the third quarter of 2003 and that’s hurting us.”
He pointed out that fuel surcharges represented $47.7 million out of Swift’s total third-quarter revenue of $727.3 million – more than double the $21.3 million in fuel surcharges the carrier collected in the third quarter last year. Swift’s total revenues were up 16.6% in the third quarter compared to the same period last year, but rose just 12.8% excluding fuel surcharges, Moyes explained.
“We’ve had really ugly meetings [with customers] on the fuel surcharge issue over the last two months – they are certainly not rolling over on this issue,” he said. Though the changes to its fuel surcharge program should shrink the impact of high fuel prices on Swift’s profits in the fourth quarter, it won’t eliminate it, Moyes said.
“Our average diesel fuel prices, including taxes, were approximately 30% higher than the same quarter in 2003,” noted Patrick Quinn, co-chairman of Chattanooga, TN-based truckload carrier U.S. Xpress Enterprises. “These higher fuel costs, net of the impact of fuel surcharges, [combined] with the lower fuel efficiencies from the new EGR engines negatively impacted our third-quarter earnings by 12 cents per share compared to the same period last year.”
“Diesel fuel prices, excluding taxes, in the second quarter were the highest in our eighteen years as a public company. Prices rose further in the third quarter, averaging 13 cents a gallon, or 12% higher than second quarter this year,” added C.L. Werner, chairman & CEO of Omaha, NE-based truckload company Werner Enterprises.
“Compared to third quarter of 2003, average diesel fuel prices excluding taxes increased 40 cents a gallon, or 46%. Prices increased another 37 cents a gallon from the beginning to the end of the third quarter alone this year, including a 10-cent per gallon spike in the last full week of the quarter,” Werner noted.
Behind the curve
“In terms of the overall economy there appears to be ample evidence it is expanding at a reasonable pace, which should benefit our trucking segment,” said Steve Lockwood, president & co-CEO of Canadian trucking operator Mullen Transportation. “However, we are somewhat cautious on a go-forward basis due to the uncertainty surrounding the impact rising fuel costs will have on the overall economy.”
“The biggest problem with fuel prices is that you are always behind the curve when it comes to ‘catching up’ with a fuel surcharge,” Murray Mullen, chairman & co-CEO of Mullen, told Fleet Owner. “Our real concern, though, is how high fuel prices will impact our customers and thus the overall level of freight demand. No doubt, [high fuel prices] are having an impact on the overall economy, but we don’t know how much of an impact: it’s spotty at this point.”