Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Parkland Corp (PKIUF, Financial) delivered a record Q2 with adjusted EBITDA of $504 million, up 7% from the prior year.
- The Canadian segment showed strong performance with a 15% year-over-year increase in adjusted EBITDA, demonstrating consistent execution and successful integration of strategic acquisitions.
- The international segment delivered an 8% increase in adjusted EBITDA, driven by strong demand and good unit margins, particularly in the tourism and natural resources sectors.
- The refinery segment reported an 11% increase in adjusted EBITDA, with high utilization rates and record co-processing volumes.
- Parkland Corp (PKIUF) maintained a leverage ratio of 3.1x and has a clear pathway to reducing leverage to the low 2x by the end of 2025.
Negative Points
- The US segment underperformed, with adjusted EBITDA down from the prior year, although it showed improvement from Q1.
- Retail fuel volume demand was weaker during the quarter, particularly in June, due to poor weather and reduced discretionary spending.
- The Florida retail and supply business continues to underperform, impacting overall US segment results.
- Parkland Corp (PKIUF) lowered its 2024 full-year adjusted EBITDA guidance to between $1.9 billion and $2 billion, reflecting ongoing weaknesses in consumer and fuel demand.
- The macroeconomic environment has resulted in lower volume fills and higher frequency of visits, indicating consumer sensitivity to increasing costs of living.
Q & A Highlights
Q: Can you provide more details on the issues affecting US retail fuel volumes, particularly in Florida?
A: The primary issues in Florida are related to volume declines and margin pressures due to previously negotiated supply contracts. We are renegotiating these contracts to improve our pricing competitiveness, and we expect to see improvements by Q4. (Robert Espey, President, CEO, Director)
Q: What are the specific improvements in supply margins you mentioned?
A: We have seen improvements in key supply differentials, particularly from Canada to the US and from California to Nevada. These improvements are due to refiners cutting back on diesel runs, which has helped recover differentials. (Robert Espey, President, CEO, Director)
Q: Can you explain the year-over-year declines in Canadian volumes?
A: The declines are mainly due to tough comparisons from last year and weaker wholesale volumes. Retail volumes are slightly down, but our core commercial business is on track. The wholesale business, particularly in the US and international markets, has seen lighter volumes. (Robert Espey, President, CEO, Director)
Q: What is driving the strong performance in the international segment?
A: Robust demand in commercial sectors, particularly in Guyana's oil exploration and natural resources, and extended tourism seasons have driven strong performance. Retail and jet fuel demand have also been strong. (Robert Espey, President, CEO, Director)
Q: How should we think about the leverage reduction and shareholder returns going forward?
A: We aim to reduce leverage by half a turn per year, balancing this with dividend payments, growth investments, and share buybacks. Despite currency impacts, we expect to reach a leverage ratio in the low 2x range by the end of next year. (Marcel Teunissen, CFO)
Q: What preparations are being made for the rollout of beverage alcohol in Ontario stores?
A: We plan to expand or repurpose coolers in about 120 sites and provide employee training. This initiative is expected to drive significant same-store sales growth. (Robert Espey, President, CEO, Director)
Q: Are there any promotional strategies that are particularly effective in the current macroenvironment?
A: Targeted promotions, such as two-for-one offers and fuel discounts through the JOURNIE program, have been effective in driving traffic and capturing market share. (Marcel Teunissen, CFO)
Q: Can you provide more details on the JOURNIE program and its partnerships?
A: The JOURNIE program has been successful with partnerships like CIBC and Aeroplan. We are piloting a small cross-promotion with Walmart and plan to integrate M&M's loyalty program fully by Q4. We are also in discussions with other retailers for potential partnerships. (Robert Espey, President, CEO, Director)
Q: What is the timeline for the $200 million in retail site divestitures?
A: We have either closed or locked in $200 million of disposals and expect to continue this process through subsequent quarters, aiming to hit our 2025 target. (Robert Espey, President, CEO, Director)
Q: What led to the reduction in full-year adjusted EBITDA guidance?
A: The reduction is primarily due to ongoing macroeconomic headwinds. Despite a robust recovery plan and progress on initiatives, we couldn't fully offset these challenges. (Robert Espey, President, CEO, Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
