Mullen Group (TSE:MTL) executives said the company’s second quarter reflected balanced freight markets, strong margin execution in less-than-truckload operations and growing preparation for potential large-scale energy and infrastructure projects.
Chair and Senior Executive Officer Murray Mullen opened the company’s quarterly conference call by saying the quarter was “one of the very best ever” for the organization. He added that several major projects with “a significant logistics component” are being actively contemplated, which he said could benefit both the broader economy and Mullen Group.
“Our customers can only tolerate so much at one time,” Mullen said. He added that broader pricing increases could come later if the economy continues to expand, but that the company’s current focus is on “high-grading the freight” it handles and demarketing lower-paying freight to support margin improvement.
Fuel Costs Shift Demand, but Do Not Spur It
Asked by Scotiabank analyst Konark Gupta about fuel price volatility and its effect on demand and pricing discussions, Mullen said he could not quantify the impact precisely. However, he said higher fuel costs do not generally create new demand but instead redistribute it.
“I think basically it hurts the general consumer economy because too much of their disposable income has to go to energy related,” Mullen said.
He said the environment may be one reason the company’s specialized and industrial services and oilfield-related businesses look more productive, given global demand for energy. Mullen said he expects the general economy to continue doing “okay, but not super good,” while growth opportunities appear more tied to capital projects.
Company Raises Capital Spending to Prepare for Major Projects
A recurring focus of the call was Mullen Group’s decision to increase its capital expenditure budget by CAD 50 million. Executives said the added spending is aimed primarily at preparing for large “nation-building” projects, including possible work tied to the Alaska LNG project.
Senior Commercial Officer Lee Hellyer said the Class 8 truck order board tightened quickly, partly due to discussions around pre-buys ahead of 2027 emissions changes. He said the company intends to fully deploy the CAD 85 million initially budgeted and that the additional CAD 50 million is directed toward major projects in Canada or potentially Alaska.
“If you wait, we were fearful that the trucks would not be here in time,” Hellyer said.
Mullen said the company had to decide whether to prepare in advance or risk being unable to execute if contracts materialize. He said the equipment has been specified so it can be redeployed across several business units if a particular project does not proceed.
“Primarily, we’re getting ready for the Alaska LNG project,” Mullen said. “If that goes, we’re ready. If it doesn’t go, we’ll redeploy in the rest of our business.”
Asked by Acumen Capital analyst Trevor Reynolds about the potential size of the Alaska LNG logistics opportunity, Mullen said the total project transportation scope could be between $250 million and $500 million U.S. over a two-year period, with Mullen Group working with a partner on a 50/50 basis. He said the company has taken an initial step with its truck investment to meet a minimum threshold, but any additional investment would depend on the size of an award.
LTL Margins Remain a Key Focus
Analysts pressed management on the sustainability of the company’s LTL margin performance. Mullen said the LTL segment “hit pretty good stride” in the quarter, helped by cost control, full cost recovery on fuel surcharges and enough freight in the system to avoid taking lower-paying loads simply to fill trucks.
“Even though revenues didn’t really go that much higher, the quality of the revenue improved,” Mullen said.
Senior Financial Officer Carson Urlacher said the company originally budgeted for approximately 17% LTL margin for fiscal 2026 and is running ahead of that plan. He said trends seen in the second quarter were consistent with early July results.
“By the end of the year, we’re looking at being able to beat what we originally budgeted for back in January,” Urlacher said.
Mullen said the company expects to maintain LTL margins through the balance of the year and could see further improvement if the Canadian economy tightens enough to support pricing. He noted that pricing leverage is already appearing in the United States but has not yet emerged to the same extent in Canada.
M&A Strategy Centers on Tuck-Ins and Margin
Management also discussed acquisitions, saying the company remains interested in tuck-in deals that can improve margins through network synergies. Mullen said Eastern Canada remains somewhat better than other regions but has not improved substantially, and seller expectations remain “reasonable” in some cases.
“We don’t think the economy is strong enough to justify just getting a bigger entity,” Mullen said.
He said the company may look more broadly in its specialized and industrial segment because it expects future activity there, particularly if large capital projects proceed. However, in the rest of the business, he said acquisitions must provide synergy to be attractive.
“We’re not really focused on the top line,” Mullen said. “We’re focused on how do we improve the margin.”
Outlook Tied to Project Timing
National Bank analyst Cameron Doerksen asked about confidence in the company’s original CAD 365 million EBITDA guidance. Mullen said it would be reasonable to conclude the company could exceed the original plan if nation-building projects begin to accelerate, because those projects were not included in the initial outlook. Still, he cautioned that “a lot of talk” has not yet fully translated into action.
Mullen said real momentum from large projects may carry into 2027, and the company will reassess trends as it builds budgets later in the year.
Executives also said regulatory enforcement in the United States has tightened that market more than in Canada, with some benefits for cross-border and Western Canadian logistics activity. Mullen said Ontario and Quebec have not tightened as much, while Western Canada is seeing more capital deployed and somewhat better conditions.
Closing the call, Mullen said the company’s priorities remain clear: “Margin first, growth second.”
About Mullen Group (TSE:MTL)
Mullen Group is a public company with a long history of acquiring companies in the transportation and logistics industries. Today, we have one of the largest portfolios of logistics companies in North America, providing a wide range of transportation, warehousing and distribution services through a network of independently operated businesses. Service offerings include less-than-truckload, customs brokerage, truckload, warehousing, logistics, transload, oversized, third-party logistics and specialized hauling transportation.
