Parkland considering possible sale and other initiatives to boost shareholder value
Parkland Corporation's poor financial showing in its Q4 and final fiscal year 2024 results is having the company enter a strategic review to look at a possible sale and other ways strategic alternatives to boost shareholder value.
Parkland at the close of markets yesterday the international fuel distributor and retail operator posted a quarterly net loss of $29 million during the last three months of 2024, compared to net earnings of $86 million during the same period a year earlier. Sales and operating revenue dropped to $6.73 billion in the third quarter of 2024, down from $7.75 billion in the same period a year earlier.
The strategic review will analyze and evaluate its business strategy and optimization opportunities, while also considering value maximization alternatives which are in the best interests of all shareholders. The review will look at asset divestments, acquisitions, transformative business combinations and even selling the company.
Parkland said it has engaged Goldman Sachs Canada Inc. and BofA Securities as its financial advisors for the strategic review.
U.S.-based activist investor Engine Capital LP and Parkland's largest shareholder Simpson Oil Ltd. have called on the company to conduct a review of strategic alternatives, including a possible sale.
Bob Espey, president and chief executive officer in an analyst briefing this morning to review the results spoke first on the announcement of the strategic review, acknowledging the review is the result of the underperformance of the company and that performance did not reflect, according to the Board, the intrinsic value of the company and its operations.
“[The strategic review] is primarily to explore opportunities to maximize value creation while also offering a potential path to seek a resolution with Simpson Oil,” Espey said. “It is unfortunate that Simpson Oil remains unwilling to engage in constructive dialogue with Parkland's board of directors, and our offer to join our board remains open and we would welcome them to participate in the strategic review process.”
Espey went on to say the review would explore a variety of strategic alternatives, including evaluating the company’s existing business strategy and its current portfolio of assets, as well as scenarios such as mergers, divestitures, acquisitions to even a possible sale of the company.
As well, Marcel Teunissen is being promoted to president, North America and will oversee the company’s retail and commercial business; and Brad Monaco, is the interim chief financial officer.
Espey also noted that with the continuing trade tensions between the United States and Canada, with tariffs on the table to impact trade between both, means that going forward that “political instability will have negative implications for both Canadian and U.S. businesses as well as for consumers on both sides”
“This could lead to volatile results over the next few months, and we have established an internal taskforce that is closely monitoring the situation to understand and act on any impacts to Parkland’s operations,” he added. “Given our focus on locally sourced fuels and convenience items, we believe the overall impact will be largely neutral.”
He continued that he believed the company is resilient and with is diverse geographic footprint and supply chain, “that will enable us to navigate the economic and political uncertainties.”
“While there will be bumps along the way, our diversified portfolio of products across geographies is well proven, and the team has demonstrated their ability to navigate a volatile environment,” Espey said. “I’m confident we can achieve our 2025 guidance and through improvements in our cost structure, continued investments in organic growth and our resilient business model will position us to provide value for our shareholders.”
Canada’s Adjusted EBITDA for the quarter was $190 million, as compared to $190 million for the same quarter in 2023. Stronger fuel unit margins from continued price and supply optimization and lower operating costs were offset by lower commercial volumes due to unseasonably warm weather and the divestment of the commercial propane business. U.S. operations delivered an Adjusted EBITDA of $32 million, as compared to $39 million in the same quarter of 2023. The timing of certain expenses and a challenging volume environment were partially offset by stronger fuel unit margins.
For the full year of 2024, Parkland posted Adjusted EBITDA of $1,690 million, as compared to $1,913 million in 2023. Resilient performance in the combined retail and commercial lines of business was more than offset by a lower refining margin environment in the second half of 2024 and the unplanned shutdown of the Burnaby Refinery in the first quarter of 2024. Net earnings of $127 million ($0.73 per share, basic), as compared to $471 million ($2.68 per share, basic) in 2023, and Adjusted earnings of $405 million ($2.32 per share, basic) as compared to $626 million in 2023 ($3.56 per share, basic).
Monaco in reviewing the results with analysts, said the poorer results were a result of macro-economic pressures that compressed retail fuel margins along with weaker consumer demand in the United States.
