OKOTOKS, Alta. — Even though the majority of its business is in oilfield services, Mulllen Group Ltd. is more optimistic about the short-term future of its trucking and logistics operations.
“We’re probably a little more bullish on the trucking and logistics part of our business to the extent that it’s not going to be huge growth but it’s gong to be active,” said Richard J. Maloney, Mullen’s senior vice-president, adding that he expects the trucking and logistics sector to demonstrate growth of 2% in the coming year.
“I know 2% GDP growth doesn’t sound like much, but if it is 2% year-over-year-over-year, there is going to be that inflection point when all the capacity in that market is starting to be taken up by a trucking and logistics perspective.
Oilfield services, we believe there is a little too much capacity right there right now. We’re just watching. We may be sitting on the fence a little more for those opportunities. It’s not to say they’re going to go away. We’re a very patient company. We’ve been around since 1949. The patriarch still walks through here every once in a while. We can wait to see what other opportunities come over the next period of time. We think risk is being mis-priced in terms of what some people are looking for for their organizations, and others can go and have at it. We don’t necessarily think it’s going to be a long-term phenomena, but we’re just cautious.
“I’m not sure if I’m seeing a lot of brand new trucking companies coming in, but there is a lot of consolidation going on. There is also a lot of very well run private companies that may be looking for an exit strategy. That’s what we provide here in Western Canada within the Mullen Group and this is an opportunity for those in Ontario in the trucking and logistics sector.”
For Maloney, “this” refers to Letter of Intent between Mullen and Kriska Holdings Ltd. to enter into partnership. The deal will see Mullen become a 30% partner in the new holding company Kriska Transportation Group. Mullen will also transfer control of Ontario-based LTL carrier Mill Creek to the new entity. According to Maloney, working more closely with Kriska in the Ontario market makes so much sense that Mullen wanted to make the deal happen any way it could.
“They didn’t want to sell,” said Maloney. “We see opportunity in Eastern Canada, and if we could have had the Kriska operation in our world, we would have, but it just wasn’t going to happen, so we believe partnering with Mark Seymour and his team was the absolute best alternative and we look forward to a very good opportunity. I know Murray Mullen, our chairman, and Mark have been in extensive discussions on the bigger picture and we will see where it takes us.”
Since the new arrangement has not been finalized yet—that’s expected to happen on October 31—Maloney can’t say exactly what Kriska’s plans will be, but he did explain that the new company is being built with a single goal in mind.
“The mandate of this new organization is to look for growth opportunities, whether it’s organic—undoubtedly there will be some organic opportunities—but there will also be some consolidation and acquisition opportunities as well.”
Maloney believes that many of those consolidation opportunities will come from retiring owners looking to sell their businesses.
“The demographic is consistent throughout North America of the owner/entrepreneurs who are turning 55-65 and now what do they do for an exit strategy? Maybe they are well run companies—at least some of them if not all of them—and those ones are the ones that are looking for an opportunity to maintain their legacy.
“The strategy we are employing with Kriska is similar to the strategy we employ within Mullen—self managed business units. Kriska will continue to operate on its own. You’ve got Mill Creek which will continue to operate on its own, to the extent there is some ability to work with one another, they do that. We’ve been doing it for over 20 years in the Mullen organization and it has worked very well. There is no need to have everything painted and branded under one name because a lot of customers like dealing with that specific service company. With that similar thinking that’s how Kriska Transportation came to be. We know the demographics in the trucking and logistics group, particularly with the owners at the point where there will be a number of people looking for exit strategies.”
As for Mullen’s own operations, it will continue to focus on the Western Canadian LTL business, a business it has grown with the acquisitions of Hi-Way 9 Group of Companies, which covers Edmonton and parts to the south, Jay’s Moving and Storage Ltd. which reaches across all of Saskatchewan and Grimshaw Trucking LP which travels north from Edmonton.
“We like the LTL business because it’s a difficult operation to replicate because there is a lot of infrastructure needed all over the place. You need those strategic last-mile type of operations or capabilities, which the three LTL operations we have: Grimshaw, Hi-Way 9 and Jay’s, we go to about 1500 different locations, that final mile that a lot of the national LTL guys cannot accommodate.”
Overall, Mullen Group has a $100 million capital budget, and approximately 25% of that is spent on its trucking and logistics divisions, including buying new trailers and tractors.
“Trucking and logistics is not as capital intensive as the oilfield services business is, if you have the trailers and you can attract the drivers, which our business units out here do fairly well, we think we have a reasonable chance to succeed,” said Maloney.
While Maloney believes Mullen does a good job of attracting drivers, he said the driver shortage is a reality every carrier must face. It’s just a case of demographics and math. That’s one of the reasons the company some transload and rail-related businesses, including Kleysen Group LP. Moving more freight by rail eases some of the demands on trucks, and leaves the drivers to fill seats in last-mile deliveries.
As for attracting drivers and dock workers to the company Maloney said Mullen not only pays attention to the obvious things like wages, but to other avenues as well.
“I think we do a pretty reasonable job of selecting the right people who can then attract people. One of the things we expect all our business units to do is measure their turnover and what they are doing to improve it. That gets into a whole host of soft things you need to do as an organization to attract people. Compensation is one of them for sure, but there are many other aspects of our HR strategy we think has been working that will help us attract the right people.”