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Mullen Group Ltd. reported double-digit increases in profit and revenue for the first quarter but warned that the motor carrier was concerned about surging inflation and higher fuel expenses.
The Okotoks, Alberta-based company said net income rose 26.2% to C$16.4 million, or 17 cents, compared with C$13 million, or 13 cents.
Revenue for the quarter rose 57.3% to C$456.9 million from C$290.5 million in the same period a year earlier.
“We had record revenues. We had higher operating profitability. We had a very good quarter. ... The acquisitions that we completed in 2021 provided the growth,” CEO Murray Mullen said in an April 21 conference call with industry analysts and investors.
All told, acquisitions accounted for C$135 million of Mullen’s revenue growth, the company said.
Soaring fuel prices are the most significant current challenge for the company and the trucking industry, Mullen said.
In some parts of Canada, Mullen said that the company is paying C$10 a gallon for diesel fuel.
If fuel prices stay up, it will increase demand for new equipment as older trucks — those running at around 4 mpg — won’t be able to operate profitably, he said.
While motor carriers enact higher fuel surcharges to recoup the cost, the increases always lag pump prices. That will even out over successive quarters and once fuel costs decrease.
Inflation will also dampen consumer spending, but one benefit is that the slowdown will allow the supply chain to resolve bottlenecks that have plagued the industry for nearly two years, he said.
Across the carrier’s business segments, less-than-truckload revenue rose 45.5% to C$175.6 million in the first quarter. A combination of revenue from the acquisitions, strong consumer spending and an C$8.6 million jump in fuel surcharges contributed to the gain. The segment’s operating income before depreciation and amortization, a measure of operating profit, increased by 26.2% to C$23.1 million.
Mullen said acquisitions will remain an essential source of growth for the company.
“Based upon what I see in this market, acquisitions are the clearest path to growth, especially in a market where there is near full employment and new equipment is virtually impossible to obtain,” Mullen said.
“This strategy is crucial to gaining future market share as shippers adjust to a structural change in the supply chain. No longer can logistics be taken for granted. It takes companies with scale and size, like Mullen Group, to handle the complexities associated with moving freight,” he said.
Mullen’s logistics and warehousing segment revenue jumped 56.1% to C$142.5 million. Strong freight demand, fuel surcharges and higher spot market prices contributed to the gain. The segment’s measure of operating profit rose 73.5% to C$25.5 million.
Revenue at Mullen’s specialized and industrial services business unit turned positive after falling for multiple quarters. It rose 5% to C$83.3 million, helped by the acquisition of Babine Truck & Equipment Ltd. and higher fuel surcharges. But revenue from the segment’s established business units continued to decline, hurt by a dip in pipeline hauling and stringing services.
Operating profits for the segment rose 18.8% to C$13.3 million due to improved commodity prices resulting in greater activity levels in the Western Canadian Sedimentary Basin and the strong performance at Canadian Dewatering, a pumping supplies and pump equipment rental firm.
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The segment is mainly dependent on the oil and gas industry.
“Evidence is mounting that oil, gas and mining needs to reinvest,” Mullen said, which would help the company’s industrial business.
Mullen’s U.S. third-party logistics segment reported C$57.3 million in revenue. The company did not report revenue for the same quarter a year earlier as it acquired the business in June 2021. It generated C$1.1 million of operating profit for the company.
Mullen Group ranks No. 60 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.