After 38% growth in 2018, the company says it is optimistic about continued expansion.
CAI International Inc. (NYSE: CAI) is best known as one of the shipping industry’s major container leasing companies, with a 1.5 million-TEU fleet of owned and managed containers valued at more than $2 billion.
But the company also has expanded rapidly in the logistics business over the past four years.
In 2018 the company’s CAI Logistics unit saw revenue grow 38% to $111.5 million — about a quarter of CAI International’s total revenue of $432.1 million.
Although the logistics unit had an operating loss of $3.1 million last year, CAI International said in its annual report that it was “focused on aggressively expanding” the logistics segment and was “optimistic about continued growth in 2019.” In the first quarter of 2019, revenue was $27.7 million, 28% higher than in the year before. CAI International is expected to report its second-quarter results on July 30.
CAI Logistics is an integration of three companies CAI International acquired 2015 and 2016: ClearPointt Logistics LLC, an intermodal logistics company focused on the domestic intermodal market that competes with intermodal market companies such as Hub Group; Challenger Overseas LLC, an international NVOCC; and Hybrid Logistics Inc., a truck broker.
The three are “well-established logistics companies that have been around for decades — while the name CAI Logistics is new, the companies are not,” explained Jason Miller, a senior vice president at CAI Logistics, in an interview with American Shipper.
(In May, the largest container lessor Triton cited a Drewry study that estimated the market share of the major companies in the container leasing industry at the end of 2017 as follows: Triton, 27%; Florens, 18%; Textainer, 16%; Seaco, 12%; Beacon, 6%; CAI, 6%; SeaCube, 6%; and others, 9%.)
Miller explained that the logistics arm of CAI helps the company reposition containers and “control our own destiny when those assets come off lease,” which can happen in various locations around the world.
When leases on containers end, the company may redeploy them or sell them.
As an example of how CAI can assist shippers, Miller pointed to last year, which he described as a “white hot, capacity-driven market” in which demand for domestic intermodal equipment was high.
CAI had a surplus of ocean containers that had come off lease in Chicago. It was able to repurpose those international ISO containers for a domestic shipment of consumer goods to Dallas. After the move, the containers were returned empty and sold. As it happens, the consumer products were canned goods, heavy cargo that did not need the cubic capacity of a 53-foot domestic container and were ideal to transport in an ISO ocean container because of weight limits.
“It was something unique that not a lot of our competitors could offer,” said Miller. “It was a win for CAI International, it was a win for CAI Logistics and it was a win for the customer because we were able to bring capacity to a very tight capacity market that wouldn’t otherwise have been there.”
He said CAI has its own direct contracts will all the Class 1 railroads.
Miller attributed the rapid growth of CAI Logistics last year to the integration of the three businesses that the company acquired and the cross-selling opportunities it created.
In its annual report, CAI International said most of the growth in its logistics business was in its “domestic intermodal and truck brokerage business. We expanded the size of the teams in our existing offices and added a new office in Dallas. We see many opportunities to leverage our existing customer base and organically grow the business.”
Miller explained “a brokerage customer might have intermodal opportunities and an intermodal customer might have brokerage opportunities or international opportunities.”
The company also is benefiting from a high demand for ocean containers in the U.S. — either to customers who want to use them to move cargo themselves or for storage or a myriad of other uses — for storage or conversion to houses and businesses properties.
“So if we’ve got customers in Colorado looking for containers to repurpose … we can bring them new containers or we can sell them used containers and ship them right to where they need them with our logistics unit,” said Miller.
While Challenger’s legacy business was heavily oriented toward the movement of U.S. exports, Miller said today CAI Logistics’s NVOCC business is global and involves moving many imports to the U.S.
While CAI Logistics is “definitely keeping our eyes and ears open on the mergers and acquisition front, we are growing organically. We are recruiting heavily, we’re bringing a lot of industry-experienced individuals into the organization both on the sales and operations side. We’re interested in how our assets and our international parent can work with logistics and how logistics can help them in more ways.”