Garbage may drive growth for Canada's truckers

Tue Nov 2, 2010 1:44pm EDT
 
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By Gowri Jayakumar

BANGALORE (Reuters) - Canadian truckers are moving into less traditional areas such as collecting garbage and delivering parcels after the recession exposed their reliance on core trucking businesses like cargo and small freight shipping.

Mid-tier truckers TransForce Inc, Mullen Group and Contrans are looking to broaden their portfolio of specialized, niche services to guard against a return to pricing pressures.

"Deal sizes in waste management, for instance, can be all across the map," said Jason Granger, an analyst with BMO Capital Markets Canada, predicting deals in the $5-$10 million range, rising to $50 million in waste management.

Walter Spracklin, an analyst with RBC Capital Markets, expects TransForce and Contrans to be the chief gainers from acquisitions in waste management -- from garbage collection to landfills.

"It's a pretty good strategy to be going into -- a higher margin business with a little less competition and higher barriers to entry," Spracklin said.

Contrans, which has already made two acquisitions in waste management including assets from BFI Canada Inc in the past two months, reports quarterly results on Thursday, with investors looking for more on the company's acquisition strategy.

Niche services, which are tough to enter due to their specialized nature and technological requirements, are largely unaffected by spot market pricing, making them attractive investment targets.

As the economy picks up, so trucking should rebound, triggering more competition in truckers' core less-than-truckload (LTT) and truckload (TL) businesses, and again putting pressure on pricing.   Continued...