Cargojet’s Earnings Call Highlights Growth Amid Challenges

Cargojet (OTC) ((TSE:CJT)) has held its Q2 earnings call. Read on for the main highlights of the call.

Cargojet’s recent earnings call painted a picture of robust domestic growth and successful charter business operations, despite facing challenges such as global economic uncertainty and softness in European routes. The company expressed optimism about future growth and improvements, underpinned by long-term client contracts and operational resilience.

Domestic Business Growth

Cargojet’s domestic business demonstrated impressive performance with a 14% year-over-year growth in Q2. This growth is largely attributed to the strength of e-commerce in Canada, which continues to drive demand for Cargojet’s services.

Charter Business Success

The Charter business reported a remarkable 22% growth, underscoring the resilience and potential of this trade lane. This segment’s success highlights Cargojet’s ability to adapt and thrive in a competitive market.

Long-term Contracts with Major Clients

Cargojet secured its future growth through long-term contracts with major clients. Amazon renewed its air transportation services agreement for four years, with an option to extend till 2031. Additionally, DHL extended its strategic partnership until 2033, with further options till 2037, ensuring a stable revenue stream.

Strong Adjusted EBITDA Margin

Despite a 10% drop in block hours, Cargojet posted a strong adjusted EBITDA margin of 33.7%, marking an improvement of 140 basis points from the previous quarter. This reflects the company’s efficient cost management and operational strategies.

Resilient Operational Performance

Cargojet consistently delivered on-time performance of over 99% month-after-month, demonstrating its operational excellence and resilience. This reliability is a key factor in maintaining client trust and satisfaction.

Efficient Fleet Management

The company plans a net addition of one 767-300 aircraft, showcasing its commitment to efficient fleet management. This strategy is aimed at sustaining operational reliability and meeting future demand.

Global Economic Uncertainty

Cargojet acknowledged the impact of global economic uncertainty, which has led to slower decision-making and affected global operations. However, the company remains optimistic about overcoming these challenges.

Softness in European ACMI Routes

The company observed some weakness in European ACMI routes post the Liberation Day. Despite this, future prospects look optimistic with new agreements expected to bolster this segment.

Net Free Cash Flow Outflow

Cargojet reported a net year-to-date free cash flow outflow of $118.4 million. The company expects to offset this by Q3 2025, reflecting its strategic financial planning.

Drop in Block Hours

There was a 10% drop in block hours flown in Q2 year-over-year, impacting operational metrics. However, Cargojet anticipates recovery in the second half of the year due to seasonal factors.

Forward-looking Guidance

Cargojet’s forward-looking guidance remains positive, with expectations of recovering block hours in the latter half of the year. The company plans to streamline its fleet and maintain a strong adjusted EBITDA margin. Strategic partnerships with Amazon and DHL are expected to provide growth opportunities in the coming years.

In summary, Cargojet’s earnings call reflected a balanced view of strong domestic and charter business growth, supported by strategic client partnerships and operational resilience. Despite challenges such as global economic uncertainty and a drop in block hours, the company remains optimistic about its future growth prospects.