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Trucking environment to soften in 2023: Mullen

Mullen Group doubts its business units will match strong 2022 results in the face of slowing global trade and consumer spending, but the fleet’s 2023 business plans still reflect a good year to come.

While trucking rates pushed higher last year as shippers struggled to move stranded freight, supply chains have normalized, senior executive officer Murray Mullen said Monday, when discussing the business environment with financial analysts. He expects rates to become more competitive as surge pricing falls away.

“Far too many carrier owners believed that business profitability would remain elevated forever,” he said.

“Six months ago, customers said, ‘Move it’. Today they’re going, ‘What’s your price?”

Mullen Group
(Photo: Greg Decker)

Acquisition plans and independent operator struggles

That said, Mullen believes a diversified business and strong balance sheet places Mullen Group in an excellent position to pursue acquisitions that will tuck into existing businesses or present opportunities to expand the network. The business pared down debt last year and has a $250-million line of credit to pursue strategic opportunities.

Not everyone will be in the same position.

Mullen predicts the number of independent operators will shrink because of factors such as rising borrowing rates as well as demographics. The price-sensitive environment comes when many of these operators are entering the twilights of their careers, he said.

“There is no new entrant independents coming into the business,” he explained. “The demographics is catching up to independents. They get in and they’re not going to make another investment.”

To compound matters, the smaller operations can find it tough to source parts let alone new trucks as larger businesses hog the order books.

Warehouses also remain full of “dead inventory” that will not sell, Mullen added, referring to earlier surges in freight that were caused by shippers attempting to get ahead of supply chain bottlenecks. “Too much of a good thing is not a good thing. Inventories became bloated and these same retailers and shippers have curtailed new buying.”

But it has meant “sticky” pricing for warehousing services.

Accelerating order books

Meanwhile, supply chain factors that have affected the availability of new trucks appear to be easing, Mullen said, noting that he’s now fielding calls from manufacturers with news of available equipment.

“Even if you wanted things, the supply chain and manufacturing and everything was kind of bottlenecked,” he said, referring to 2022. “We think there’s going to be a better flow this year … A lot of the order book is going to be accelerated because some of these carriers, they’re getting over their skis.”

Mullen Group plans for the coming year include $85 million in capital investments not including acquisitions or facilities.

“Fuel efficiency of the new power units are providing us with a 30-40% improvement in miles per gallon,” senior operating officer Richard Maloney noted. And about $15 million of the planned capital expenditures will focus on sustainability, with a continued focus on reducing emissions.

There are limits, though.

While the fleet continues to invest in natural gas equipment, it still represents a small share of the operation. The advantage to those units that are in place is that the fuel itself costs 70 cents a liter, Mullen said.

The rollout of electric trucks also remains limited by the ability to power facilities even when the trucks themselves are available, he added. “The biggest issues with electric trucks is the grid and distance.”

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