Mullen Group’s (TSX:MLN) truckload business weighed on an otherwise strong quarter, but expects it will normalize as the year continues, the firm’s CEO told analysts.
“There were too many trucks,” Murray Mullen said on July 25, a day after the company released its second quarter earnings. “That’s the one [segment] that got hurt.”
He suggested that sluggishness in the Canadian truckload market could create acquisition opportunities.
“Too many carriers are either getting into a leverage issue or coming to a realization that this could get tougher – and they’re going to look for an exit strategy,” Mullen said.
Mullen did not break down the total truckload revenue for the quarter. But the company said it increased by C$0.2 million (the Canadian dollar equals US$0.76), helped by C$2.6 million in revenue from an acquisition.
Lower truckload performance contributed to a relatively flat quarter for Mullen’s trucking and logistics segment, which consists of 14 companies in Canada. Revenues increased by 0.1 percent to C$219.6. But stronger performance yielded an 8.4 percent increase in operating income to C$36.2 million.
Overall, the transportation and oil services firm reported that net income increased by 6.1 percent to C$15.5 million, while revenue increased by 7.9 percent to C$319 million, compared to the second quarter of 2018. Mullen earned an adjusted C$0.15 per share, C$0.04 cents higher than analyst expectations.
“Growth is hard to come by, but we keep finding ways,” Mullen said.
Mullen had a positive outlook for the company in what he characterized as a stagnant economy.
The company will seek to strengthen its less-than-truckload and final-mile business to take advantage of the growth of e-commerce.
The Greater Toronto Area represents Mullen’s biggest opportunity for growth, Mullen said. “It’s the biggest consumer market in the country,” he said.
Revenue and profits also surged in Mullen’s oil services segment. Operating income increased by 42 percent to C$16.9 million, while revenue jumped by 30.1 percent to C$99.8 million because of acquisitions in 2018.
Mullen said the company was already reaping the benefits of the forthcoming resumption of the Transmountain Pipeline expansion. The company’s oil services units have already delivered pipe for it.
“Thank you, Canadians, for fronting this business,” Mullen said.
Mullen’s trucking and logistics company posted record revenue and profits when it reported first quarter earnings in April.
Mullen also said in April that the company would make trucking and logistics acquisitions in 2019. Mullen has purchased three firms since then.
Mullen acquired two small British Columbia carriers in July, expanding its less-than-truckload and delivery business.