Mullen Group lays off 1,000 as ‘wants’ economy disappears
OKOTOKS, Alta. – As the “wants” economy has evaporated due to the Covid-19 pandemic, Mullen Group has taken drastic measures, including laying off 1,000 employees. While reporting its Q1 earnings, Mullen Group indicated all was going well until mid-March. “Until mid-March our business was performing ahead of last year and basically on target to meet our expectations,” said Murray Mullen, chairman and CEO of Mullen group. “However, once the full extent of the virus started to become evident, demand deteriorated in many sectors of the economy directly impacting several of our business units.”
The company also suspended the payment of its dividend for three months, and instead used the money to create a £5-million Family Assistance Plan.
The funds will be used to help employees who are under financial duress before government support kicks in. “I just found it, as a CEO, very difficult to say I’m going to lay off 1,000 people but I’m still going to pay shareholders,” Mullen said on a conference call with analysts April 23. “If our associates get into trouble before the government arrives with their help, we said ‘We’re going to have a backstop here for people, so don’t worry, everything will be okay. Let us work on getting you back to work as soon as possible, but if you and your family get into trouble, we’ve got you covered.'”
Executive salary cuts have also been implemented. Trucks are still moving to support the “needs” economy, Mullen said. But he couldn’t anticipate when the other side of the economy will return.
He’s not expecting the usual second- and third-quarter LTL ramp-up to stockpile goods for a seasonal uptick to occur this year.
“We may be in the early innings of what is a dramatic shift in the economy.”
Murray Mullen, Mullen Group
“I don’t see that happening until the economy opens up,” he reasoned. “We won’t have a seasonal bounce-back this year. I don’t see that right now.” What began as a health crisis, Covid-19 has morphed into an economic crisis, Mullen said.
“We may be in the early innings of what is a dramatic shift in the economy,” he predicted, adding no guidance can be issued at this time and previous outlooks can be trashed. “The 2020 business plan and expectations are totally altered due to the outbreak of Covid-19 here in North America.” Mullen was quick to act as the virus took hold, formalizing an initial action plan as early as March 2.
“I don’t want to even guess on how our business can or will perform over the next couple of months,” he admitted. “I think in the short-term, the next two to three months, I really expect business to be challenging.” Further out, Mullen wonders how the newly opened economy will look. Will consumers spend money?
Will they spend it on things, or services? Moves made by Mullen were intended to protect the balance sheet, and to that end, any potential acquisitions are on hold. Mullen acknowledged supply chains are under pressure, which could lead to “choppy” demand for LTL freight services.
But Mullen is well-positioned, as it serves as a lifeline to communities served by its broad network across Western Canada. As for its speciality equipment, Mullen quipped he may offer up his parked tankers for crude storage, with capacity nearly full. “I might be storing some oil in those tankers and not hauling it,” he said, adding Mullen will park equipment rather than operate at a loss. “I’m not going to work and not get paid.
That’s not going to happen around here.” As for the first quarter, Mullen generated revenue of £318.2 million, down 0.4% year-over-year. The LTL segment was up 3.5%, specialized and industrial services grew 1.5%, but logistics and warehousing fell 5.4%.
Net income fell by £6.9 million to £4.7 million, reflecting a £2.3 million increase in finance costs and a £3.9 million negative variance in foreign exchange.