Parkland’s third-quarter results lower than expected
Parkland Corporation announced its financial and operating results for the three and nine months ended September 30, 2024.
While the results were lower than expected, Bob Espey, president and chief executive officer of Parkland was still bullish on the company’s growth plans and for the remainder of the year as the company continues to make strides to find efficiencies and meeting consumer demands in the convenience space.
“Despite robust operational performance, our third quarter financial results came in below expectations due to lower refinery margins, which were felt across the industry adjusting for this impact of approximately $140 million,” Espey told Canadian and U.S.-based analysts during a conference call on the results. “We continue to see strength and growth across our underlying business. Adjusted EBITDA from our retail and commercial businesses have grown 2% over the last 12 months despite soft economic conditions.”
Espey was particularly pleased with Canada’s performance which has Parkland “now being the second largest fuel and convenience retailer [in Canada]. This is an impressive achievement and testament to the strength of our asset base, the execution of our organic initiatives and the dedication of the Parkland team. I am confident in the resilience of our diversified business and the team continues to execute our organic growth strategy.”
According to Parkland’s financial disclosure for the quarter, Adjusted EBITDA was $431 million, a decrease of 26% as compared to Q3 2023, largely due to lower refinery margins in the third quarter of 2024. Canada delivered an Adjusted EBITDA of $200 million, in line with Q3 2023 ($206 million). Performance was underpinned by strong fuel unit margins from continued price and supply optimization despite lower consumer demand.
“Fuel margins remain strong driven by continued price and supply optimization. We also saw same store volumes growth of 1.4%,” said Marcel Teunissen, chief financial officer for Parkland during the analysts call. “This demonstrates the strength of our company-owned network and the positive impacts of our Journie Rewards loyalty program and the On the Run convenience operations. Our business is built to adapt to changing economic conditions, and this allows us to evolve our value proposition to meet customers’ needs. As economic pressure shift, our private label business was up 12% compared to the prior year and we continue to leverage Journie Rewards to attract customers into our sites with targeted fuel incentives, in-store convenience offers and cross promotions between the forecourt and convenience stores.”
Teunissen also highlighted the success of Parkland’s move into beverage alcohol sales in the province of Ontario.
Starting in September, Ontario opened its alcohol market to include convenience stores, more grocers and big box retailers selling beverage alcohol. At the September opening, some 4,187 convenience stores across Ontario were licensed to sell alcoholic beverages, along with some 3,000 other licensed retail outlets.
“During the quarter, we launched alcohol sales at 80 sites in Ontario,” Teunissen said. “We accomplished this efficiently and with minimal capital investment. We plan to offer alcohol in 120 sites by year end. It is still early days, but initial results are promising, driving increased traffic to these stores.”
On the fuel side of the business Parkland lowered its full-year earnings forecast as sluggish market conditions continue to take a bite out of margins at the company's Burnaby, B.C. refinery, as well as global economic conditions that have reduced demand.
Still, Espey remained confident about the overall outlook for Parkland going into the remainder of the year.
“The Parkland team has delivered excellent operational results during the quarter, which I have no doubt will continue going forward,” added Espey. “Looking ahead, I am encouraged by the resilience of our business, which is supported by our customer and supply advantage; and to strengthen our customer advantage, we continue to evolve our customer value proposition. I am confident we can compete going forward and we will be positioned to win in the long term in a slow economic environment.
“We are progressing well with our non-core asset investments and are on track to close the sale of our Canadian commercial propane business. In the fourth quarter, we also announced the intended sale of our Florida business, which reflects our commitment to disciplined capital allocation and redirecting capital towards the highest return opportunities. Our business is resilient and these headwinds are temporary. We will continue to focus on executing our long-term strategy and I remain confident in our ability to drive organic growth across the portfolio.”
With files from The Canadian Press
