Mullen Group Takes Hit From Downturn in Oil Field Services
Mullen Group reported higher revenue and profits in the fourth quarter of 2018 despite a “market meltdown” caused by falling oil prices that curtailed demand for transportation services as the year ended.
“We definitely saw the freight demand slow in the quarter as business adjusted to credit tightening,” CEO Murray Mullen said in a statement Feb. 6. “The swift declines in crude oil pricing along with a ‘blowout’ in the price for Canadian crude oil virtually brought drilling activity to a halt as producers adjusted spending plans to align with cash flow.”
Overall financial results were positive nonetheless, Mullen said, thanks to positive contributions from acquisitions and improved performance by some of Mullen’s trucking businesses.
Operating profits increased 12.4% to C$51.7 million in the three months ended Dec. 31 from $46 million a year ago, and revenue grew by 12.6% to $333.3 million from $296.1 million.
As a result of the downturn in oil field services, Mullen said it recorded a $100 million charge against earnings to reflect an impairment of goodwill, resulting in a net loss of $81.1 million, or 77 cents a share, in the fourth quarter of 2018, compared with net income of $5.4 million, or 5 cents a share, in the same period in 2017.
Mullen’s trucking and logistics segment generated operating income of $33.2 million, which was a record compared with any previous fourth quarter, and was up 6.4% from $31.2 million in 2017. Revenue increased 6.3% to $219.7 million from $206.6 million.
Growth came from a combination of rate increases and increased demand in western Canada for both less-than-truckload and truckload freight hauling, the company reported.
Oil field services generated operating income of $20.8 million in the fourth quarter of 2018 compared with $15.4 million in 2017. Revenue increased 27.6% to $114.1 million from $89.4 million, due mainly to acquisitions and greater demand for pipeline hauling and stringing and de-watering services.
For the year, Mullen posted a net loss of $43.8 million, or 42 cents a share, on revenue of $1.26 billion in 2018, compared with net income of $65.5 million on revenue of $1.14 billion in 2017.
“We are taking a reasonably constructive view in our outlook and business plan for 2019,” Mullen said. “We have a well-structured balance sheet, a diversified portfolio of business units distributed across Canada, and we are seeing competitors, especially in western Canada, forced out of business.”
Mullen said while he expects Canada’s economy to show modest gains in 2019, the oil and natural gas sector “will underperform for at least the first half of the year.”
“On balance,” he added, “we believe 2019 will be a good year for the Mullen Group. And because of our business model, we have the good fortune of being able to wait for a rebound in drilling activity along with gaining market share as our competition struggles.”
Mullen Group, based in Okotoks, Alberta, ranks No. 52 on the Transport Topics Top 100 list of largest for-hire carriers in North America based on revenue for its trucking operations only.
