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Ryder System advanced its proprietary business segment with the acquisition of Cardinal Logistics in February the company said on Tuesday.
The transportation group sees the addition as part of a strategy to accelerate profitable growth in the dedicated segment, CEO and President Robert Sanchez said on a first-quarter earnings conference call.
Total revenue for its standalone segment in Q1 rose 24% year-over-year to $563 million, and segment operating income rose 33% year-over-year to $427 million year-over-year earnings announcement.
But acquisition and integration costs, as well as insurance costs put a dent in that path for the quarter. This left a 38% year-on-year drop in pre-tax profits. The company plans to pay about $10 million in integration costs, which should cover most of the expected costs, Sanchez analysts said.
However, this setback appeared to be temporary. Ryder Dedication Transportation Solutions’ pretax profit was 4.2% of operating revenue in the 1st quarter — falling short of a high-single-digit target amid higher costs.
The company, which is still integrating the plugin, expects further improvements to its bottom line. Ryder expects to achieve a GMP target this year for its traditional exclusive business and to meet the sector’s overall target in 2025.
“As we reach full completion in year three, we expect net synergies to be between $40 million and $60 million,” Sanchez said he said on the phone call.
Ryder previously noted that the acquisition would generate $800 million in operating income each year.
Cardinal and another acquisition, a 3PL known as Impact Fulfillment Services, also primarily led to an 11 percent increase in operating income for Ryder’s supply chain division, CFO and EVP John Diez said on the earnings call.