Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cargojet Inc (CGJTF, Financial) reported an 11.5% increase in total revenues during the second quarter compared to the previous year.
- The company secured a three-year scheduled charter service agreement with Great Visions HK Express to fly e-commerce products between China and Canada.
- Domestic network revenues grew by 10.8%, ACMI posted a 7.3% gain, and all-in charter posted a record 23.4% growth versus the second quarter of 2023.
- Cargojet Inc (CGJTF) achieved a 99.4% on-time performance, showcasing operational efficiency.
- The company announced an 11.25% increase in its quarterly dividend rate, reflecting strong financial health and commitment to shareholder returns.
Negative Points
- Despite the positive revenue growth, Cargojet Inc (CGJTF) remains cautious due to macroeconomic headwinds such as economic slowdown and geopolitical uncertainty.
- Free cash flow was suppressed in the second quarter, primarily due to the investment in two Boeing 767 feedstock.
- The company faces challenges in the form of increased ground costs, which rose by 21% compared to the prior year.
- Cargojet Inc (CGJTF) had to incur one-time startup costs associated with the new China contract, impacting short-term profitability.
- The company had two aircraft impacted by a significant hailstorm in Calgary, which required repairs and temporary replacement services.
Q & A Highlights
Highlights of Cargojet Inc (CGJTF) Q2 2024 Earnings Call
Q: Are there any contract opportunities already attached to the new aircraft investment, and will this aircraft go into the domestic network or will they mostly fly charter?
A: At this time, there is no signed contract to support that investment. We had to pivot and replace the inventory of feedstock that was originally planned to have one converted late this year and one next year. We need feedstock on inventory to pivot quickly and capture that inventory for future growth. (Scott Calver, CFO)
Q: Could you elaborate more on how the China e-commerce opportunity arose and how it is progressing so far? Do you see opportunities to upsize this contract as e-commerce demands continue to improve in the second half of the year?
A: Demand for e-commerce products coming out of China has somewhat exploded this year. We had a significant number of requests for charters coming out of China into North America. The contract came together quickly, and we are currently operating three flights a week. We are seeing significant demand for capacity and are actively having discussions with both the existing new customer and other potential customers. (Jamie Porteous, Co-CEO)
Q: Can you talk a little bit about what you're seeing in the domestic business and the ACMI business more in detail?
A: The second half of 2024 is expected to be much stronger than the first half. Domestic revenues in the second quarter were up just over 10% year-over-year, largely driven by e-commerce growth. Feedback from our customers indicates strong growth from e-commerce. ACMI business, primarily driven by DHL, is seeing much stronger demand than last year. (Jamie Porteous, Co-CEO)
Q: How should we be thinking about the efficiency and cost profile of the 757s in the network compared to the 767s?
A: The 757s and 767s are common cockpit aircraft, meaning the same pilots can fly both. They are very complementary in terms of efficiencies and costs. The flexibility to switch resources between the two aircraft provides us with efficiency and cost benefits. (Ajay Virmani, Executive Chairman)
Q: Were there any one-time costs associated with the China contract in the quarter?
A: Yes, there were some startup costs, particularly pilot costs and overtime, as well as additional training costs for e-tops pilots. These costs will soften out as we go forward in the next few quarters. (Jamie Porteous, Co-CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
