TFI International Inc
TSX:TFII
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
154.34
219.88
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
TFI International Inc
You don't have any saved screeners yet
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's First Quarter 2020 Results Conference Call. [Operator Instructions]Before turning the call over to management, please be advised that this conference call will contain several statements that are forward-looking in nature and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. All dollar amounts are in Canadian dollars.Also, last year, the company adopted the new accounting standards under IFRS 16. And as a result, certain numbers are not directly compatible with past results.Lastly, I'd like to remind everyone that this conference call is being recorded on Wednesday, April 22, 2020.I will now turn the call over to Alain Bédard, Chairman, President and Chief Executive Officer of TFI International. Please go ahead, sir.
Well, thank you for the introduction, operator, and I appreciate everyone joining us this morning as the world continues to navigate through these unprecedented times. Yesterday, after the close, we released our first quarter results, and if you need a copy of the release, please visit our website. As we have previously communicated, our utmost priority since the start of the COVID-19 pandemic has been the health and well-being of our employees, our customers and the communities we serve.In early March, our senior executive team came together to strategize and establish guidelines for our operating -- for our operations during the coronavirus pandemic. Following their guidance, TFI International has been handling the ongoing crisis well. And I believe that we will emerge even stronger when economic conditions return to normal.I know you are most interested in current condition and how we are responding, but I wanted to briefly discuss our accomplishments during the first quarter starting with our listing in the New York Stock Exchange. This was a highly successful strategic accomplishment for TFI but also a very natural step given how our company has rapidly grown over the years to serve all of North America. Our NYSE listing in February was well received and the combination of many years of successful growth and value creation at our company. The proceeds from the offering have been provided an even stronger financial foundation for TFI to navigate what's ahead.Operationally, during the first quarter, our performance was solid despite the significant impact of COVID-19 beginning in March. As I've said often -- as I've often said, regardless of fluctuating business condition and the industry-wide capacity concerns that still exist during most of the quarter, we at TFI always focus on the basic fundamentals of the business. This consistent approach in how we optimize our free cash flow and earning per shares, which then used to expand our business and create long-term value shareholder. For example, we pursue an asset-light business model. We seek opportunities to enhance efficiencies, and we maintain a strong balance sheet.When it's strategic to do so, we also look at accretive acquisition opportunity, always in the highly disciplined manner. And in early March, we completed the acquisition of R.R. Donnelley's Courier Service business. This modest acquisition strategically adds critical mass and valuable new customers to our TForce Logistics same-day parcel delivery operation in the U.S.In terms of our first quarter financial results, total revenue was up 1% compared to prior year's first quarter at $1.2 billion. More important to us because of our emphasis on profitability, our operating income increased 13% to $118 million, while our adjusted EPS on a diluted basis was up 8% to $0.83. In addition, we generated net cash from operating activity of $192 million, up a very robust 19% when compared to the year ago figure.Before reviewing our balance sheet strength and the expenses reduction measure we have introduced, I want to share with you how each of our business -- of our 4 business segments performed during the quarter and discuss how each has been affected by the COVID-19. Although transportation and logistics was quickly deemed as an essential service, during the last 2 weeks of March, we did begin to feel the effect of governmental policies put in place to flatten the curve.Starting with P&C. This segment represents 13% of total revenue before fuel surcharge and -- saw a revenue decline of 4% year-over-year in the March quarter. Operating income was $16 million compared to $21 million in the corresponding year prior year quarter, and the segment operating margin was 11.1% relative to 14.3%. Package and Courier, which is typically our highest-margin business, has felt the largest impact from the COVID-19 with B2B activity slowing significantly. This segment has been a focal point of our cost-reduction efforts that I'll review in a moment. And your formal guidance given COVID-19, we'll instead provide you a look at the over -- at the year-over-year performance for each of our segments in both late March and early April.For P&C, our revenue were running negative 28% versus the prior year during the last 2 weeks of March and negative 30% during the first 2 weeks of April.Turning to LTL. This segment represents 16% of total segment revenue before fuel surcharge and saw revenue declined 14% year-over-year in March quarter. Our operating income was $18 million compared to $28 million in the prior year, primarily driven by a $9 million gain on sales of real estate in Q1 of 2019. And our operating margin was 9.8% compared to 13.3%. For the LTL, our revenue were running negative 17% versus prior year during the last 2 weeks of March and negative 39% during the first 2 weeks of April.Next up is our Truckload, our segment -- our largest segment, representing 48% of total segment revenue before fuel surcharge. Truckload saw revenue grow 1% year-over-year in the March quarter. Our operating income was $63 million, up 24% relative to $51 million a year earlier. And our operating margin was 11.8%, was very solid 220 basis points compared to the prior -- first quarter of last year. For Truckload, our revenue were running negative 4% versus the prior year during the last 2 weeks of March and negative 20% during the first 2 weeks of April with both dry van and specialized operation impacted.Lastly, Logistics is our second-largest segment at 24% of total revenue. Before fuel surcharge, we saw revenue grow 20% year-over-year in the March quarter. Our operating income jumped 71% to $26 million from $15 million a year earlier, reflecting a 290 basis point increase in our margin to 9.7%. Approximately half of this increase in Logistics operating income relates to the bargain purchase price gain recognized in the association with the acquisition of the Courier Service business of R.R. Donnelley with the rest from operating improvements and M&A. Logistics has received a boost in recent weeks with both the e-commerce and medical end markets doing very well, partially offset by weakness in B2B. For Logistics, our revenue were running positive 39% versus the prior year during the last 2 weeks of March and positive 12% during the first 2 weeks of April.Next, I'll discuss our balance sheet, which currently reflects the lowest leverage our company has in many years. Further, we ended the March quarter with about $130 million in cash and equivalent $800 million -- $830 million still available on our revolving credit facility and no debt maturities until $200 million comes due in June of 2021. During the COVID-19 pandemic, our balance sheet has continued to serve us -- to serve as a source of strength for TFI International.Shifting gears. I want to spend a moment on our expense-reduction effort. While we quickly moved to reduce operating costs and CapEx in March, we've approached all decision with an eye towards strategically enabling TFI to quickly snap back and emerge even stronger once the operating environment improves. But for now, everyone within the TFI organization is currently pitching in and are very grateful for the pride and professionalism of our people as shown doing everything they can to help our customers and help our company through this stretch.Some of the many steps we've taken include the following: first, we reduced wage for executives anywhere from 5% to as much as 15% for all C-level officers and all executives VP across our organization. Second, for more than 1,000 full-time employees, we've reduced their workweek to 4 days, while helping them through this time by maintaining their pay at 85% of base salary, which amounts to an increase in their per-day wage.Third, many other employees were subject to reduction in force, which we hope will prove temporary. For these individuals, we have not continued to provide benefits, but we also instituted a base salary recovery program to support them during this period of temporary unemployment. Fourth, we suspended all CapEx to which we had not committed, and we plan to revisit these potential outlays as condition permit. Again, these are just a few examples of the many strategies we have implemented. In addition, I should mention that we have provided full support to our operating companies, so that they can protect the health and safety of all employees in full accordance to -- with local requirement.At this point, 70% of our head office employees are working at home, and we have taken additional precaution within our offices. This includes the installation of sanitizer dispensers, 6-foot distancing policies, limiting in-person meetings to 3 people, restricting unessential visitors from office, a visitor log and mandatory questionnaire and more thorough cleaning of common areas.Before opening for Q&A, I'll mention that our overall capital allocation plan, despite our current strategic delays in CapEx, is unchanged. We invest capital where we see the best risk-adjusted return while paying our quarterly dividend and continuing our track record of identifying attractive acquisition opportunities. We approach all capital allocation in a highly disciplined manner as we always have. And as you've seen in our results over the years, we look to generate not just growth but profitable growth. Our ultimate goal at TFI is to create and unlock shareholder value, returning excess capital to our shareholders whenever possible.I want to thank all the dedicated and hardworking people of TFI who have demonstrated pride in the work that they do each and every day during the COVID-19 outbreak. I also want to welcome aboard all our new investors that took part in our recent offering on the New York Stock Exchange, and we assure you that generating long-term shareholder value will always be the key focus of TFI International.With that, operator, I'd like to take questions from the audience. If you could please open the lines.
[Operator Instructions] Jason Seidl with Cowen.
Alain, I wanted to start off asking a question about we are -- I know CFI itself doesn't have a large exposure to energy. However, as the decline we've seen in oil prices starts to flow through and hit the Canadian economy, that's likely going to free up a lot of people used to hauling energy and energy-related goods. Is that going to throw a lot of capacity out into the marketplace in profit?
Yes. Well, Jason, our exposure to energy is really, really small. I mean we have a small operation that's left for us in Texas of P&D Odessa market. But this is really small revenue for us. And we're still very present in Alberta with our LTL and to a certain degree, in our special TTL, but really, the service that we provide with the energy sector in Alberta or Saskatchewan is very, very limited. I would say that today, energy is very small component of TFI's revenue. For sure, if you look at Alberta, I mean, the province has been slapped with the double whammy. It's got the oil situation, and it also has the virus like everybody else in the world. So our LTL has been affected probably the same as the rest of Canada. If we look at our specialty truckload, it's been affected a little bit more than the average that we see on the East Coast, Ontario, Québec.
Okay. And speaking about the LTL, obviously, there's a lot of operational leverage in that model over the past couple of years. TFI has really taken the approach to sort of streamline its network, right, get it as slim as possible. Is there anything left to do? Are there any other small terminals to close down? Or is it sort of just your -- where you're adding it right out the storm here?
You know what, Jason, this is a very good question. And absolutely, I mean, we will be -- 2 years ago, we've combined TST Overland with Kings Wind East, okay? And that was a major transaction for us, and it saved us a lot of dollars. Because you have to understand that on the Canadian side, the LTL is shrinking every week, every month because of the e-commerce. And now virus is just one more, okay? That's just not helping us. So what we are planning, and this is going to be taking effect at the end of April, is that we're also now doing the combination of TST Overland, okay, with our CF operation, 2 great names in Canada. CF was only a regional player, covering Western Canada, and TST Overland is a national carrier. So as of the end of April, okay, that's one more move that we're doing to streamline and be more efficient. So I was just looking at the equipment. So we're going to shed about 200 to 300 piece of equipment.In terms of headcounts, I mean, the headcounts will be down significantly because of that. Because we're getting ready because this LTL keeps on shrinking, so there's no other option for us in Canada that we have to adjust to the volume. Now for sure, as soon as we can, okay, we've got some targets in mind. We're also talking to some people because a lot of people in the LTL business in Canada are not making money because they have the same problem as us, is that volume is -- keeps on coming down, and they don't know what to do. Us, we have a plan. So our plan is always put in place, and we adjust, and we cut, and we have to live with the market condition. And our focus is always about serving customers, but we have to make money.
Yes. That makes sense. And real quick before I turn it over to somebody else. What's the average age of your Truckload fleet now in the U.S.?
In the U.S., I would say, at the end of March, I mean, we're just under 2 years of age. So this is why what we did on the CapEx side on the U.S., talking with Greg and the team there and David, is we said, guys, I mean, our fleet is so new that we can afford. So what we've done in the U.S., we've canceled the CapEx for everything that was not committed. So probably what we'll see is we still have some CapEx coming in for U.S. TL in Q2 in terms of trucks and trailers. But after Q2, everything has been canceled. So this means, if I remember correctly, about $60 million net CapEx that will not be done in 2020 for U.S. TL, Canadian dollars, though. So I mean, you put that in U.S. is about, let's say, USD 40 million, USD 45 million.
Mona Nazir with Laurentian Bank.
Congrats on the quarter in a challenging environment. So my first question is just a clarification. So for LTL, did you say the last 2 weeks of March was down 17%?
You know what, let me just check because I think so. I think so.
Okay.
Yes. Yes, 17% down. Yes.
Okay. And then in the first 2 weeks of April? Sorry.
39% down. Now what I have to add on that, Mona, is what we've seen really. If I look at my first week of April, okay, versus my second week of April, now I've got my third week of April because April for us is 3 months -- is 5 weeks, so when I look at that, I see a trend that this volume, okay, was really, really down the first week and a little bit less in the second week, a little bit less in the third week. So I think that right now, we're probably -- until the government decides to reopen businesses, I mean, we're probably just improving a little bit week by week.The same thing with our P&C. P&C, the first week, it was a disaster. I mean bang, whoa, and then it start to drop even more. So the first -- the last 2 weeks of March, okay, because they announced the closing, okay, we went down, down, down. Then the first week of April, again, even down more. And then the second week of April, back up a bit, and then the third week of April, we're starting to see up a little bit. So this is why, if I look at my P&C, as an example, 2 weeks ago, for the first 2 weeks, I was down like 40%. Now after 3 weeks, I'm down only 30% year-over-year.
Yes, that's helpful. Because I was just looking, even at the quarter, I mean, LTL shipments were down almost 17% in the quarter. But just given that margins improved significantly, I was just wondering if it was safe to assume that the majority of that decline was driven by a reduction in lower-margin business and if that, in fact, is the case.
Yes. Some of that is true. Some of that, Mona, is true. Yes. Yes.
Okay. Okay. And if we're just adding up the steps that you've taken in regard to reducing executive compensation, reducing office staff to 4 days a week for lowing some P&C staff to preserve capital, I'm just wondering, combined, what kind of an impact can all of these items have on OpEx?
Yes. Well, that's a very good question. And you know what, this also depends on the level of volume that we have. But one thing I could say is that we've revised -- I mean, we are -- I am monitoring our P&C by the day now, okay? The same thing with LTL. The same thing with our U.S. TL. I used to monitor by the week. Now we're by the day. What I could answer on that is that a lot of people were scared that TFI would lose money even in Q2 because all will be, but we're not going to lose money in Q2. That's for sure. I can't give any guidance, but what I could say is that all the steps that could have been done, okay, and we're following information and tools and data by the day. In every business that we had a huge drop, like our P&C and our LTL. And my U.S. LTL, the reason that we're checking that by the day now is because that's the most capital-intensive business we have, right? Because my Canadian Truckload or specialty truckload is not as capital-intensive. And yes, my van division has been affected. My specialty truckload as soon as -- as an example, the construction in Québec has been shut down. The mining has been shut down. So now, they're starting to reopen that. And already, we're starting to see some improvement in our specialty truckload and Canadian Truckload. So really, our focus for us right now, okay, is really our P&C, our LTL and our U.S. TL that we monitor by the day, okay?Now to answer your question, your original question, how much -- what's the quantum of all that? I can't really answer that, Mona. I don't know the numbers, but what I could tell you is that we are monitoring that by the day. We're comparing year-over-year, day-over-day comparing, let's say, for instance, our labor costs used to be 12%. So are we at 13%? Are we at 11%? Where are we at? And we're doing that for all, like I said, LTL, P&C and U.S. TL.
Okay. Perfect. And just lastly for me. I understand that M&A may be temporarily on hold, just given due diligence is challenging on third parties at this time and you want to preserve capital. But when the M&A tap turns back on, I'm just wondering what can expectors invest -- expect -- what can investors expect? Are you going to be sticking to your current verticals? I know you just touched on LTL. But is there any scenarios where you would look outside of current activities? I know in the past, for example, you said that your waste business was a gem.
Yes. Absolutely. Now you see, Mona, when -- the minute we could do M&A again, okay, which maybe in Q3, depends on what April and May looks like. But we will start really with some small tuck-in deals that we've been working on for the last few months and we put on hold. So that's how we're going to start M&A. And it's going to be either in the U.S. or in Canada. But these will be small deals, nothing major. We were working on significant-sized deal prior to this virus thing there. But we were not going to do any major deals in 2020. It's too risky, okay, not knowing how long this virus is going to be with us for. Maybe it's a year. Maybe it's 18 months. Nobody knows. So this is why anything of size won't happen probably until '21. But I would tend to say that small tuck-ins that we could do in Ontario, for instance, I think that there's a probability that we could do that in Q3 or in Q4 of 2020. So we have ample of files that we're looking at right now.And don't forget, if we are in a difficult position because revenue just disappeared because of this virus, I mean, everybody else is in the same boat. I mean we're all on the same ship. I mean the market is difficult for everyone. Now the strong like TFI that's got the balance sheet, that's got the team because, don't forget, you need the team to do all this M&A, you need a solid, solid operational team to take over a company and just integrate like we're doing in the U.S. right now with Donnelley, okay, sure. The guys will say, "Wow, Alain, you got $5 million of profit in Q1 that comes from that deal." Yes, because we buy at the right price. So what's the problem with that? And then you'll see, Donnelley, as an example, okay, it will help us grow our last-mile logistics business in U.S. with all the nice vertical like health care, for instance, or e-commerce.
Jack Atkins with Stephens.
So I guess, just to kind of start off here with a couple of higher-level questions. But I know you've seen a lot over the years. I know you're a young man, but you've seen a lot over the years. So I guess, I'd be curious to get your take on sort of how you think, what we're seeing right now from this COVID-19 pandemic. How did that structurally change the transportation markets in the U.S. and Canada as we look out over the next couple of years? And sort of how do you want to position TFI to really capitalize on that?
Well, that's a very good question. And Jack, we've learned from the lesson of 2008, 2009 as TFI. If you go back and look 2008, our revenue dropped about 20%. Our EBITDA dropped about the same. But we were way more capital-intensive then than we are today. Our balance sheet was not as strong as what it is today. And that's one of the things that we learned from that crisis then. If you look at this crisis now, okay, and you look at that and you say, well, Jesus Christ, this is really the first time that we have shut down everything just overnight, just overnight, okay? The government decided that for health reason, okay, well, this has got to shut down, boom, goodbye. So our B2B has been affected. And what we learned from that, okay, if we look in the future, I think that this -- the consumer, okay, was slowly moving towards more and more e-commerce, slowly. I think that this is going to be a catalyst, okay, for those guys to slowly even -- no, not as much slowly, but probably a little bit faster into more and more of this e-commerce thing because they are getting -- some of those consumers are getting used to the e-commerce, okay? Whereby, let's say, just a few months ago, these guys say, "Well, e-commerce? I don't really like that. I'm just going to go shopping at the mall." So I think that this is going to be really a catalyst to have even more and more e-commerce down the road, okay, faster than it would have been without the virus.I think that the solution that we have as TFI is unique because if you look at Canada, we offer the next-day solution with the Canpar, Loomis operation okay, which competes with UPS or FedEx or Puro in Canada. In the U.S., we don't have this solution, but we have our Logistics and Last Mile solution, which is the same as the big e-tailer. Everybody knows about Amazon. We have exactly the same product. So this is like a diamond in the rough within the TFI family. And I think that people are just starting to understand. Once they start understanding that, wow, this is a real diamond. Those guys, okay, can compete easily. Well, for sure, we service Amazon as a customer, although small, but we have the same service that we can offer to other customers, which we're doing, okay, and which we're growing.So going back to your question, what do I see from this is that e-commerce will keep on growing even faster, and that's going to help our Last Mile and Logistics. This is -- to me, this is the first thing I see when I look at this.The other thing also is that the fact that TFI has always been low in capital intensity. If you look at the global TFI today, we're between 4% and 5% capital intensity. Why? Because our focus has always been to generate cash. We want to generate cash. Why? Because we want to buy back stock. We want to buy -- pay dividend to our shareholders. We want to do M&A, et cetera, et cetera. Without that free cash flow generation, you can't do that. I mean yes, some trucking companies have no debt, but they have no free cash flow. So for sure, they can't afford to have debt or they can't pay dividend. So our approach as TFI has always been, okay, try to do more with less. So if you look at our U.S. TL operation, about 2 years ago, Greg Orr came to us and say, "Hey, we have to start a logistics operation within CFI." So Greg makes a lot of sense, okay, so we've invested in that. We've also focused lately even more into trying to grow our owner-operators fleet in the U.S. It's always been a problem to grow that. Lately, I mean, Greg and his team has been very successful. We're adding owner-operators. So that will reduce our capital intensity, hopefully, for the next years to come.So I mean, this is a really good question, Jack. And I think that this is what's so important about understanding where TFI is today and where can it be tomorrow, okay? This e-commerce solution that we have within TFI is like one of the best-kept secret in North America.
Well, that's great to hear. And I guess, just to follow up on that. You guys have a great track record of free cash flow generation. That continued in the first quarter. We've been hearing some anecdotes over the last couple of months that shippers have been trying to push back on payment terms. As they look to sort of hold on to cash, everyone is trying to hold on to cash as much as they possibly can. Have you guys seen that? How are you responding to that? How are you thinking about free cash flow generation this year more broadly?
Yes. Well, for sure, there's some customers that always try to hide and give you the excuse. So just to delay their payment. But us, we're very strong on that, and I'll give you an example. There's a huge mining company in Canada that those guys had all kinds of issues with their IT system. That's always a good excuse. And we say, guys, I mean, we're not a bank. I mean we're not a bank. So we can support you, guys. It's a huge corporation, an international corporation. So finally, we're able to get payment because we said, "Guys, if we don't get the money, you guys don't get the trucks." So that's always been our approach, Jack. I mean when you do a transaction with a customer, I mean, we agree on price, we agree on service, but we also agree on payment terms. And everything in that agreement has to be respected.
Scott Group with Wolfe Research.
So can I just clarify, the April updates that you gave that were helpful, was that volume or revenue? And if that's revenue, is that with or without fuel?
Yes. No, it's excluding fuel, and this is revenue.
Okay. And is there any way on the -- so the P&C that's, I think, down 30% in April, can you just help us think about what trends you're seeing, specifically, B2B versus B2C? Maybe just to remind us of the mix of B2B versus B2C for you there. And then anything that's notably different between the package side and the courier side?
Yes. So if you look at our P&C, you could split that in 2. So you got Loomis and Canpar, okay? And you got our specialty kind of P&C, which is ICS and TFIS. So if you look at TFI -- TFIS and ICS, those guys are niche B2B carrier. So those guys are way more affected, okay, than the Canpar and Loomis. Why? Because Canpar and Loomis has also B2B but also has a significant content of e-commerce. Whereas if you look at TFIS and ICS, they're basically very, very little e-commerce in those 2 divisions because these are specialty carriers. Like as an example, ICS is very heavy with the insurance world, very heavy with the optical world, dental and all that. So it's really -- so all the dentists, all the optical boutiques are closed down. I mean ICS is just dead, okay? So that's the big difference between the 2. So you'll see, if you say 30% down, okay, in early April, well, that means that those specialty guys are like closer to 50% down, okay, and the other guys are closer to 20% down because they have more e-commerce and less B2B exposure than the other one.
So is it fair to think then that the -- so within the down 30%, that the B2B, maybe to your point, is down in half and that the...
Yes. Absolutely.
The B2C in e-commerce is -- okay.
Yes, sir. Yes, sir. Absolutely because with all the shutdown, I mean, think about all the malls, they are shut down completely. So all your customers are closed. So that's why our B2B, okay, has been affected so badly in our niche carrier like ICS and TFIS.
What are the implications on margins for that segment? I know you said, "Hey, don't worry, we're going to make money this quarter." But can that segment -- can the P&C segment make money in this kind of environment? Or is there any way to think about margins in that quarter right -- margins in that segment right now?
When we look at our forecast, our reforecast and our re-reforecast is we're not losing money in any of our sectors, okay, in Q2, based on what we know after 3 weeks of operation in April. So we're not going to be an 18-point EBIT, okay, P&C in Q2. It's impossible. But we're not going to lose money.
Anything more directionally you think is worth thinking about? Is this a mid-single-digit kind of business right now for the time being? Or could it be a little bit better than that?
Yes, I would say so. I would say so. I mean it all depends based on what we know so far. But also, when I look at the trend, and that's what I was saying earlier, okay, there's a little bit of improvement in our trend. So we really took a major hit in the first 2 weeks of April. It was really a, "Wow, where are we going with that?". So we -- now I think we found some kind of stability, okay, and slowly, we're picking up again. Because if you look at the virus in Canada, I mean, Québec has been affected so badly. It's terrible. And then you got Ontario. But if you look at the Western provinces, we believe that those provinces will reopen faster than, let's say, Québec. Québec will probably very slow because they got so much virus case. They have more than 50% of their cases in Canada right now. So Québec will be slow. But the West will probably be the first areas in the Maritimes to reopen slowly. So based on what we know, okay, and not forecasting a lot of improvement in Q2 in May or in June, P&C will be something in the 3% to 5%, probably. But this is not a guidance. This is an opinion.
No, no. I get that. And then just last thing. You gave us the Truckload sort of CapEx, how much it's cut. But in aggregate now, what's the CapEx budget or plan for the year?
Net CapEx is probably going to flow around between $80 million to $100 million, net CapEx, net of disposals, which is about half of what we normally do.
Tom Wadewitz with UBS.
I think following on -- following a little bit along the lines of the questions and topic you just had. What is the B2C-B2B mix in the P&C business? And as you look at that and your comments on acceleration in e-commerce, do you say, well, maybe before we wanted to be stronger on B2B, but we kind of review the structure and changed the strategy a bit in terms of how we look at B2C, even if it's a lower-margin business and kind of core B2B?
That's a very good question because let me explain you our philosophy. Our philosophy is our next-day service, okay, which is Canpar, Loomis, TFIS, ICS, which compete with UPS, FedEx and Puro in Canada. Our focus is, yes, we'll do e-commerce, but not so much, where it makes sense and where our margin could be as good as the rest of our business. Why? Because us, we have a solution that nobody has, which is our Logistics and Last Mile. And this is really the best tool. This is really the efficient way in huge, high-density areas like, let's say, in Canada, Toronto, Montreal, et cetera, or New York, Chicago in the U.S., L.A., Houston, Dallas. So our solution is really the same kind of solution that the big e-commerce guys is using to service its customer, way more efficient, way more effective, less capital-intensive because we don't have the conveyors. We don't need those conveyors because everything is done, the sorting is all done at the customer level. So that's why going back to your question, our P&C business, the focus will remain on B2B. And I agree with you that maybe B2B will get down, the revenue will slowly get down because of this move of e-commerce. But we're also replacing some of that business with e-commerce that makes sense, okay, that we could do in our next-day service. What we're trying to explain to our customers is the guys, we offer another solution, which is our Logistics and Last Mile, okay, which is really good. But you need -- like the other guys, like Amazon, you need warehouses. And if you don't have warehouses, it's very difficult to do, okay, what Amazon is doing, okay?
So I mean, it sounds like it might be fair to say that if there's a big acceleration, B2C and e-commerce, and it's more on a structural basis, that's kind of bad news for P&C to some extent, but it's really good news for your Last Mile business. Is that fair that it's kind of partial?
Yes. Yes, this is exactly what I'm trying to say, okay? And when I talked to Kal, our EVP in charge of our Logistics and Last Mile, I said, guy, "Kal, you got a diamond. You've got a diamond in the rough." And the only problem is that people still don't understand what we can offer. They understand the Amazon solution, okay, because Amazon is fully integrated now from warehousing to distribution. And us, we're not in the warehousing business. We're just talking to some customers and say, "Guys, if you have this kind of distribution network, we could help you on the e-commerce." So it will take time. But we have this solution that is -- it's unbelievable what we could do with that. It's just it will take more time. But the e-commerce, because of this virus, will accelerate absolutely. So it will be to the detriment or the B2B in the P&C side for us or for Puro, for probably FedEx and UPS, we'll see that soon. And it's probably going to be some kind of permanent kind of impairment of the B2B because of what's going on.
Right. Okay. That's great. That makes a lot of sense. One other question for you. Your strategy is differentiated in terms of the aggressive use of independent contractors. And obviously, that's a component of your focus on cash. I know there's some cyclical aspect to attracting ICs, and you can probably attract whether it's drivers or ICs or whatever, I would think, easier in this environment. Do you look to make potentially structural changes on the mix? Do you say, well, this is an opportunity if we were -- I'm not sure the number in a specific business, but if we were 40% IC, 60% company driver, now we want to go to 50-50 or we want to flip it and go 60-40. Or do you look at the market and just say, "Hey, we like our mix of IC and company driver," and this is just cyclical stuff that doesn't change the kind of structural kind of IC versus company driver mix?
Yes. Very good question. And you got to look at it differently, either if it's a Truckload operation or if it's a P&C and LTL operation. P&C and LTL operation, it's a model that's very easy to run with owner-operator. Why? Because it's easier, okay, easy to find. The guys are happy. They have their own business, they're home every night, et cetera, et cetera. So that's why if you look at our P&C and LTL, I mean, our mix is very, very high on the owner-operator model. On the Truckload side, I mean, it's more difficult -- even in the U.S., it's even more difficult, okay, because a lot of those guys don't make any money because there's, in the U.S., a lot of pressure on rates with customers. The customers are smart. They feel that, oh, there's an overcapacity because the truckers bought so many trucks in 2018. Because they thought that this would be a fantastic year for the next 15 years, so they bought thousands of trucks. And now the rates are the s***. So those poor owner-operators are just dying.So to answer your question, I mean, Truckload for us, a mix that makes sense is 65% asset and 35% nonasset, which would be either Logistics or owner-operator. But if you look at our P&C and LTL, it's completely the opposite. So there, you will see us running at 30% asset and 70% nonasset.
So that's the mix, but you're saying the mix doesn't necessarily change for you as a result of the current condition?
No.
Ken Hoexter with Bank of America.
Just wanted to follow up on -- I guess, you have great insight given your multiple segments. And I get what you're saying on the down 30%, down 50% kind of difference depending on the segments. But where do you look first, given your multiple views into the market, your touch points to see the trends as you prepare for the reopening? Where do you expect to see that kind of the signals first within your different endpoints?
I think that where we've been affected the most, okay, which is our P&C and LTL, what we're waiting the signal is that, at one point, they reopened the shops, the malls, that the retail business because this is really killing our B2B business. So that's why we're monitoring that by the day. About 3 weeks ago, I said when I looked at the sharp decline in our revenue in our P&C, I said, guys, I mean, you guys monitor that by the day. But us, it's by the week. And then office, it's got to be done by the day, and we monitor the labor cost, the owner-operator cost, the staff cost and all that. So for us, the other thing also that we've implemented is a kind of bring back the employees with a support deal. So if an employee has been laid off, okay, when he comes back, let's say he comes back after 12 weeks. So we have a program in place that he's got an incentive to come back. So if I remember correctly, the first 4 weeks, we're supporting this guy with $100 a week. After 4 weeks, we go up to $125 for the next 4 weeks. And then we go to $150 a week. So let's say, the guy has been away for 10 weeks. So he's got an incentive to come back to work when we call him back. So he's ready to come back because over and above that he's got his job back, he is also having a kind of a bonus to come back to and pay all the bills that he's been stuck with because of this pandemic.
Great. And then you kind of gave some thoughts on your margin outlook for the P&C. You just kind of gave the mix change on the Truckload side, given trying to stay asset-light. But what kind of margins do you anticipate seeing on the Truckload side?
It depends. If you look at our U.S. TL, I mean, if we look at our reforecast for Q2, like I said, we have no sector that's going to be losing money. Now are we going to be able to run at 94%, 95% OR? So far, what we see is our OR in Q1 has been deteriorated by about 100 basis points, right? If you look at -- I think we did 93.4%, and the year before, we did 92.4%. So 100 basis point deterioration year-over-year. Now can we think that in Q2, can we see a 500 basis point deterioration, maybe. What I've seen so far from the other U.S. TL is that in Q1, some of them have deterioration of 150 basis point or even more. Not a lot have been coming out so far. So the target is always not to lose money, and this is an utmost priority. It's very early in the game because we have only 3 weeks experience in April. But what I could tell you is that if you -- if we look at our model, none of our division are losing money. And even our U.S. TL is not losing money based on what we could see. We lost some customers because of closure, like Packard, for instance. But we also have customers that are doing 3, 4x more like Clorox. So our revenue is down, yes. It's more down at TCA than CFI because of our dedicated business. For instance, Mercedes has been shut down, but they are reopening, okay? So all in all, that's why we're not giving guidance because it's such an unknown environment. But the only thing I could say is that the guys are working really, really hard, and we're not going to be losing money in Q2 or any other quarters. I mean in all of our division and each and every one of them.
Appreciate that. And then just real quick, I guess, to wrap up. Are you seeing any differences in your Canada operations versus U.S. in general in terms of how you're handling the impact?
Well, when we look at the Canadian operation in our Truckload sector, I mean, where we're really affected is our flatbed because of the steel. If car plants remain shut down for months and months because there's no demand for cars, in Canada, I mean, it's really our flatbed business that's been affected. We don't have any flatbed business in the U.S., so we're not in that business. So -- but the rest of our business in Canada is fairly -- it's down, but it's not down as much as our flatbed business.
Konark Gupta with Scotiabank.
So just I wanted to ask you first on pricing. So it seems like, as you noted in the financials, the pricing turned positive in Q1 in most of the segments from negative in Q4. So first, like what caused the pricing to turn like that? And then how do you see the pricing trends in the first 2 weeks of April or 3 weeks of April?
Yes. Well, if you think about our pricing with our LTL, for example, I mean, our pricing improved. It's not because the market has improved in terms of pricing. It's just because we're getting rid all the time of low-margin accounts. So this is why by getting rid of all those guys that don't want to pay the fair price, it improves our average revenue. So LTL, it's not a pricing power that we have. It's just that we're cleaning up again. And we always find those situation whereby a customer, we try to take advantage of a trucking company.If you look at our P&C, okay, it's more like the average weight or the coincidence of delivery, rates are fairly stable. U.S. TL, our rates are a little bit under pressure, not so much, okay? But what we see probably in Q2 is that we'll have probably a little bit of pressure on the rates in the U.S., not so much in Canada so far. So the way we're going to win this war with this virus, it's about cost, and it's about volume. Now the focus has always been at TFI that we service customer where we can make money. So get rid of all those guys where you lose money or you make 2 points. So it's -- this is why we're so light in assets and this is why return on invested capital is so good is because we focus on that all the time.Now the problem is when you have B2B shutdown like 50%, you lose business, you lose volume that are highly profitable. And there's nothing you can do about that, except adjusting your cost base. Hopefully, when those guys reopen within the next few months, I mean, we'll be back on business. But like I said earlier, on the P&C side, long term, medium, long term, we'll probably see either flat or some reduced volume, but that is -- will be for TFI to the advantage of our solution, which is our Last Mile and Logistics. Already, we see that. I mean our Logistics division in Canada is up. If you look at our revenue so far in Q2, we're up, okay? That's basically the only division that we're up year-over-year, excluding M&A.
Okay. That makes sense. I see. I think you obviously gave us pretty good color on how the revenue run rates have trended in March and April, so thanks for that. I just wanted to understand on the Truckload and Logistics side, so you noted the numbers on revenue being down 20% in April and then on Logistics, up 12% in April. So just wanted to clarify, is that apples-to-apples, I mean, normalizing for acquisitions...
Yes.
Because there were some acquisitions -- okay. Yes.
Yes.
So they include acquisition this year as well as last year, right, when you see it?
Yes.
Okay. Makes sense. So the Logistics, is it the e-commerce that's what's driving the revenue up significantly in March and April?
Yes. Well, let me get that again, okay? So if you look at our Logistics year-over-year, okay, in Q1 versus -- there was no real big M&A. But if you look at the first 2 weeks, okay, Donnelley is in there, okay? So Donnelley, if I remember correctly, I think we closed that deal mid-March. So that's why we still show some improvement. But don't forget, like I said, our Logistics in Canada is up organically, okay? There's no M&A there, up double-digit in Canada. And then in the U.S., we were down organically, if you exclude Donnelley. Why? Because we were really badly affected in New York. New York's big market for us, Detroit, Boston, Chicago. So we lose there. We gained on the other side. So we gained a little bit on the e-commerce in the U.S. We gained a little bit on the West Coast, Texas. We've also been affected in South Florida. So our forecast, as an example, in our Logistics and Last Mile in Q2 in the U.S., excluding M&A, is that we're going to be down probably like 10% because of New York and Chicago and Detroit and all that.
Okay. And that's great color. So in the press release, you mentioned the -- since COVID began, you saw good demand for like household goods, obviously, health care, e-commerce. Can you remind us like -- obviously, we talked extensively about P&C here. But can you talk about exposure to household goods, health care, e-commerce for other segments like in LTL, TL or Last Mile or Logistics? So what kind of exposure you have there? And then how do you compare those trends in those segments versus B2B?
Okay. So if you look at our Logistics sector, I mean, in the U.S., we're really, really big on health care. So it's probably like 25% of our revenue today. So it's -- we've got really some good exposure in the U.S. Last Mile with that. In our P&C in Canada, I mean, it's mostly our specialty like an ICS because of its optical exposure although -- it's health care, but all the shops are closed. All the stores are closed. So it's not helping me at all. LTL, it's small. I mean LTL is mostly retail. As you look at my pie chart, retail is #1, and we used to be big in industrial LTL in Canada, but they shut down all the plants over the last 10, 15 years. So we're mostly a retail carrier like everybody else now in Canada on the LTL side.
Okay. Makes sense. And then lastly, coming out of this down to our land, do you see an opportunity to optimize your portfolio like you did in 2008 and '09, I mean, like in the way of any divestitures or any acquisitions focused on particular areas you would be looking at?
Oh, absolutely. Absolutely. We -- the way I see 2020 is like, okay, it's a test. It's a test. And for sure, it's turning some lights on. It -- hopefully, it will help us sell even more of our Logistics and Last Mile to our customers, so that we can offer them a great service at a very, very attractive price. But also, we look at the LTL in Canada, and it's a shrinking business. So I think that we have to do more M&A in Canada on the LTL side to help us in the future. I think that there's a lot of opportunity in Canada. Maybe there will be some opportunity in the U.S. We'll have to see that down the road because we run a partnership model with a U.S. carrier right now. Maybe we'll see what happens there.On the Truckload side, I mean, we see a lot of opportunity, again, in improving our density in Canada, Ontario, mostly, to beef up the density, the offering that we could give our customers. And we've opened up a small specialty truckload division in the U.S. through some acquisition. We would like to grow that. So there, again, there will be lots of opportunity we're now discussing with many, many trucking company in the U.S. about join the family and do more with TFI. So our balance sheet is really strong. Our team is second to none. Our mission is very clear. So we have to go through this storm. We've navigated to some storm before. We're going to navigate this one. We're really solid. We monitor things by the day. And we're not sitting on our hands.
Brian Ossenbeck with JPMorgan.
Just to follow up on that last one, you talked about consolidation after obviously done. Can you just run us through competition at this point in time, considering the big drop-off in volume, if you see any place that it's maybe a little bit outsized pressure, particularly in some of the more challenging end markets? And away from consolidation, what do you think about just the general health of some of your competition? Are you expecting absent consolidation just for some capacity overhang to get lifted here as some players exit the markets maybe in more of the asset-heavy side of the business?
Well, what we're seeing so far from the competition is I think that everybody is so busy trying to manage the downsizing of the business. That -- they've not been chasing the other guys' volume to try to replace the volume that they've lost because of whatever happened. That's what we've seen so far. That may change down the road. But so far, I mean, everybody is so busy trying to manage, okay, safety for the employees, downsizing the operation here, doing this, doing that, that we haven't seen any competition trying to chase volume.The other issue is that if you try to chase volume, the shippers are busy also themselves trying to manage their own issues, right? So is that the right time for them to switch because 1 trucker is going crazy and offer stupid rates? So far, so good on that. I mean the business we have, we haven't lost anything so far because of somebody comes in and offer a stupid raise to a shipper and the guy says, "Okay, I'm going to jump on that," so far.In terms of the industry in general, if you look at the industry in general in Canada, it's very different than the industry in general in the U.S. because what we see out of the large trucking company in the U.S., their balance sheet is strong. Most of them don't have any debts. So they don't -- they're not -- I don't think they're going to go crazy banana. But in Canada, it's a different story. I mean most of the companies are small, highly leveraged. And for sure, some of those guys are calling us, and we're saying, guys, I mean, M&A is completely out of the question for us now. But we could start looking at the situation. So this is why when I say looking at the situation is, today, we probably have 8 or 10 active files in Canada that we're just waiting, okay, to say, okay, go because we have more visibility about our Q2 and what Q3 may look like. So if you think that after we look at April, we look at May, and we -- okay, fine. Are we on plan with our new refocus plan? Are we better than the plan? Are we worse than the plan? That will guide me into saying, well, okay, this is -- these are the small deals that we could do right away in Canada. These are the small deals right away we could do in the U.S. So the M&A machine at TFI has been put on hold for now, okay, because we want to be cautious, but that doesn't mean that the activity is not there. I mean we have lots of opportunity that's going to be so great for our shareholders in the future.
Okay. Got it. On the self-hope side of things. Obviously, you're managing through this just like everybody else. But I think a little while ago, you combined some of the leadership for Last Mile and Logistics and gave them some more responsibility in the U.S., the Canadian team. So maybe you can just give us an update on things away from in the areas that you can control, combining the systems and operations platforms rather on the TL side in the U.S. and then specifically on Last Mile and Logistics. Is that something you're just sort of trading water on given the current environment? Or are there sort of other levers you can pull here in the meantime?
You know what, Brian, what we've done with our Logistics, trying to have Kal overseas, both division, U.S. and Canada, having Dean overseas both sales force, U.S. and Canada, having also our Canadian financial team help our U.S. team there, it's already helping our U.S. team to do much better. Don't forget that these guys had to swallow, okay, 3 acquisition. We bought Dicom complete -- Dicom U.S. completely disorganized. We bought BeavEX in '19 completely disorganized. We bought the courier division of Donnelley even worse. So those guys have a lot of challenge, and they need help. They need support. And this is why if we look at the -- all these acquisitions, this is beefing up the revenue, helping us, okay, improve our density. And at the same time, we're also correcting some mistakes of the past. Some culture is issue. The focus about making 2 points. Is that good business? Well, maybe for the other guys, not for us. I mean change this culture. And if we look at our Q1 U.S. Last Mile, it improved. It improved by, I would say, about 200 basis point. And I said that in Q4 on the call is that I am seeing at least 200 basis point improvement in our U.S. Last Mile operation even in a very difficult context because some of our great markets like New York, forget about New York, I mean, it's down 60%, 60%, 65% because of what's going on there. Some of the great markets like Chicago is down also as well. So even with that, I mean, we're doing way better in terms of dollars, bottom line and percentage. So it's a great boom, and there's a lot more to do.
Okay. Got it. Last quick one. If you can just offer some comments on the decentralized model that you have with more of the central overlay for a lot of the functions in the monitoring. You touched on it a few times during the call in terms of how you're monitoring things by the day instead of by the week. But just wanted to see if given this current stress test that you're going through, what do you think is the model going forward, if there are things you're looking to add or tweak? Or is this kind of what you expected? How for it to perform and the people underneath you, given the current environment?
See, Ken, our team is -- Ken -- I mean, Brian, our team is really great. What I've done is monitoring by the day instead of by the week. It's just I want to make sure because I've got a responsibility with the Board and with my shareholders. And I don't want to come up with the excuse that, oh, okay, so we dropped the ball. No, no, no. We can't come in with some excuse, we dropped the ball. So I've got a strong belief that my guys are doing the right thing, but I just wanted to make sure that, hey, we don't drop the ball. Because this is, like you said, a lot of stress. You have to manage downsizing. You have to manage customers' expectation, et cetera, et cetera. So these are very, very difficult times. And in very difficult times like that, this is when you see that you got a hell of a crew. And I'm so proud of our crew at TFI. I mean oh, my EVPs, I mean, the guys are doing a fantastic job, a fantastic job. And me, like we always do in the head office, we just want to make sure that those guys are focused on the right things. And this is why I went through a lot of different phase, critical phase in my trucking career. I've been a trucker for some 20 years. So I'm there just to make sure that we don't drop the ball, we don't lose focus. And also, I'm there to motivate the guys and to encourage them. It's not easy to do what we have to do now to be successful and to preserve capital and to keep the morale up. When you drop -- when you have a business that drops 50%, it's not a crisis. It's a tsunami. So you have to let go people. You have to -- what are we going to do tomorrow? It's not easy. And this just happens overnight. It's not something that has been going on, okay, for 6 months. It just boom, going to happen. And then, okay, what do you do now, right?
Walter Spracklin with RBC Capital Markets.
So when I look at your free cash flow for this year, I know you're probably reluctant to give any guidance there, but just looking at $1 free cash flow deployment, it sounds that, obviously, you've talked about acquisitions being on hold for now. Would that hold as well? Obviously, dividend, buyback and really, you're just reloading your balance sheet, building up liquidity. Is that the best description of the 2020 strategy for free cash flow?
Yes. So there's no concern on the dividend. So we're not going to do anything on the dividend in 2020. In terms of M&A, like I said, nothing is going to happen in Q2 and then maybe something in Q3 and in Q4, depending on what's the visibility we have now.In terms of the buyback, we put that on hold. We did some buyback in Q1. We bought back about 1.3 million shares. We're not -- this was not normal because normally, you don't issue shares and buy it back. This was just because we gave notice to the -- as a matter of fact, it's RBC that managed our NCIB prior, and the stock dipped so much with what happened that the buyback was now back on track. But as of April 1, I mean, we're not doing any buyback. We're just going to wait and see. Once we see what April looks like, what May looks like and what the stock price looks like, maybe then it becomes a choice. Are we going to buy a company? Or are we just going to buy the stock? We'll see then. But I don't think NCIB is in the picture, at least for a few months.And then like I said, yes, excuse me, Walter. But on the CapEx side, it's going to be a huge reduction, and we can afford that because our fleet is so young in the U.S. And then -- so we've canceled the U.S., but we've postponed Canada. So on the Canadian side, depending on what we see in Q2 and early Q3 or in Q3, we could get the benefit of those CapEx, okay? Because they were booked at a very low exchange rate U.S. Canada. So we would like to do those Canadian CapEx in Q4, but the environment has to be positive for us to do that.
You mentioned some files you were investigating. You're doing due diligence on. You're holding back for now, obviously, given the conditions. What's your main concern? Is it really just you don't know how much COVID is going to impact the operations of potential targets and you want to get a better handle on that? Or is it that the seller has gotten a little bit more reluctant? Or are you renegotiating price given everything going on? What's the tenor of the discussions with those you already have actively involved in?
Yes. So the first reason for us to put that on hold is to preserve cash, not knowing, okay, what will be the impact of the virus and how long this is going to be an issue. So that's reason number one. All the discussion we're having with sellers, nothing is about price so far because we don't want to talk about price with these guys trying to tell them that, well, market valuation of trucking company has dropped 30%. So we have to drop our offer 30%. We don't like to do that. I mean because maybe TFI stock is down 30%, 40%. But this is -- maybe it's going to be up 30% in 1.5 years. So we don't play this game of trying to squeeze the seller. We have a reputation of us in Canada and in the U.S. to be fair. So we want to buy at a fair price. But if there's a permanent impairment in the target, okay, because those customers that this guy has or, let's say, his revenue was $60 million, and it will never be back at $60 million. It's because whatever happens, I mean, he's got a lot of B2B customers that are shut down and they will never reopen, then we have to readdress the price, okay, because of that, but we never readdress the price because of market condition. This is not fair in our mind. But for now, everything is on hold because we want to be cautious about preserving the cash.
And on that note about permanent impairment and then opportunity, obviously, there's going to be companies that post-COVID-19 are permanently impaired. There will be those that go back to normal and those that thrive and go to a benefit from a new normal. When you look at each of your businesses, generally, once COVID passes and a new -- kind of new normal establishes, what's your anticipation division by division of whether they can go back to normal, whether they will be permanently impaired or are there -- or what areas would actually propel to a new level post-COVID-19?
Yes. So that's a very good question, Walter. And I think that on P&C, I said it, is that because of B2B will never be the same, okay, pre-COVID-19 and after COVID-19. I think that a lot of malls, a lot of stores, et cetera, et cetera, will never reopen. So that's -- that will have some effect to our B2B, okay, within our P&C next-day delivery system because the guys will never reopen. So that being said -- but it will probably be small, nothing major, okay? But it will be more than if we wouldn't have this virus that accelerate the e-commerce. So we will probably lose a little bit on that side, but we will gain tremendously in our Logistics and Last Mile operation, both in Canada and the U.S.The LTL, to me, I've said it many, many quarters, is LTL keeps on going down all the time because of the e-commerce. So the only way as we've been able to sustain some kind of revenue is through M&A, okay, feed the beast. Why? Because -- and then just sort of continue serving the good customer that you acquired through the acquisition and just get rid of all the small guys that don't want to pay a fair price. So LTL is a little bit the same as the P&C because all these malls, okay, have been fed up, fed by P&C guys and LTL guys. So to me, there's a little bit of permanent impairment there, okay? So this is why us, our M&A strategy, okay, in LTL will keep on doing what we've been doing for that long over time.I don't think Truckload will be impaired at all because Truckload, either specialty or van, I mean, all this switch of e-commerce is really not a big effect on Truckload. I mean those fulfillment centers have to be filled up like the DC of Walmart and the DC of Amazon and all, yes. So on the Truckload side, I don't see anything significant because of this virus before and after. So huge gain in my mind down the road with our Logistics. We're already seeing that. Some customers are just saying, you know what, we would like an Amazon-type solution. Well, guys, we have that. Well, yes, but we don't have any DCs. Well, okay, fine, we don't have any DCs us, but you could -- we could match you with someone that's got a DC. That's their business to run DCs. So we see that, and it's the diamond within the TFI family. Like the waste used to be 1 of our diamond. P&C is still a diamond within TFI, but it lost a little bit of its luster because of this maybe some small permanent impairment because B2B will never be the same after this virus thing gets back to normal. But all in all, if you sum that up within TFI, TFI will be a huge gainer, okay, after this virus is behind us.
Cameron Doerksen with National Bank Financial.
Just 2 really quick ones for me. First, just on the R.R. Donnelley acquisition. You mentioned that the profitability of that revenue is probably pretty low. I'm just wondering just in the very short term what that means for margins in that business. I mean is that a business that you can pretty rapidly get the quality of revenue improved?
Absolutely. Absolutely. I'm convinced on that, Cameron. I mean we bought the business. We had to shed 1 major account that didn't make any sense. So those guys are gone or will be gone within the next few weeks. There's another one that will be gone in June, significant customers. But it's just crazy. Listen to that, we had a cargo liability with those guys in the $10 million. I said it like I said. I mean who can be hauling opioids or things like that with a $10 million cargo? So you can negotiate the rates with the customer. The first thing you have to negotiate with them is we don't want to have this $10 million liability. So customer says, well, we'll try to find another stupid trucker that's going to accept that. Well, good luck. So that being said, those 2 customers, 2 or 3 customers are gone. The rest, what we see so far will be good business and it fits into our network. So this Donnelley acquisition, once we get rid of all the things that don't fit TFI, it's going to be fantastic.
Okay. Great. And then just secondly for me, just on the specialty truckload in Canada specifically, one of the drivers there is obviously construction activity. We're already, I guess, starting to see a little bit of opening up. But I mean, is that kind of 1 of the big drivers of that business rebounding is really construction coming back?
Yes. Construction is one. Mining is the other, okay? So mining is back, okay? But we -- for mining, you need the world economy to get back on track. So yes, the mines are reopened in Canada. So it's good. But we need the global economy to be on track. So when you look at what is anticipated for 2020, most of Europe is going to be down GDP about 5%, 6%, 7%; U.S., about the same. So it's going to be still a difficult year for us in 2020. But I think '21 is going to explode back into what makes more sense.The other business that's affecting us is the automotive business because of the steel. So steel and automotive, I think it's going to be really difficult for them, at least for a year. So probably, it's going to be slow until mid-2021 -- '21, not '20, but '21. So really, the specialty truckload, it will probably the -- be the one that is less affected, but really, our flatbed is the one that is mostly affected now. As an example, we have a lot of explosive for the mines. While everything was put on hold until now. So in Québec, the construction has been put on hold since mid-March. They are starting slowly to reopen. This has been a huge negative for us in Québec. I mean I think Québec was the only province or state that closed down their construction industry. So I mean, it is back on track.
David Ross with Stifel.
Just a quick question on the Last Mile in the U.S. After the 3 deals you've done recently, are there any holes left? How do you think about the U.S. network and where you want it to be in a couple of years versus where it stands today?
Yes, that's a very good question. So yes, we have some markets where we could be stronger or better. And we're always on the lookout for some M&A. We have discussion with another group. And finally, maybe it will happen sometimes late this year or early into next year. But really, the main focus of our business in the U.S. with Kal and Dean there is to really sell our solution, okay? We've been very successful in Canada, selling our solution, but not so much in the U.S. as of yet. So really, we have a great solution for e-commerce. We have a great solution for, let's say, the health care industry. We do well, but we could do better. So really, M&A, yes, if we can. If we can find the right target in the U.S., absolutely, we're going to jump on that. But I don't see anything major in 2020 on that. But what I see very important with Kal and Dean and Scott Leveridge and all the team in the U.S. is, guys, we have a fantastic solution, okay, that is second to none. And we have to have customers understand better. So we're really focused on that for '20.Now the problem is that try to sell something to a customer now, it's difficult because they're like us. They're stuck in this major crisis of the virus. So there's not a lot of people to really listen to a new solution. But we're educating our salespeople. We're working on the program and all that to be ready as soon as we can sell this solution to the market. So right now, big issue is how we're going to digest all these acquisitions, we're doing that now. We've improved our bottom line, like I said earlier, in our U.S. Logistics by about 200 basis points in Q1. We still have a lot of work to do with the Donnelley acquisition. So we're busy. We're busy. We got lots of good stuff. But also, we're getting ready as soon as we can to sell our solution like we're doing in Canada in the U.S.
And then you talked recently about the automotive sector and how that's going to take some time to come back. It's about 9% of the business. Which segment is that most concentrated in? Would that be LTL and Canadian Truckload? Or is there something else?
It's Canadian Truckload and a little bit also U.S. TL. So we got Packard, as an example, customer, both in U.S. and Canada, those guys are shut down. So we got Mercedes in the U.S., those guys are shut down. We got Nissan, okay? So it's, I would say, probably a little bit more U.S. than Canada for the automotive business today, U.S., Mexico.
Okay. But it's primarily in the Truckload segment?
It's -- yes, Truckload. Yes, yes. No, nothing major in LTL or in P&C.
Our final question comes from the line of Benoit Poirier with Desjardins Capital. [Operator Instructions]
Just to come back on the potential targets on the Last Mile business in the U.S., would it be similar profiles to Dicom, Donnelley and BeavEX? Or this would be higher, let's say, more organized companies? Or would it be -- how would be the profile?
No. This is -- it's going to be the same kind of profile, the 3 that you just talked about.
Okay. That's great. That's great. Okay. And when we look at e-commerce, you've been very, very disciplined in the past. You could have grown that business much higher, but profitability was always a big threshold. So I'm just wondering, given the strong demand we see these days, what about the pricing environment? Do you think there's better opportunities given Amazons are very busy? And is your goal to become fully integrated or really to complement the biggest player right now?
Yes. Good question. So yes, Amazon, for sure, is really, really busy. And what we've done us in the meantime is because New York, as an example, I mean, we're down so much in New York with our regular customers. So our U.S. team said, okay, we'll do a deal with Amazon. So right now, we're delivering about 5,000 parcels a day in New York because we're down so much. We know that this is short term. We know that as soon as -- they will try to find somebody else to do it cheaper than us because us, we're about making money.But that being said, the environment, what we're trying to do, Benoit, is have customer understand better our solution. Now our solution, like you said, is not fully integrated like an Amazon solution. Amazon's got the DC fulfillment center and distribution today. So our solution is a little bit like the other transportation company, UPS or FedEx, whatever, is that we offer the transportation, not the DC. But our solution to customers that have DCs or have matched up with DCs is the same -- is similar to what an Amazon solution is, very efficient, lean and mean, great service, and that's what we're trying to do. Now down the road, okay, does it make sense for us to really have a partnership, okay, with someone that's got the DC capability and that's offering this kind of service to the shippers? Maybe that may happen, Benoit, but we're not there yet.
Perfect. And when we look at the fuel and the foreign exchange, obviously, there has been some big movements year-to-date, which I would expect to be favorable. So could you maybe provide some color or -- on how is it going to be flowing to the bottom line with respect to fuel and FX?
Yes. Well, fuels are pass-through. So really nothing major for us on the fuel side. But really on the FX, for sure, I mean, our -- but we need U.S. dollars profit to be significant. So depending how good our Last Mile and our Truckload guys will do in the U.S. will definitely help TFI. Our Canadian division mostly run Canadian dollars, except for some of our Truckload division. So it could help us a little bit in the rest of the year because now we're -- I think the dollar is about $1.40, something like that. So we'll see. But this is not something I would say, Benoit, it's really significant for us in terms of bottom line.
Okay. Perfect. And last one for me. You provide kind of a consolidated number for net CapEx this year. I was just curious whether the amount of asset disposal should be bigger in light of the adjustment to the capacity or asset disposal should be pretty similar to the past.
No. No. Normal, normal. I mean, what we're doing is we're not shedding trucks, okay, because of this revenue shortfall because like we're protecting our employees with our kind of system of bonus to bringing them back to work. We don't believe today that this will be long-term impairment in terms of the volume. So it will be a disaster in Q2 in terms of the volume. Everything that we read says that maybe the U.S. GDP in Q2 will be down like 30%, okay? But it's up in Q3, okay, so -- and in Q4, everything that we read about that. So what we're saying is that, okay, well, we don't have any other options. So we sell what needs to be sold. But what is still useful for the company in the time being is we're going to have to park that at the fence and wait until the business comes back.
There are no further questions at this time. I would now like to turn the call back over to Alain Bédard for final remarks.
Well, thank you, operator, for facilitating this morning's call, and thank you, everyone, for joining us today. So we at TFI very much appreciate your interest and want you to know that, as I've said, we are working hard to create value and unlock it for our investors and whenever possible, return excess capital to our shareholders.So I look forward to updating you throughout the year, and I can assure you that working together, we will all make it through these unprecedented times and emerge even stronger. So have a great day, and thank you again.
This concludes the TFI International's First Quarter 2020 Results Conference Call. We thank you for your participation. You may now disconnect.