Canada’s freight market is set for a major bump once the COVID-19 pandemic is under control, the CEO of Mullen Group (TSX:MTL) said on Thursday after the trucking and logistics firm reported an over 8% drop in revenue in the first quarter.
“There is ample evidence to suggest that once the impact of COVID is minimized, the economy will recover quickly and show very strong growth, the active ingredient for freight demand and improved margins,” Murray Mullen told financial analysts. “Now we only need to look to the U.S. for guidance: that the economy is on fire and freight demand has never been better.”
Mullen made the comments after the company posted mixed results in the first quarter. They reflected a country hunkered down in pandemic crisis mode with a third wave bringing more lockdowns amid a vaccine rollout far behind the U.S.
“I watch what is happening in the U.S., for example: When a successful vaccination program gets widely distributed, COVID cases fall dramatically and the economy opens up,” Mullen said.
The Alberta-based firm generated CA$290.5 million ($232.5 million) in revenue during the first three months of 2021 versus CA$318.2 million a year earlier. The company’s profits, however, grew, with adjusted net income jumping by over 24% to CA$11.8 million, or 12 cents per share.
Despite the healthy bump in net income, Mullen’s operating results still show the substantial drag of COVID. Operating income before depreciation and amortization would have dropped by 9% if Mullen Group hadn’t received CA$6 million from the Canada Emergency Wage Subsidy Program.
The weakness wasn’t universal. Mullen’s less-than-truckload business — made up of carriers from Ontario to British Columbia, grew revenue by 6.9% and operating income by 45.1% during the quarter.
The LTL strength, driven by consumer spending, helped make up for weakness in logistics and warehousing, and specialized and industrial services.
“The segment results were decent, but not where I’d like to see them,” Mullen said.
He nevertheless took a cautiously bullish tone on the rest of the year — contingent on Canada getting the upper hand on COVID-19. Adding to the company’s momentum: its pending acquisitions of Ontario-based LTL carrier APPS Transport and British Columbia’s Bandstra Group of Companies.
Mullen also shed light on the Bandstra deal, which includes a small Volvo and Mack truck dealership business, Babine Truck & Equipment., in addition to trucking and logistics operations.
“We took the whole smorgasbord, and then we’ll figure it out over time, but for right now, it’s very integral to the Bandstra total operating model.