Cargojet fell into the red last quarter as it felt threatened by a drop in consumer demand due to rising inflation and had to cut back on its growth plans.
The air cargo and aircraft leasing company reported a net loss of $34.9 million in the fourth quarter, compared to a profit of $2.6 million in the final three months of 2022, marking a nearly two-year hiatus for Cargojet. It was the first quarterly loss.
“It’s no exaggeration to say that 2023 has been a challenging year for Cargojet,” co-CEO Pauline Dillon said on Monday.
She cited rising interest rates, “out-of-control inflation,” a weak economy and a consumer backlash from splurging on delivery services during the pandemic as the main reasons for the Mississauga, Ont.-based organization’s struggles. .
A wave of COVID-19 spending caused Cargojet’s revenue to double from 2019 to 2022, and the stock soared to a high of more than $242 in November 2020.
But a similar surge in demand quickly posed a challenge for the company, Dillon said, as “every passenger airline in Canada announced that they were going into the air cargo-only business.”
Cargojet stock is currently trading at less than half its 2020 high. Shares closed on Monday at $113.51, down $3.54, or about 3%, after falling to $108.69 earlier in the day.
Over the past three years, Air Canada and WestJet have established air cargo fleets rather than transporting ordered goods on passenger planes.
Despite this, Cargojet co-CEO Jamie Porteous said Cargojet sees no “threat” from within Canada’s two largest airlines, and says Cargojet sees no “threat” from within Canada’s two largest airlines, and that Cargojet does not believe there is a “threat” from within the country for Canada’s two largest airlines, and that it is The company said it was refocusing its efforts after abandoning plans to expand internationally with a series of aircraft.
Cargojet announced last month that it would halt purchases of four Boeing 777 jetliners and scale back its fleet expansion. The move comes after the company retired the remaining four 777s in an initial eight-plane order it announced to shareholders in March 2022.
“The current move to focus almost entirely on the 767 is due to the need for a single fleet that can be operated more effectively at a lower cost,” Walter Spracklin, an analyst at RBC Capital Markets, said in a note to investors. They will benefit.”
“We currently think of Cargojet as only a domestic overnight business, and we see the (aircraft leasing) business as filling a gap in aircraft usage.”
The change in plans also involved a change in leadership.
On January 1, Cargojet implemented executive personnel changes announced in November, with then-CEO Ajay Virmani becoming executive chairman and CEO Pauline Dhillon taking over the top position. and Chief Strategy Officer Jamie Porteous (now co-CEO).
Both leaders believe there is room for growth this year.
“Personal spending appears to be slightly stronger than it was in early 2023, and we expect domestic sales to grow in the mid-to-high single digits in 2024,” Porteous said.
Cargojet reported revenue for the quarter that ended Dec. 31 was $254.7 million, down 6% from $271 million a year earlier.
On an adjusted basis, Cargojet reported a loss of 14 cents per share in the latest quarter, compared with adjusted earnings of 89 cents per share in the year-ago period.
The loss was 117% lower than analysts’ expectations for adjusted earnings of 81 cents per share, according to financial markets data firm Refinitiv.
This report by The Canadian Press was first published Feb. 26, 2024.
Companies featured in this article: (TSX:CJT)
Christopher Reynolds, Canadian Press
