Parkland posts first quarter results for 2024
Parkland Corporation announced its financial and operating results for the three months ended March 31, 2024.
"The team continues to deliver on our strategy and optimize our portfolio," said Bob Espey, president and chief executive officer in a statement accompanying the release of the results. "We have identified more than $400 million of non-core assets for disposition, many of which have been sold or are in the advanced stages of negotiation. This represents more than 80% of our $500 million target by the end of 2025."
"I have full confidence in our team's ability to execute our operational plan that leverages our customer advantage and unique supply benefits, despite headwinds in some of the markets where we operate," continued Espey. "We expect to deliver our 2024 Adjusted EBITDA Guidance range of $1.95 to $2.05 billion and see a clear pathway to achieving a Leverage Ratio at the low end of our 2 to 3 times target range by the end of 2025."
For the first quarter of 2024, Parkland posted an Adjusted EBITDA of $327 million, a decrease of 17% as compared to the first quarter of 2023, driven by an unplanned shutdown of the Burnaby Refinery.
“This 2024 did not begin as we expected,” Espey said during an investor briefing. “The combination of extreme cold weather in British Columbia and a curtailment of natural gas supply led to the unplanned shutdown of the Burnaby refinery. Such circumstances test the capabilities and resolve of a team, and I am proud of the way Parkland rallied together to safely return the facility to normal operations by the end of [March 29, 2024] while continuing to serve our customers. The strength of our supply-centric business model ensured customers continue to receive the essential fuels on which they depend. In addition, our refinery team has implemented a detailed plan to make up for the shortfall during the remainder of the year, which relies on our unique supply advantage and capabilities. I believe that the true test of an organization is its ability to overcome setbacks and remain focused on its long-term goals.”
Parkland reported a net loss of $5 million ($0.03 per share, basic), a decrease of $82 million as compared to the first quarter of 2023, and Adjusted Earnings of $43 million ($0.25 per share, basic), a decrease of $71 million from the first quarter of 2023.
In response to this loss, Espey told the attending investors and financial journalists that Parkland continues to see solid organic and inorganic growth opportunities going forward across all parts of the company’s business. “At our November Investor Day [2023], we shared our ambitions for 2028, which is to double our available cashflow per share to $8 and 50 cents. This will generate $6 billion of available cash, which we will allocate in accordance with our discipline plan that is shown on the slide. Recall, we launched the current strategy in early 2023 and driven by consistent execution, we delivered an approximate 50% total shareholder return over that time.”
Marcel Teunissen, chief financial officer with Parkland, added that Canada delivered an Adjusted EBITDA of $191 million, which was up 14% from the prior year and that Parkland’s operational KPIs showed the benefit of consistent execution and ongoing organic growth investments.
“Company-owned same store fuel volumes grew nearly 6% in the quarter well ahead of market food and convenience. Same store sales growth excluding cigarettes was 3.1% and we delivered gross margins of 35% with strong performance in our beverage category along with the full implementation of the M&M Express program at over 500 On the Run locations that is helping to drive sales and diversity our product mix. This is resulting in improved growth margins across Canada industry.”
Teunissen added that while retail fuel volume demand was flat as compared to the same time in 2023, strong same store growth led to increased market share. “This was driven by our rebrand of Husky locations and continued growth in our Jourine Rewards program, and fuel unit margins were higher due to improved efficiency and supply capabilities as well as improved productivity of our company owned network.”
He continued that while Parkland in the United States delivered an Adjusted EBITDA of $33 million in this quarter, up 57% from the prior year’s quarter, this result was still behind on where the company wished to be. He said this was “due to both external and internal factors across the U.S. market, and we continue to see declines in retail and commercial fuel volumes, which we believe are driven by higher fuel prices, changes in consumer behavior and some indications of and economic slowdown with unit margins under pressure due to rising fuel prices.”
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Ian White, president of Parkland Canada added that Parkland’s performance was also impacted by consumer trends, and that “as customer needs change, our retail business continues to grow and is up 13% year-over-year despite some margin and volume pressures in the U.S. If we take a step back and look at the retail customer, the inflationary environment is creating cautious consumers who are actively managing their spending. As a result, they're seeking value and convenience, but how is this showing up?”
White said at the forecourt, Parkland is seeing customers pumping less fuel into their tanks but are coming more often to do so.
“Average fuel size is down approximately 6% while frequency has increased by 10%. Higher frequency visits create more opportunities for customers to visit our On the Run convenience stores, leading to an improved sales mix and market share. Our teams are proactively delivering targeted promotions and bundles that reward convenience purchases with a fuel discount and vice versa. This connection between the fuel and a convenience offer is a competitive advantage for Parkland. It is an advantage we will continue to bolster and leverage our loyalty program which is the backbone of our retail value proposition. It harnesses the complimentary benefits of our fuel and convenience offerings which support each other and enable us to make targeted personalized offers and provide customers with the choice and value they are seeking.”
He pointed to Parkland’s partnership with Aeroplan that launched last year and which he said has introduced many new customers to Parkland’s retail offerings. “We have already seen a 20% improvement in share of wallet with Aeroplan cardholders who on average purchase 10 to 12% more than a typical Journie Rewards member,” he added “These are customers that have shifted their fuel and convenience spend and in turn are driving improved site productivity and same store growth.”
Espey said that Parkland is well on its way to meeting the goals it has set out for itself over the next five years that it set last November. “I believe that this strategy will maximize value for our shareholders. Our previously announced portfolio optimization plan targets total divestments of $500 million by 2025. We have sold and identified more than $400 million of non-core assets for disposition with a substantial portion in advanced stages of negotiation. We have set an ambitious $2 billion adjusted EBITDA target for 2024, which is a year earlier than our original ambition. I have full confidence in our ability to deliver this well within the target range.”
