Mullen Group reported record second-quarter financial results and increased its 2026 capital budget by $50 million, with chairman and senior executive officer Murray Mullen saying there are growing signs the three-year freight recession may be ending.
The company generated record quarterly revenue of $609.3 million, up 12.6% from a year earlier, while operating income before depreciation and amortization (OIBDA) climbed 35.6% to a record $103.9 million. Net income increased 40.6% to $36 million, or $0.37 per share.
“There is growing evidence, from recent economic reports and our second quarter results, that the Canadian economy has finally gained some traction,” Mullen said, adding June “was the best month our group has had in years.”
Citing improving customer sentiment, particularly among capital goods sectors, Mullen said the board approved an additional $50 million in capital spending to prepare for expected growth in freight demand. He also indicated support for further acquisitions if suitable opportunities arise.
The increased capital budget comes as Mullen reported strength across most of its business segments. Logistics and warehousing revenue rose 28.5% year over year, while less-than-truckload revenue increased 6.6%. The company also reported improved margins in its LTL and U.S. third-party logistics operations.
Mullen said continued enforcement of trucking safety and regulatory requirements, combined with improving economic conditions, could signal an end to the prolonged downturn that has weighed on the trucking and logistics sector for nearly three years.
Mullen and other senior executives gave analysts more detail on the market during a conference call this morning.
Margins improve as lower-paying freight demarketed
Mullen said there’s increasing evidence that the three-year freight recession has ended, giving Mullen Group the ability to be more selective in the freight it accepts, which boosted margins.
“The market’s in balance but not growing,” Mullen said. However, he sees future growth in the specialized and industrial segment, where the company is investing so it’s prepared to participate in nation-building project construction.
He specifically mentioned a major liquefied natural gas project the company is bidding on in Alaska. The Alaska LNG Project is a proposed US$44-billion-plus natural gas pipeline and export terminal that would transport gas from Alaska’s North Slope to a new LNG export facility in Nikiski, creating one of North America’s largest logistics and heavy-haul construction projects.
“There is no capacity in the system right now to be able to execute on that project,” Mullen said.
But when the company started securing order slots, “lo and behold, the Class 8 truck market got very tight,” he added.
“The Class 8 order board tightened very quickly,” said Lee Hellyer, senior commercial officer. “There’s been a lot of discussion about a pre-buy for 2027. Our full intention is to fully deploy the $85 million we initially budged for and $50 million more directed toward nation-building projects here in Canada or the Alaska LNG project.”
The trucks were spec’d to be versatile enough to be deployed in any segment, however, Hellyer added.
LTL margins jump
In the LTL segment, fuel surcharges helped buoy revenue and profit and tightening capacity allowed Mullen to shed less profitable freight.
“There’s just enough freight in the system that we don’t have to take low-paying freight to fill the trucks and we’re demarketing that,” Mullen said of less desirable shipments. “The quality of revenue improved, that’s what helped drive our margin improvement.”
The company has been successful in passing through fuel surcharges, but still gets pushback on general rate increases. “If you get any growth in the Canadian economy, as the market has tightened, that will give us the Go sign to raise prices. We’re already seeing that happen in the U.S. We haven’t quite seen that happen here in Canada yet. It will probably be a 2027 situation.”
The M&A outlook
Mullen Group continues to evaluate synergistic small tuck-in acquisitions but don’t expect it to make a huge splash.
“We don’t think the economy is strong enough to justify getting a bigger entity,” Mullen said. An exception could be made in the specialized and industrial segment if promises of large projects become reality, he added.
Increased enforcement tightening capacity — but not enough
Asked if increased enforcement is driving out capacity and tightening the market, Mullen said that’s the case in the United States, but less so here in Canada.
“Enforcement action in the U.S. is very aggressive and that has tightened the U.S. market dramatically,” he said. “There’s been some enforcement in Canada but not to the same degree as in the U.S., period.”
He added the cross-border market has tightened as fewer drivers in Canada are willing or able to cross the border, but noted Eastern Canada – specifically Ontario and Quebec – remain has yet to tighten significantly.
Credit: Source link
