U.S. trucking company Arkansas Best Corp posted a narrower-than-expected quarterly loss, but said it remains cautious on the economic recovery in the second half of the year.
“Economic recovery appears to be tenuous and there’s uncertainty about the rate of further improvement in the second half of the year”, CEO Judy McReynolds said on a conference call with analysts.
The overall freight levels and yields need to improve for the company’s largest unit ABF Freight System to return to profitability, the CEO said, adding that the “economy remains fragile and we are therefore prepared for a modest rate of recovery.”
Analysts and investors have been concerned about the less-than-truckload carrier’s high costs and losses through the economic downturn and its inability to reach an agreement with its labor union.
Sterne, Agee & Leach analyst Jeff Kauffman said he expects the rate of tonnage growth to decelerate and that the company has to resolve its cost issues to turn towards profitability.
According to Kauffman, Arkansas Best’s labour cost is about 10 percent above the rest of the industry.
“The union needs to work with the management on a concession package or the management needs to take matters in its own hands and make the appropriate labor cost reductions to bring it more in line with the industry,” he said.
This should help the company to return to profitability by the end of 2010, Kauffman, who has a “buy” rating on the stock, said.
The company said ABF benefited from lower non-union fringe benefit costs as well as workers’ compensation and third-party casualty insurance claim costs as a percent of revenue.
In May, the Teamsters labor union of Arkansas Best turned down a proposal to cut wages by 15 percent—a move that would have helped the company step closer to profitability.
Q2 Loss Narrows
Arkansas Best, which has been posting losses for the past six quarters, saw losses narrow in its recent quarter helped by improvement in daily tonnage levels at ABF.
Revenue rose 13 percent to $411.3 million.
Total tonnage per day at ABF increased 11.9 percent. (Reuters)