Falling gasoline prices would seem to be a boon for trucking companies like Patriot Transportation Holding Co.
But at the Jacksonville-based company’s annual shareholders meeting Wednesday, Patriot said the fuel market is creating some difficult challenges.
Patriot also reported operating earnings fell by 55 percent in the first quarter ended Dec. 31 to $817,000, mainly because of lower fuel surcharges passed on to customers.
“The first quarter of 2016 was tough. I think it’s going to be tough for a while,” CEO Tom Baker said at the meeting at The River Club.
During the quarter, Patriot’s fuel expenses dropped by about $2.2 million but its revenue from surcharges dropped by about $3.1 million, resulting in a gap of nearly $900,000.
Executive Vice President and Chief Financial Officer John Milton explained some of Patriot’s large customers control the timing of changes in fuel surcharges, so the company can’t directly pass on its fuel costs immediately to customers.
“It’s not just us. It is the culture of our industry,” Milton said.
Patriot’s trucking subsidiary transports petroleum and other liquids and dry bulk commodities throughout the Southeastern U.S.
Patriot actually reported final net income for the first quarter rose 37 percent to $1.5 million, or 46 cents a share, because of a large settlement from BP Exploration and Production Inc. related to the 2010 Deepwater Horizon event.
That major oil spill in the Gulf of Mexico disrupted Patriot’s operations in the Tampa area, Milton said, which entitled Patriot to a settlement for lost income.
The payment increased the company’s net income by about $1 million, or 31 cents a share, in the first quarter.
Patriot used part of the settlement to pay off the long-term debt on its books.
“We now have no debt on the company whatsoever,” Milton said.
That’s one reason company officials are optimistic about Patriot’s future.
“While 2016 will be tough, I think we’re laying the foundation for a great future going forward,” Baker said.