Editor & Associate Publisher, Convenience Store News Canada
Parkland delivered a stellar quarter with adjusted EBITDA of $450 million, up approximately 40% from Q2 2021, which the company says is underpinned by acquisitions, consistent operating performance and organic growth. Net earnings for the quarter were $81 million or $0.52 per share, up from a loss of $64 million or $0.42 per share during the same period in 2021.
Fuel volumes were up 12% compared to the same period last year, to approximately 6.4 billion litres, which Parkland attributed to the strength of its marketing business and acquisitions, including the completion of four Eastern Canadian product terminals.
In addition Parkland reported it continues to grow its Journie Rewards loyalty program, attracting approximately 300,000 new members in the quarter, for a total of 3.5 million members.
"Our record results demonstrate the resilience of our integrated business model and our ability to grow throughout economic cycles," president and CEO, Bob Espey, said in a statement. "The Parkland team continues to serve the needs of our customers, while simultaneously mitigating inflation, driving organic growth and strengthening our financial flexibility."
"Consistent with our strategy, we continue to thoughtfully integrate acquisitions, capture synergies and reduce our leverage ratio," added Espey. "Our operational performance year-to-date gives us confidence to increase our 2022 Adjusted EBITDA guidance. We are firmly on track with our ambition for $2 billion run-rate of Adjusted EBITDA by mid-decade."
"Across our company retail network, we delivered same-store fuel growth of 2.1% with our Ontario sites leading the way at 8.5% growth year-over-year. More broadly, the Canadian retail fuels volume returned to within 10% of the 2019 levels. We continue to see some changes to customer behaviour in response to high commodity and fuel prices," CFO Marcel Teunissen said during an earnings call Aug. 5. "Last quarter, we highlighted that some customers are buying less fuel each visit, but are coming to see us more often. This trend has continued. This quarter, we also saw a slight decrease in premium grade fuel volumes as some consumers switched to regular grades."
In the back court, Parkland reports it saw the positive impact of its centre of store merchandising strategy on a same-store basis; packaged beverages, salty snacks and candy were up 6%, 11% and 12% respectively. However, customers have dialled back on car washers, lottery tickets, prepaid cards, vape and cigarettes.
"These categories lowered our overall same-store sales growth to a negative 8.2% year-over-year and a negative 0.6% excluding cigarettes," said Teunissen, adding that the previous two years were exceptional in terms of same-store sales due to COVID-related lockdowns, making the current quarter a difficult one to compare. "We expanded our merchandise margins from 29% to 35% year-over-year. And this was done through proactive margin optimization and the contribution from food, including from M&M Food market."
During the earnings call Aug. 5, Espey said the company will address the softening with a growth plan that includes targeted promotional and pricing strategies. "Centre of store remains the strength within our sea stores. We have several promotions planned for the summer and fall, including a national retailer sales contest that focuses on basket size and upselling. To continuously enhance the customer experience, we are investing in a national food program, which will refresh and strengthen our coffee and food offer. It will provide our customers with a better product, increased consistency, among locations, for enhanced marketing and promotions and provide a platform for future food expansion. We will also expand our M&M Express Offering, Quebec, for the first time.
Internationally Parkland delivered adjusted EBITDA of $87 million, up 32%, from Q2 2021 ($66 million). Performance was underpinned by increased fuel volumes driven by continued recovery in tourism, aviation, and wholesale, acquisitions and synergy capture. Subsequent to the quarter, Parkland completed its previously disclosed acquisition of the Jamaican business of GB Group and announced a share exchange for the remaining 25% of Sol Investments - it now has100% ownership.
USA delivered adjusted EBITDA of $51 million, up 70% from Q2 2021 ($30 million). Again, the company said performance was underpinned by the impact of prior year acquisitions, synergy capture, organic growth in itscommercial and wholesale business and robust margins.
Refining delivered adjusted EBITDAof $164 million, up 33%, from Q2 2021 ($123 million).
Espey said: "I am delighted to lead off by acknowledging our announcement to exchange 20 million Parkland shares for the remaining 25% of Sol held by the Simpson family. This will consolidate our ownership of Sol to a 100%. We appreciate the opportunity to continue to work and grow our relationship with the Simpsons. They are highly supportive shareholders who share our conviction in the Parkland strategy and long-term vision. We are excited to continue our longstanding relationship with the Simpsons who upon completion will own approximately 19.5% of Parkland."
Epsey believes now is the right time to consolidate ownership. "We are doing this on a leverage neutral basis and can see significant future growth opportunity. Simpson family has and will continue to play an integral part in our growth. We greatly value their continued support and appreciate the confidence they are showing in the Parkland team's ability to build long-term value."
From an enterprise perspective, combined operating and marketing general and administrative costs were $479 million, up 34% from 2021, says Teunissen: "This is mainly due to the inclusion of the acquired businesses, which is responsible for about half the increase, and to a lesser extent, the increase was also driven by variable costs to support higher volumes and prices, such as credit card fees and staff costs returning to normal."
He also acknowledged that "inflation is impacting a number of areas of our business and we continue to proactively manage costs. Most of these cost increases are industry-wide and we have the opportunity to pass this onto the market."
Parkland sells gasoline and diesel to motorists through a network of retail service stations across Canada, the northern tier of the United States and Caribbean. In addition to its flagship On the Run convenience brand, Parkland owns and operates The Corner Store and Snack Express.