Alimentation Couche-Tard exceeded expectations for Q4 and wrapped up a solid fiscal year operating under pandemic restrictions.
In a call with investors and media this morning, Brian Hannasch, president and CEO of Alimentation Couche–Tard, expressed deep gratitude to team members and customers for an extraordinary year. "We did more than maintain the status quo... our company culture and balance sheets are stronger than ever before."
The company delivered a solid fourth quarter overall, with results strengthening is areas where COVID-19 restrictions easing.
Total merchandise and service revenues hit $3.7 billion, an increase of 15.2%. Same-store merchandise revenues increased 8.1% in the U.S., 9.7% in Europe and other regions, and 1.6% in Canada.
Same-store road transportation fuel volume increased 5.4% in the U.S., 3.6% in Europe and other regions, and 4.9% in Canada, due to higher fuel demand compared to the comparative quarter. Revenue from the fuel business jumped 32% to $8.35 billion in the fourth quarter after falling by more than a third in the first three quarters.
"Across the board, we had positive trends in same-store merchandises sales and fuel volumes as traffic is returning to our locations," Hannasch said in a statement. "While fuel volumes remained impacted by restrictive measures, we had a steady improvement in parts of the network, especially in the U.S., where we are starting to see a return to more normal driving behaviour. We also continued to realize good fuel margins in all regions of the business, despite rising product costs. Once again, this quarter, 15 months into the pandemic, our operation teams have done an exceptional job in their continual commitment to the business and care for our customers. In my almost seven years as CEO, I have never been prouder of our teams this past year."
Hannasch said the quarter "ended a remarkable year both financially and operationally, despite the persistent pressures of the pandemic on our customers, employees and supply partners. Across the global network, we made notable progress on our strategy of accelerating organic growth by expanding our fresh food offer, data-analytic capabilities, and our fuel procurement and transport capabilities. We also reinvented and expanded our brands, making them increasingly more modern and recognizable at every part of the customer journey and facilitated the customer experience through expanded frictionless payment options. Through the acquisition of Circle K Hong Kong, we made our long-planned entry into the dynamic Asian market and, through our Norway lab, we pushed forward our ambition to be a world leader in electric vehicle solutions. Our ability to stay agile, focused, innovative and committed to our long-term strategy has prepared us for an even stronger future ahead."
Claude Tessier, CFO, added: "As we conclude another strong year in fiscal 2021, I want to highlight some of our key achievements over the last twelve months. While we operated in a particularly challenging environment, one in which our fuel business saw meaningful volume declines, we maintained our focus on returns, as well as our discipline on cost control and cash management. We also continued to invest in our business, preparing for the future and an eventual return to pre-pandemic traffic levels. The strong capital structure that we have diligently put in place served us well during the past year, as we had the means to support our team members, to protect them as well as our customers, and to continue to create value for our shareholders."
Fourth Quarter 2021 highlights
Net earnings attributable to shareholders of the Corporation ("net earnings") were $563.9 million, or $0.52 per diluted share for the fourth quarter of fiscal 2021 compared with $576.3 million, or $0.52 per diluted share for the fourth quarter of fiscal 2020. Adjusted net earnings1 were approximately $564.0 million compared with $520.0 million for the fourth quarter of fiscal 2020. Adjusted diluted net earnings per share1 were $0.52, representing an increase of 10.6% from $0.47 for the corresponding quarter of last year.
The fourth quarter of fiscal 2021 marks the first period that cycled the start of the COVID-19 pandemic and associated impacts. As the company moved through the quarter, results varied by region as some saw a progressive lifting of restrictive social measures while others continued to struggle with restrictions. Convenience performed well on a two-year basis and categories most impacted by COVID-19, such as food, are showing positive trends. Fuel margins continue to be higher than 2019 level, even though fuel volumes are still below as they continue to be challenged by work from home trends and changes in local restrictions.
Merchandise and service gross margin decreased 0.7% in the U.S. to 31.8%, 0.1% in Canada to 31.0%, and 2.5% in Europe and other regions to 38.1%, which was impacted by the integration of Circle K Hong Kong. Gross margin in the U.S. and Canada was impacted by inventory adjustments of $26.4 million and $3.2 million, respectively, mostly related to specific COVID-19 related effects. Excluding inventory adjustments, gross margin in the U.S. and Canada would have been 32.8% and 31.6%, respectively, favourably impacted by changes in product mix.
Same-store road transportation fuel volume increased 5.4% in the U.S., 3.6% in Europe and other regions, and 4.9% in Canada, due to higher fuel demand compared to the comparative quarter.
Road transportation fuel gross margin of 34.45¢ per gallon in the U.S, a decrease of 10.48¢ per gallon due to the unusually high fuel margins of the comparable quarter. In Europe and other regions, it increased by US 2.18¢ per litre to US 10.85¢ per litre, and by CA 2.56¢ per litre in Canada to CA 10.92¢ per litre.
Looking at gross profit on a two-year basis provides additional insight given the volatility in the various key measures of our business. Excluding the impact of CAPL and Circle K Hong Kong, merchandise and service, as well as road transportation fuel gross profit, are higher by 4.2% and 42.5%, respectively, compared with the pre-pandemic fourth quarter of fiscal 2019.
Subsequent to the end of the quarter, successful issuance of $1.0 billion of US-dollar-denominated senior unsecured notes, including an inaugural tranche of Green Bonds totaling $350.0 million.
Fiscal Year 2021 highlights
Net earnings per diluted share of $2.44 compared with $2.09 for fiscal 2020, an increase of 16.7%, while adjusted diluted net earnings per share1 were $2.45 compared with $1.97 for fiscal 2020, an increase of 24.4%.
Fulfillment of the November 24, 2020 share repurchase program, totalling $1.1 billion, including $550.4 million during the fourth quarter of fiscal 2021. Subsequent to the end of the quarter, the Corporation implemented a new share repurchase program which allows it to repurchase up to 4.0% of the public float of its Class B subordinate voting shares. Under this new program, shares for a net amount of $299.2 million were repurchased.
Increase in the annual dividend of 25.5%, from CA 26.5¢ to CA 33.25¢.
Return on capital employed improved from 15.0% to 15.9%, on a pro forma basis.
Leverage ratio improved from 1.54 : 1 to 1.32 : 1, driven by strong earnings.