Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Parkland Corp (PKIUF, Financial) delivered adjusted EBITDA of C$431 million in Q3, with a 4% year-over-year increase in the underlying business after adjusting for one-time benefits.
- The company saw same-store volumes growth of 1.4%, demonstrating the strength of its company-owned network and the positive impact of its loyalty program.
- Parkland Corp (PKIUF) launched alcohol sales at 80 sites in Ontario with plans to expand to 120 sites by year-end, driving increased traffic to stores.
- The US segment delivered C$54 million in adjusted EBITDA, up 4% from the prior year, benefiting from renegotiated supply contracts and tactical improvements.
- Parkland Corp (PKIUF) is progressing with organic growth initiatives, including rebranding and building new retail sites, which are driving double-digit same-store sales volume growth in Guyana.
Negative Points
- The international segment's adjusted EBITDA was C$152 million, 11% below last year, primarily due to lower wholesale volumes.
- The refining segment reported adjusted EBITDA of C$49 million, down from C$88 million last year, driven by lower refining margins.
- Available cash flow was C$627 million, down 16% from 2023, primarily due to weaker refining segment results.
- The company's leverage ratio increased to 3.4 times, attributed to lower adjusted EBITDA over the last twelve months.
- Parkland Corp (PKIUF) lowered its 2024 adjusted EBITDA guidance by approximately C$250 million due to weak refining margin outlook.
Q & A Highlights
Q: Can you discuss the challenges in the refining segment and your confidence in its recovery?
A: Bob Espey, President and CEO, explained that the refining segment faced a tough comparison to last year's record quarter, primarily due to lower crack spreads. He noted that the refinery operated well, and the fundamentals suggest that crack spreads will improve as global demand grows. The company remains conservative in its projections but is confident in its marketing and supply business, which continues to gain market share.
Q: Given the stock's performance and guidance cuts, how do you view capital allocation priorities?
A: Marcel Teunissen, CFO, stated that capital allocation remains aligned with their long-term plan, prioritizing balance sheet strength and leverage reduction. They continue to buy back shares when opportunities arise, viewing it as an effective way to allocate capital.
Q: How do you plan to achieve your leverage ratio target by the end of 2025?
A: Marcel Teunissen mentioned that achieving the target leverage ratio depends on EBITDA improvement and potential divestments, such as the Florida assets. The company expects to make significant progress as weaker quarters roll off and divestments are completed.
Q: Can you elaborate on the impact of carbon credits and renewable diesel imports on your capture rates?
A: Bob Espey noted that the capture rate was affected by an oversupply of carbon credits due to renewable diesel imports from the US. He expects this to rectify as US legislation changes and demand for carbon credits increases, making them more valuable in the future.
Q: What are the key drivers for organic growth in your international business?
A: Bob Espey highlighted growth in retail, commercial, and aviation businesses, particularly in tourist-linked and natural resource-rich economies. The company strategically moves in and out of the wholesale market based on economic conditions to ensure optimal returns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
