Q2 2020 Sunoco LP Earnings Call
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Welcome to the snow quell pieces second quarter 2020 earnings call at this time, all participants alright listen only mode. A question and answer session will follow the formal presentation.
I will now turn the conference over to your host Scott Crescendo, Vice President of Investor Relations. Thank you you may begin.
Thank you and good morning, everyone on the call with me. This morning are Joe can now call piece, President and Chief Executive Officer, Karl failed Chief operations Officer, and other members of the management team reminded that today's call will contain forward looking statements that are subject to various risks and uncertainties.
These statements include expectations and assumptions regarding the partnership's future operations and financial performance, including expectations and assumptions related to the impact of the code in 19 pandemic.
Actual results could differ materially and the partnership undertakes no obligation to update these statements based on subsequent events.
Please refer to our earnings release as well as our filings with the FCC for a list of these factors.
During today's call. We will also discuss certain non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted.
Please refer to the Sunoco LP web site for a reconciliation of each financial measure.
I'd like to begin today's call by reviewing the financial and operating results for the second quarter of 2020. Despite the reduced volume we saw this quarter, our business performed well and our cost reduction efforts are on plan.
We're on solid financial footing as we continue to navigate this challenging environment.
For the second quarter of 2020, the partnership recorded net income of $157 million, which included the benefit of a $90 million noncash inventory adjustment.
Adjusted EBITDA was $182 million compared to $152 million in the second quarter of 2019.
Fuel volumes totaled 1.5 billion gallons down 26% from a year ago.
The second quarter volumes reflect a full quarters impact of code in 19 on our business.
Fuel margin was 13.5 cents per gallon up from 9.1 cents per gallon for the same period last year.
Lease income of $34 million was essentially flat both sequentially and year over year, our gross profit from non motor fuel sales was $30 million, which represented a $22 million decline from the previous quarter.
As a reminder, that first quarter included an 18 million dollar favorable legal settlement.
Total operating expenses for the quarter decreased to $97 million from $143 million in the first quarter and $123 million a year ago, Karl will provide additional detail on expenses in his remarks.
Moving on to capital, we spent $14 million on growth projects and $4 million on maintenance capital in the second quarter.
As we announced in March we expect to spend approximately $75 million in growth capital for the full year and approximately $30 million and maintenance capital.
Second quarter distributable cash flow as adjusted was $122 million, yielding very strong coverage ratios of 1.41 times for the current quarter and 1.55 times on a trailing 12 month basis on July 20, Eightth, we declared an 82.55 cents per unit distribution.
On the balance sheet, our long term debt decreased by $110 million to just under $3.1 billion.
Our liquidity remained strong with $1.3 billion remaining under our revolving credit facility and no debt maturities prior to 2023.
We ended the quarter, what the leverage reading of 4.07 times down from the 4.39 times and the first quarter.
Finally, as many of you Sarner June press release, Sunoco Lps, Chief Financial Officer, Tom Miller is retiring from Sunoco effective September 1st on behalf of the entire Sunoco LP leadership team, we would like to personally thank Tom for his many contributions to the partnership and wish him health and happiness and the next chapter of his life.
I'll now turn the call over to Carl.
Thanks, Scott and good morning, everyone.
Our strong results in the second quarter highlight the resiliency of our business model even in the face of the continued impact of coated.
As Scott mentioned, our second quarter volumes were down 26% compared to last year.
Looking more closely at the monthly trends volumes bottomed in mid April with year over year declines of around 45%, but showed meaningful improvement from there.
In May our volumes were off about 30% followed by a decline of about 15% for June.
The pace of continued recovery in fuel demand has flattened over the last several weeks with the rising Corona virus cases in some geographies.
For the month of July we averaged about 15% off last year's volumes and have seen similar results in the mid teens in early August.
Our normal seasonal pattern is for average daily volume to rise each month from the beginning of the year to a peak in August at the end of the summer.
This means that even as volumes have flattened on a relative basis, we have seen increases in absolute volume so far in the third quarter.
I'd like to provide some context around these volume trends.
We have clearly benefited from the geographic diversity of our fuel distribution network.
Well demand in southern states held up more strongly than in other areas of the country during the onset of the pandemic.
It has been more impacted on a relative basis in recent weeks as reopenings our scaled back.
Contrast, this with the mid Atlantic in Northeast States, which continued to see improvement as Reopenings progress.
While volumes were notably weak in the second quarter fuel margins showed consistent strength throughout the quarter.
Even in the face of increasing commodity prices.
These strong margins have continued into July and August.
Taking a macro look the strong margins can be primarily attributed to broader market forces that have impacted the industry over the course of the last few months.
You will volume declines across the country increased the breakeven cost for many operators and provided favorable margin environments for market participants.
From single site operators to companies with scale.
These increased fuel margins have done much of the work to offset the gross profit impact in each channel of distribution.
The volume declines and resulting margin increases also occurred in a favorable environment for the consumer.
As the average retail price for gasoline during the second quarter was the lowest since 2016.
While these market forces provide a favorable landscape for our gross profit optimization strategies. The rest of the work must be done through expense reductions.
We are skilled and strongly positioned in both of these areas and thus have been able to weather demand declines as well or better than most.
We have a deep knowledge of the markets, where we operate and had committed organizational resources to gross profit optimization and expense management well before this recent demand shock.
Scott mentioned, our total expenses of $97 million for the second quarter and that we are on plan to deliver total expenses of between 460 and $475 million for the full year 2020.
Consistent with our commentary last quarter since a portion of the expense reductions consisted of volume related items, we would expect that the second quarter would be our lowest expense quarter of the year.
As volumes have recovered we anticipate quarterly expenses in the back half of the year being higher than our second quarter run rate.
But well within the range that we have communicated.
As we look forward to the second half of 2020, there is still uncertainty around the shape of the volume recovery curve.
However, we expect market forces and our gross profit optimization strategy to result in fuel margins remaining above our historical annual range.
Our commitment to expense management delivers results directly to the bottom line.
As our second quarter performance demonstrates our ability to optimize within the current market environment as well as our focus on capital and expense management will remain key.
We are confident that are demonstrated strength in operational and financial discipline will continue to yield solid financial results throughout the rest of the year and beyond.
I will now turn it over to Joe to share some closing thoughts Joe.
Thanks, Carl Good morning, everyone. Let me start off by thanking our employees and our fuel distribution partners for their continued dedication and keeping sunoco strong and stable during this unprecedented times.
Last quarter on our earnings call, we suspended our 2020 EBITDA guidance given the high level of uncertainty at that time.
Today, we have far better clarity for the rest of the year as a result, we believe our 2020 EBITDA will be greater than $700 million, which is above the original guidance that we provided last December.
Our revised outlook has been shaped by a few key items.
The first item is obvious.
We have delivered to really strong quarters that are already in the books.
Second we believe the fuel margin environment will remain attractive although the exact shape of the demand recovery curve is still to be determined we expect the margin environment to be above historic average.
It is too early to determine whether recent events have established a new long term baseline for margins.
However, we believe the industry breakeven point for fuel margin has gone up for various operators meeting certain operators will require greater margins to remain profitable and this is good for us.
In a different scenario, where volume rapidly recovers and fuel margin refers to the previous mean this is also good for us less margin, but more volume.
Overall I believe the gross profit environment for the second half of the year, we remain very attractive.
Could it be difficult to match the first half of this year given historic drop in crude prices that occurred in March.
Finally, our revised outlook reflects our ability to deliver on the expense guidance that Carl noted earlier.
The path, where on now to having an exceptional strong year was not exactly how we envision or word described it back in December.
However, despite the office challenges facing our nation, we expect to delivered yet another strong year.
Our financial stability has positioned us for growth, we continue to deploy capital to grow our fuel distribution business.
The opportunity sets remained robust and we expected organic opportunity to remain year after year.
On the midstream side, we have read dedicated resources to look for highly synergistic acquisitions that further enhance our overall portfolio.
Let me close by saying that over the last few years, we have built that very resilient business model.
We remain proactive throughout the current challenge as well as any future challenges to ensure a stable long term future for Sunoco.
Operator that concludes our prepared remarks, you may open the line for questions.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask your question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question Q. If has any time you wish to remove your question from the Q. Please press star to for participants using speaker equipment, maybe necessary to pick up your handset before pressing the star keys. One moment. Please following poll for questions.
Our first question is from Gershuni Shneur with you've yes.
Hi, good morning, everyone. Good to hear your well it's actually scenario.
Maybe to start off I'm, just wondering if you can talk about the optimization behavior of your competitors in the marketplace right now.
So when you're in your concluding remarks, you sort of talk about how optimization benefits would come down and if volumes team back aggressively but is there a scenario where.
Everybody stops trying to plan for market share and there's an opportunity for margins to actually maybe not be at these current levels with the higher than they've been historically.
And overall, there would be a net that fit to everyone.
Hey, good morning generic so let me try to give some more color on on the breakeven comment that I've made and Carl mode.
Whenever volumes dropped dramatically between the second quarter, especially in April people had less volume and inside sales were affected people tried to.
Currently expenses to offset that but the amount of expense cuts to match the decline in volume what would visit more than difficult to achieve as a result, the breakevens went up for lot of players.
And if and when breakeven goes up for a lot of players people have to get margin in order to offset the loss as they had or if there are often their losses, thereby still wants a reasonable rate of return on their investment. So in that scenario when volume went down the mark to kind of Recalibrated with a higher margin. So demand is slow.
Dish on recovering the breakeven is going to remain if demand stars skyrocketing backup to previous levels. Then there is a theres definitely a scenario where the margin could.
Revert back to the mean, because breakevens are going down, but theres also a third scenario, but theres nothing thats. What you are trying to highlight is that.
Volume starts recovering a new baseline is established on the margin side that is the potential scenario from Sunoco perspective were good in all three scenarios, obviously higher margins, a kind of a rebalancing and margins above the roughly 10 cents, though we guided previously would be great for us at a higher volume but.
Regardless of any of those three scenarios that I highlighted I think we're in a very good position.
Okay that makes total sense to make.
And maybe just to pivot a little bit here.
You are kind of headed into a positive free cash flow, even after distribution type of scenario.
You did mentioned that you would be looking for some acquisition opportunities.
But absent finding those opportunities what is the plan for the casualty in your Youre around your leverage targets your bonds are trading extremely well.
Do you consider buying back units maybe some from your your general partner is kind of wondering what the options that you're considering absent.
Finally, it reasonable acquisition target.
Yes sure. This is Scott I'd say first and foremost we're committed to maintaining the distribution and an operating at or above that coverage ratio that we communicated in December of 1.2 times over the long term I think we're also comfortable with our targeted leverage range of 4.54 0.75 I think.
The leverage reading for the past few quarters amid the the environment of unprecedented demand destruction that we've talked about on this call I think it's proven the resiliency of our business model and our ability to support our current debt levels and so what does that give us that gives us the opportunity to identify and execute on high return growth opportunities.
Organic and acquisition based I think all that to say, we position is not with the healthy balance sheet strong leveraging coverage ratios that are going to be able to give us the opportunity to take advantage of growth opportunities I don't foresee a unit buyback program and the card Fred I think our focus is more to deploy the free cash flow towards.
Organic and acquisition growth opportunities.
Well I completely understand that and just to make it clear wasn't implying that you were considering putting the distribution exactly the opposite just given our strong everything's been.
But I guess, so if a acquisition opportunity he doesn't materialize in the near term.
I guess your primary focus would just be to keep the facility at zero and maintain cash is that we've got kind of the read there when you say that you're not interested in doing buybacks at this point.
Generic probably another way of saying it is that.
I highlighted a little bit on my prepared remarks that there is we see ample robust opportunities in the field distribution sector year. After year I think if you look back and kind of trace Sunoco since the 711 transaction, we've been growing EBITDA, we I think we've highlighted over and over that these fuel distribution.
Opportunities for us we flipped over from a a acquisition strategy to organic strategy because we saw a good pipeline, we developed internal capabilities and they are paying off for US then we started switching the the path a little bit by adding.
Midstream acquisitions and looking at organic projects. So I think we like where we have both in the field distribution sector and the and the midstream sector. So as far as the free cash flow we had at.
Certain point, if that dries up our we don't like now obviously, we have to pivot to it to other ways to creating value, but for the foreseeable future we'd like to opportunities in front of us from it from a capital standpoint, and obviously acquisitions are more optum opportunistic and has to be at the right pricing fit all the financial criteria that we set for ourselves.
Perfect well really appreciate the color today guys. Thanks for taking all my questions and haven't safe day.
You too thanks.
Our next question is from Theresa Chen with Barclays.
Hi, there thanks for taking my questions.
First just on the margins CPG margin.
Even outside of this quarter last quarter, it's been for years really that we've seen outsized results above that long term range and I was just wondering if you could remind us again, what do you think are the primary driver of outperformance here.
Is it connects to scale your diversification distribution channels and how sustainable do you think it is going forward.
Hi, Theresa good morning this Carl.
Here's how we we look at margins I think some of you've heard us over the last.
Number of quarters.
To put this this hypothesis out that that the portfolio of fuel distribution channels that we have.
Really has.
This this characteristic of where we have favorable market conditions like we had in the first quarter with that Joe mentioned on his prepared remarks that.
Gasoline prices fell quite a bit in March where we would capture a good amount of upside on the margins.
And then when we would have it a tough quarter from a market.
Favorability perspective, so say a large movement up that we would put up.
You know solid margins.
Definitely lower but inside the 9.5 to 10 half cent guidance range. So I think it's really that that asymmetry that that when you look on an average basis we've averaged.
Above that range. So the factors that play into that are really the portfolio that we've we've crafted the geographic diversity that we have we've talked for a long time.
Couple of years about gross profit optimization in our ability to.
Look at volume and margin together and respond to that I am not definitely has has proven out in this quarter. So those are those are the kind of things that I think we think about and you guys should look at going forward.
Thank you and and in terms of your.
Wholesale distribution.
Network and channel so.
We recently saw the announced.
The transaction of 711 acquisition.
Way and.
I believe they have entered into as long term feel supply arrangement with.
By Eric years ago, we did something very similar and entered into a long term fuel supply agreement with what is now your largest customer at what I believe.
The rate that is not only far below your long term guidance that certainly below.
And printing recently does the recent transaction have any implications for your renewals to be contracting with the customer and can you remind us.
When that comes up.
Sure, Yes, our relationship with 711 is very solid on the original contract that we signed was a 15 year agreement. So just at the end of the first quarter of this of 2020, we finished our second year on that contract. So it has a little less than 13.
Years left.
You know here's what I'd say about 711 is they've been a great partner there are well run company and I think.
We feel good about the relationship we've had with them.
You know we think the you know we don't comment on the details of other deals but from what we've read in the press about the Speedway 711 transaction. This should be Grayfer for 711 in their stated goal of continuing to grow and we think a good stable partner just strengthens our relationship going forward.
Okay and along those lines.
It's been publicly stated that the seller has option to grow with 711 as they achieve their targeted stores within thank you. Wes do you have anything similar to that can you also grow with the customer per euro arrangement.
Yes ill.
If you go back a couple of years that was actually baked into our original deal that over the first four years of our relationship with 711 that it was built into the contract.
Some growth.
Structurally in addition to that we obviously have the opportunity to work with them and and.
Based on our relationship where it made sense. So I'd say, we have both to the contractual growth as well as additional upside.
Thank you.
Thanks Theresa.
Our next question is from Spiro Dounis with credit Suisse.
Hi, good morning, guys.
On a follow up on that last question, but maybe ask more broadly about how you're thinking about changes happening on both sides of your value chain I guess on the supply side seeing some refinery closures and indefinite idling. Some are turning into renewable diesel facilities on the demand side seeing some ongoing consolidation and retail so just curious over the long term.
Hey thing about that impact on your business, what you're doing to adapt to that and overall what that means from margins overtime.
Yes fair this Carl.
On the supply side, one of the I'd say foundations of our strategy that we've talked about for while is that we felt overall that the United States was long product and are being in our spot in the value chain.
Buying in that long environment, and then supplying.
Either into.
Into our customers stores was a good spot so I think.
Even with these unprecedented falloff in demand on that that just makes us longer right. So I think some of the rebalancing that we've seen in them in the market.
Is appropriate for the demand that we see no I spent a long time and the refining industry myself and and whatever the demand level will be.
The refining business balances to that so whatever the future holds I think that will continue to be true, but the U.S. has really turned into an export market and that definitely strengthens our ability on on the margins ill, let Joe comment on the retail side, yes.
The retail side.
The settlement of transaction I think it was reported about $21 billion and I'll, probably reinforce the comment I made earlier about to about Breakevens and reasonable returns I think whenever you somebody spends $21 billion on acquisition. They expect a reasonable rate of return on that one. So I think is a ticket could be.
Instructive to margins going forward I don't see a scenario, where this will be our should negative towards margins going forward and I think the other thing I would note about the 711 transaction is is that.
Depends on how you want to calculate the devaluation of this I think it does highlight and remind investors the value of quality downstream assets and we have sunoco, we have quality downstream assets and our consistent performance kind of reinforces the quality of our business. When we factor all these together I think theres.
As a compelling argument.
There is some undervaluation of Sunoco.
Yes fair enough.
The second question maybe to follow up on some of your prepared remarks, just around what you're seeing regionally you give us a pretty helpful break down last quarter, our around some of the different regions and despite some shut an impact it sounded like volumes are actually pretty resilient you mentioned, some western spacing increased cobot issues that sounds like demand and your prime.
Hi regions are rebounding, a little stronger I guess it is that fair and then could you give us a little more detail on what you're seeing across the different regions.
Sure.
I think I mentioned some variability in my prepared remarks, but I can add a little bit more color to that if you think about the the northeast states that we where we saw we have a decent amount of business and we saw I'd say more rapid decline at the end of the first quarter.
You know they've continued on their trajectory of of recovery without a lot of change.
On the southern States, where you've seen more cobot cases come up it's kind of interesting I mean, Texas, where we have a decent amount of business and it's really in our backyard. So we know, Texas pretty well I'd say I'd say, Texas has definitely the recovery volume has flattened.
Over the course of the last several weeks, but then you look at a stay like Florida, where we also have a decent amount of business and even with the reported Kobin cases, there that volume recovery has continued to strengthen and you know is probably relative to last year one of the better states.
Volume wise, where we operate.
Then you have you know maybe a different ended the spectrum is our operations in Hawaii.
Hawaii, obviously has a.
A large component of their economy is based on tourism and with that slowed down.
I'd say, our pace of volume recovery has not been as quick and the current volume relative to last year is I'd say below the national average or below the mid teens.
That we've said for our whole network. So you know it really varies by state and kind of what the government does but even on top of that it really depends on the consumer in those markets and what they do.
I think that that variability highlights and I mentioned this in my prepared remarks, as well the value of our geographic diversity and.
We talked a few minutes ago about our our 711 deal that that's the foundation of our fuel distribution business and then the remaining fuel gross profit.
Based on this diversity and geographies and channels and I think thats really really played out so even where we might have some lower volume performance, we have other areas with higher volume performance and offset.
Very helpful. Thanks, guys.
Okay.
Our next question is from John Royal with JP Morgan.
Hey, good morning, guys. Thanks for taking my question.
So in terms of the margin results 13.5 cents adjusted can you help us on a high level with how much of that strength was driven by.
You are kind of moderate exposure to retail margins.
And how much it was driven by kind of your much larger wholesale business I'm, just trying to get a sense for.
How the margins tranquil share between wholesalers and retailers.
Yes, John that's good question.
We don't disclose a lot of detail around the margins by channel, but I can give you a general sense that.
I'd say.
The margins were higher in all of our channels of distribution, So obviously, where we've elected to keep.
Some retail margin exposure.
Mentioned why earlier as well as in the New Jersey Turnpike, those are really good retail markets and we'd like the assets that we have there and so we've definitely.
Benefited from higher retail margins in those areas, but.
Going down the value chain into some of our dealer and distributor business. We've also seen strong margins in those areas as well. So I think the breakeven costs. It Joe mentioned really is true it kind of easier to wrap your head around in the retail side, but it's also true it's on the wholesale channels and we have.
Seeing stronger margins in all of them.
That's helpful. Thank you and then just looking at shares question from a slightly different Angola, given where you said.
Well bridge.
Warming quite well through a trough demand period doing 700, plus in EBITDA. This year I was there any thoughts are moving some of the conservatism around if your capex and sort of leaning into this period instead of going back.
John I think Thats a.
Good points and obviously when we when we.
Made the revision to our Capex at the end of the first quarter.
And I mentioned that in the prepared remarks. So there was a heightened level of uncertainty and now we have a lot more clarity I would definitely say that.
We have the flexibility to deliver exactly what we said on the second quarter, but also at the same time, we have the flexibility because the demand for us to go as far as signing up new customer is there. So I think we definitely have upside and we're in a position where if the free cash flow and we have like.
We guided to have some excess cash so we can deploy the growth capital. We're in a good position to do that but we're about a positive right now we're not ready to go Hey whip solve the Mark and say we went down on Capex go up on Capex, but I will say, we're in a position to to actually do what you said.
Okay. Thank you very much.
Okay.
As a reminder, if you'd like to ask a question. Please press star one. Our next question is from Sharon Lui with Wells Fargo.
Hi, good morning.
Oh injectable thing you can provide some color on your customer base.
There are faring in this environment I.
I guess given the strong margins have you experience any change in credit or collections and if there any risk of potential closures absolutely this smaller sites.
Hi, Sharon.
What I'd say about our customers is that they have proven to be very resilient.
In general So I think we mentioned last call that obviously see in.
Some cases, we worked with customers.
On on liquidity held or different things I'd say generally that was was temporary and the vast majority of our customer base.
Has been resilient.
If you look back on the on the history, the convenience store industry, which represents the majority of our customers.
A lot of them are small privately held family based companies and if you look at other periods of difficulty where people thought that you know these businesses were going to we're going to struggle.
They found a way to get through and I think thats panning out this year there good business operators and they find a way to make it work.
Okay.
And then I guess, if it's maybe provide an update on JC, knowing what you guys are seen for diesel demand.
Sure.
Obviously with the lower drilling activity.
We've seen some impact on the diesel business in West, Texas related to the JC No one project.
You know you look back at the beginning the year before the doubled black Swan of this Saudi Arabia, Russia Price War, and then the cobot related demand declines.
The pipeline was performing very well it was full and actually performing better than our projections for the project.
Since drilling has slowed.
In the second quarter, we were below 50% of capacity on the pipeline.
I will say, we also have 200, plus retail sites in the market and they generally continue to perform well we've seen most the impact on on the diesel side.
As we look forward, we still generally like the Permian as a favorite production region and we've actually started to see some activity pick backup in the third quarter as crude prices seem to have found a floor around $40. So this part of our business in the second quarter.
Was a drag on our earnings but I think this another example, where our portfolio approach for the fuel distribution business has ensured that we still deliver solid results each quarter and as we look forward, we expect that performance in chasing on to strengthen.
Great. Thank you.
Thank you.
Our next question is from game Marine with Mizuho.
Hey, good morning, everyone I'm, just I think Joe you mentioned last quarter about a lot of the cost savings.
Sort of being fixed in nature and not necessarily part of the variable component seems like you're tracking of maybe even above your expectations on the cost on the fixed side could you speak to that component and then also.
I appreciate that on the variable component of things costs will rise as volumes increase, but but how should we think about I guess non variable cost in the back half of the year.
Hi gave this Carl I'll I'll comment on the costs.
Yeah, I think you hit really on the two buckets of how we look at our cost reductions.
Volume related costs as I mentioned in my remarks.
With the the lower volumes in.
The second quarter I'm, clearly, we had more cost savings related to that and as we've gone into the third quarter. Some of those costs have come back in.
On the fixed side.
We did look through all of all of our cost structure, and we were able to take some fixed costs out of the business and that's going to continue through the second half of the year and even into 2021. So I did say that you should expect that our costs will be higher in Q.
Three in Q4 than they were in Q2, but we're still tracking very well inside our our guidance of 460 to for 75 for the year.
Thanks, Carl then maybe if I could ask a question on the M&A landscape overall.
We are indeed, it sort of a higher plateau on margins just.
Thoughts on kind of multiples around wholesale businesses out there whether those will change as well and also the degree to which people are you are seeing are willing to transact given the uncertainty that's still out there.
Yes, Dave.
As far as.
Couple quick questions you have embedded in the as far as the multiples per for wholesale business.
If I'm not ready to call that Theres, a new new baseline for margin set but there are some encouraging signs and the shape of the recovery curve plays out I think will get better and better insight into Theres, a revised kind of new new mean for margins and I think definitely the the direction.
As it's going to either revert back to what it was historically or it's going to be higher I don't see a scenario where it actually below historic averages. If that's the case, obviously, that's us less conducive for any type of valuation for downstream assets from the M&A standpoint.
We're not seeing as much so it's like open process this coming our direction, let's say the theres. Some other three no non open going on but we're just not seen as much I think it makes sense because people are still trying to sort through how to even interpret the last three month of information when you're down 30, 40%, but.
In margins are up 30, 40% people are still trying to calibrate what that means going forward, both from a seller and buyer perspective for us.
I mentioned that provinces, the last three or four quarter that we've kind of switched over to more organic strategy versus acquisition strategy. If valuations go up we still have our organic arm to go to go to go develop business for us and Thats why we worked so hard to develop capability versus relying on a on.
On an acquisition strategy for for fuel distribution.
Thanks, Joe.
Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to Scott quiz show for closing remarks.
Well, thanks, everyone for joining us on the call today as always please feel free to reach at me with any follow up question, we'll talk to everyone. Soon.
This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.