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Tank Fleets Struggle for Profits Despite a Still-Buoyant US Economy

May 1, 2002
WHILE THE US economy continues to climb skyward, tank truck carriers are not reaping many of the benefits. The 1999 Modern Bulk Transporter Gross Revenue

WHILE THE US economy continues to climb skyward, tank truck carriers are not reaping many of the benefits. The 1999 Modern Bulk Transporter Gross Revenue Report shows that even the best carriers in the industry struggled to make a decent return on investment last year.

During a year when many dry freight truckload carriers reported revenue growth of 14% or more, the tank truck industry as a whole achieved a modest 4.6% increase. That was less than the US economy, which expanded by nearly 6% in 1999.

Managers point to a number of factors that resulted in flat to moderate growth for tank truck carriers in 1999. For one thing, the US chemical industry was flat in 1999. Specialty chemicals were up 5%, but shipments of industrial chemicals grew by just one half of one percent, according to the Chemical Manufacturers Association.

Extra business that boosted returns for many fleets in 1998 dried up as the worst of the railroad problems were resolved. Glitches in the Conrail breakup generated some additional tank truck cargo in 1999, but it was much less than in 1998.

Even when additional business was available, some fleets missed out because they didn't have enough drivers. The problem won't be resolved anytime soon, and any solutions will be expensive.

Tank fleet managers caution that a crisis is building, and driver supply is just a small part of it. Without adequate rate increases and profitability improvement, the failure rate for tank truck carriers is certain to escalate in coming years. In addition, more fleets will be pushed into mergers or acquisitions.

At a minimum, tank truck carriers need rate increases comparable to those being requested by other sectors of the trucking industry. For instance, truckload carriers are requesting increases of 5% to 10% this year and possibly next year. Refrigerated carriers are calling for similar rate hikes.

The need for higher rates is evident in the latest Modern Bulk Transporter Gross Revenue Report, which shows revenue growth down almost one percent from 1998. Slightly more than 64% reported higher revenues, but just 21.2% had improved operating ratios. In comparison, more than half of the tank truck carriers participating in the 1998 Gross Revenue Report had higher revenues, and over a third had improved ratios.

Even some of the top carriers had a difficult year. For the first time in several years, though, mergers and acquisitions made a smaller impact on the top rankings.

Quality Distribution Inc remained in the top spot. Trimac Transportation Services Ltd was at number two and Matlack Inc at number three. Climbing to number four from number 10 was Superior Bulk Logistics, which listed consolidated revenue for Superior Carriers Inc, Carry Transit, and Central Transport.

DSI Transports slipped a notch to number five, followed by Kenan Transport Company, Bulkmatic Transport Co, The Dewey Corporation, and Groendyke Transport Inc. Schneider National Bulk Carriers moved up from 11 to round out the top 10.

With revenues of $2.2 billion, the 10 largest carriers accounted for 42% of the revenues in this report. A year earlier, the top 10 tank truck carriers had combined gross revenues of $2.1 billion and accounted for 40.4% of the revenue total.

The top 25 carriers had $3.3 billion in revenues, or almost 64% of the total represented in this report. That was about 3% higher than in the 1998 report. The 50 largest carriers had revenues of $4.3 billion, or 82.2% of the total, which was slightly greater than 3% in 1998.

Of the 136 carriers in this report, well over half had higher revenues in 1999 than in 1998. A year earlier, 53% reported revenues that were higher than the previous year. Less than a quarter showed improved operating ratios in 1999, compared with 34.5% in 1998.

Total 1999 revenues for all carriers in this report were $5,308,322,715.96. In 1998, those same carriers reported a combined total of $5,055,698,336.59.

For the 136 carriers in this report, the average revenue for 1999 was $39,245,316, up from $36,083,833 in 1998. Excluding the top 10 carriers from the total revenues produces an average revenue of $22,757,634. The median carrier on the list, the one with an equal number of carriers above and below it, had revenues of $19,135,200. In 1998, the median carrier revenue was $16,994,600.

Operating ratios for 1999 and 1998 are listed for 114 of the carriers in this report. Twenty-five showed improvement over the previous year, 24 less than in last year's Gross Revenue Report. The operating ratio represents operating expenses as a percentage of revenue.

The operating ratios clearly illustrate that even the best tank truck carriers struggled to make a profit last year. Seventy-two carriers had ratios between 95.0% and 99.0%, 11 more than in 1998. The number of carriers with ratios above 100% increased by one. Thirty-four fleets had ratios between 90.0 and 94.9, three less than the previous year. Eight had operating ratios below 90%, four less than in 1998.

Well over half of the tank truck carriers provided tractor revenues. The average for 1999 was $127,461. That was an increase from the 1998 tractor revenue average of $122,185. Seven of the top 10 carriers reported tractor revenues, and the average for this group was $146,763, down 2.3% from the 1998 Gross Revenue Report.

The highest revenue per tractor ($328,414) was reported by a mid-sized East Coast chemical hauler. The lowest amount ($29,970) came from a small chemical fleet that is also on the East Coast.

Ten carriers that emphasize chemical hauling had an average revenue per tractor of $158,040. The average for chemical carriers in 1998 was $147,014.

Average revenue per tractor for eight petroleum transporters was $124,761, slightly up from the previous year, when 15 carriers had an average tractor revenue of $121,226. The high for 1999 was $203,861, while the low was $71,009.

Five dry bulk carriers posted average tractor revenues of $115,186, a substantial drop from the $168,220 average achieved in 1998. Tractor revenues ranged from $82,768 to $132,972.

Five liquid and dry bulk food fleets recorded average tractor revenues of $122,956, virtually the same as the $122,807 average in 1998. The high for the category was $150,969, and the low was $92,889.

Many of the figures here are from preaudited reports, and some may include nonbulk revenues or revenues from subsidiary tank truck carriers.

In most cases, the figures were supplied directly to Modern Bulk Transporter. The magazine greatly appreciates the cooperation of all who helped in the preparation of this report.

To view a chart with this year's ranking and revenues, use the "Related" link below to find it and all reports going back to 2001 in the Gross Revenue Reports Archive.