Q3 2021 Parkland Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to Parkland Corporation.
21, Q3 results conference call.
At this time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session.
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This call is being recorded on Wednesday November 3rd.
I would now like to turn the conference over to South Roberts director of Investor Relations for Parkland. Please go ahead.
Thank you operator with me today on the call are Bob Espey, President and CEO, Marcelo <unk>, Chief Financial Officer, and Doug Haugh, President Parkland USA.
This call is being webcast and I encourage listeners to follow along with the supporting slides. We will go through our prepared remarks, and then open it up for questions from the investment community.
Please limit yourself to one question and a follow up as necessary and if you have other questions reenter the queue.
Ask analysts to follow up directly with the capital markets team afterwards for any detailed modeling questions.
During our call today, we may make forward looking statements related to expected future performance.
Statements are based on current views and assumptions and are subject to uncertainties, which are difficult to predict.
Certainties include but are not limited to expected operating results and industry conditions among other factors.
Factors applicable to our business are set out in our annual information form and management's discussion and analysis.
We will also be discussing non-GAAP measures, which do not have any standardized meanings prescribed by GAAP. These measures are identified and defined in parkland continuous disclosure documents, which are available on our website or on SEDAR.
Please refer to these documents as they identify factors, which may cause actual results to differ materially from any forward looking statements.
Dollar amounts discussed in today's call are expressed in Canadian dollars unless otherwise noted.
I'll now turn the call over to Bob.
Great. Thank you and welcome to parkland Bill and good morning, everybody. We appreciate you taking the time to join US and trust you are staying safe and healthy.
Photo on today's cover slide showcases the first of our on the run Ultrafast electric vehicle charging network in British Columbia located in downtown Kalana. This site is strategically positioned to serve the emerging needs of electric vehicle owners in the region consistent with our strategy of creating convene.
Yes, some food destinations. We are currently upgrading this site to feature and on the run branded convenience store and a refreshed.
And our research to joining triple those restaurants, when you combine these amenities with conventional and electric refueling options. It represents a fully integrated experience for our customers and shop refuel and used complimentary Wi Fi as a recharge their vehicles, we are on track to open our.
RPC electric charging network in 2022, our goal is to enable our customers to make the most of every stop and the vast majority will feature and on the run convenience store and a triple those restaurants.
So I'd like to start by thanking the entire parkland team for delivering record results at an enterprise level as well as in our U S and international segments working together as one parkland team, we generated record third quarter adjusted EBITDA of 364.
<unk>.
At $1 billion year to date. These are exceptional results that put us on track for a strong finish to the year and give us high confidence that we will achieve the upper end of our full year adjusted EBIT guidance.
Our performance highlights the strength and growth trajectory of our company the quality of our brands and our ability to anticipate and meet the evolving needs of our customers. Our record results were underpinned by the capabilities of our team.
Consistent operational execution organic growth, winning new business and financial discipline in parallel we continue to benefit from our acquisition strategy and proven ability to capture synergies.
Late last year until now we have announced or closed 14 acquisitions, each complement and expand our existing business are in demand resilient markets and collectively they are immediately accretive and we are.
Seeing strong supply leverage across our system, we can expect will increase distributable cash flow by approximately 10%.
These acquisitions will provide further growth and synergies through leveraging our supply platform parklands brands and marketing capability and integration into our back office platform.
As you will have seen earlier this morning, we announced the acquisition of rupee yet.
Southern Florida, which will almost double the size of our U S retail business, Doug will talk more about this later on the call at our Burnaby refinery, we achieved the composite utilization of 101% during the quarter Youll recall that we set an ambitious renewable fuels target for 2021 aiming to co cross.
That's a 100 million liters of Canadian sourced bio feedstocks.
Equivalent annual environmental benefit of removing 80000 passenger vehicles from the road.
Team embraced this challenge and co processed a record 33 million liters of bio feedstocks in the third quarter and we are confident we will meet our full year target year to date, our co processing accomplishments have delivered compliance cost savings of more than $35 million.
Virtually paying for our entire capital investment in co processing since 2017.
We've also seen growth in the carbon compliance and offset trading business and elbow River Lastly, I would like to provide an update on the planned maintenance at the Burnaby refinery commenced in early October and I can report that refinery has substantially less.
Substantially operational by the end of the October.
Very proud of the entire parkland team, we have set new performance records in the third quarter.
<unk> has had.
<unk> has a very exciting future and you can count on us to remain focused on maintaining our financial strength.
And delivering sustainable long term growth on a per share basis I'll now pass it over to Marcel discussed our third quarter results in more detail.
So.
You, Bob and good morning, everyone.
Turning to slide four and a summary of our financial results spoke already mentioned, we delivered a record quarterly performance adjusted EBITDA $364 million, which is up 8% compared to the same quarter in 2020. During the first nine months of 2021, we generated $1 billion exactly.
Adjusted EBITDA, which is up almost 40% to the same period in 2020 and these are really remarkable accomplishments for our company.
So what are the main drivers for our record performance.
If you look at the macro level, while COVID-19 continues to impact the broader economy.
<unk> seen continued signs of recovery and as you can see on the right here in the graph Canadian volumes, a whole beginning with 2020, but have not yet back to pre COVID-19.
19 vessels and this is driven largely by the integrated markdowns and the impact of work from home orders in some provinces.
We've seen good volumes in Quebec, MPC at almost recover to 2019 levels, where Ontario discoveries at Atlantic provinces are still about 10% behind the 2019 levels, but significantly up from quarter two.
This year, the computer markets around the big cities have not yet fully recovered, but we do see positive signs as things normalize.
We see similar presence in several countries are across the international segments, but not yet at all and on the other hand actually the U S is largely open for business and Oems are exceeding pre COVID-19 levels.
You can see the table in the boxcar market business, which is comprised of our Canadian U S and international segments continues to deliver consistent growth. These results were driven by some customer offers excellent performance from our recent acquisitions, including Colorado, Bishop in Idaho, and the East light joint venture in the Dominican Republic plus associated.
Supply advantages that we've captured.
Relative to the first nine months of 2019, adjusted EBITDA and these combined marketing segments is up 17%, which shows the success of our operational excellence and organic inorganic growth strategy.
Our supply business was also markedly up from 'twenty, driven by 4% refinery utilization bundle that in 1%, including a record $33 million, which is a five pizza co profits in the quarter.
At the refinery continues to explore alternative ways to increase the renewable fuel production rejection recall from last quarter is the most cost effective way to comply with the BC low carbon fuel standards.
Barclays is firing on all cylinders are extremely old batteries as well and we are positioned to capture upside as economies continue to recover.
Moving to the segment overview on slide $5 stock with Canada.
We delivered $105 million levels of adjusted EBITDA in quarter, three as recovering volumes and growth in merchandise gross profit were offset by lower unit margins driven by a shift in few and customer mix.
Benefits from the Covid related ratio assistance program.
Unit fuel margins in the retail segment continued to be strong supported by our digital pricing capability.
Same store sales growth, excluding cigarettes, maybe 2% up.
This was driven by strength in major categories, including central store beverage and alcohol, while successful margin enhancement initiatives drove merchandise gross profit you'll recall quarter. Three 2020, you've also an exceptional quarter and which kind of it almost largely open fully locked down during the summer, which made the year over year comparison, a difficult run to serve.
Pos.
To expand our on the run convenience, Brent and over 90, new to industry retail sites and lump Costco locations in the quarter and we are on.
On track with our target to complete approximately 61, the run off side conversions by the end of the year being a Canadian come to around 400.
Reflecting our focus on continuously strengthening our connection to customers. We have now grown our acuity membership to $2 5 million.
Continued to further diversify our retail offer and expand the ways. We can meet the evolving preference of our customers.
<unk> and door dash and now available at over 270, and 200 locations respectively.
Moving to the international segment. So the international segment delivered a record adjusted EBITDA of $83 million.
Which was up $6 million from last year, which you may recall last year include a nonrecurring $10 million benefit. So it's really an outstanding performance in.
Q3 performance was underpinned by the ongoing recovery in our base business supply optimization, and previously announced cost control initiatives I spoke to you on growing strength in offshore drilling and production activity in Guyana and Suriname.
We also drove value from our recently announced acquisitions, including <unk> Joint ventures, Dominican Republic that added approximately 160 high quality retail sites to our portfolio plus we deliver related supply advantages.
Our total international volumes were up nearly 20% year over year and in some markets.
We have seen some early signs of tourism recovery.
We are well positioned to capture additional upside to SPX or into the tourism season in quarter, four and into quarter. One next year.
Shifting to our U S segment, we have doubled our business year over year.
Adjusted EBITDA of $44 million in the quarter.
U S national retail fuels volume have surpassed 2019 levels.
This site for the U S economy.
Our U S performance was propelled by a combination of acquisitions organic growth from our national accounts business and the benefits of a strong summer driving season.
We saw strong contribution from whom rapid Vishal, which we acquired in April this year.
Inventory early supply synergy capture.
Our underlying strategic growth initiatives and delivering results are delivering results and our acquisition and integration capabilities to continue to generate shareholder value.
We continue to see additional upside in a recovery, particularly in our marine Bunkering business in Florida and from oil and gas activities on an order.
Regional operating center.
As I mentioned in last quarters call, we continued to manage inflation as wages for workers service providers and across the products have been increased.
Pressures are not isolated to partner and our team is doing an excellent job of offsetting these headwinds and ensuring additional costs are recovered from the markets.
Our supply segment delivered exceptional third quarter results reporting $161 million of adjusted EBITDA, that's up $37 million for quarter three in 2020.
Every product the Burnaby refinery team have continued to extend our co processing and renewable fuel manufacturing leadership has proven capabilities directly support our goal of helping our customers lower the carbon impact of that journey during.
During the quarter, our energy team set another record co processing, an average of 2300 barrels a day or 33 million liters of buyer feedstock and year to date the refinery escrow processes.
$83 million, you, just placing us well on track to reach our 2021 goal of $100 million co processed feedstock.
Supply optimization business also reinforced and low carbon fuel logistic transportation and blending as well as low carbon credit sourcing on trading.
As you're aware, we undertook planned maintenance at the refinery in October.
<unk> already mentioned at this point to work has been substantially completed and we now wrapping up the typical utilization levels.
Corporate adjusted EBITDA expense was 29 million, reflecting the reduced benefit from the Canadian rates.
Emergency brake subsidy program and administrative costs to support a partial return to pre COVID-19 business activity levels.
Because in the room today is the Hawk presence for our U S business and he will provide a few highlights of our most recent acquisition and the rest of that was announced earlier this morning.
Thanks Marcel.
Slide six is a quick spotlight on our recent announcement to acquire <unk>.
This acquisition complements our existing Florida commercial business that we've had since 2019 and establishes a large high quality retail and convenience growth platform for us in southern Florida.
As Bob mentioned in his opening or be it does almost double the size of our retail business with 94 new sites. We're currently at about 101 existing sites. So it's almost a double gives us immediate scale in a densely populated and rapidly growing Florida market with some really unique real estate and location attributes of this network.
We love is going to give us an awesome opportunity to expand our on the run convenience brand.
We'll talk more about this at our Investor day, I, just want to take the chance to thank the <unk>.
Nacho and only ever be added on their family for working with US on this choosing parkland choosing to join our family and further support going forward and growing a very exciting market in Miami.
Thanks Marcel.
Thank you Dr <unk>.
Regulations to you and the team.
I'm excited about this.
On slide seven we have summarized the impact of all of our recent acquisitions since reporting our quarter three results and 2020 last November we've now announced or closed 14 transactions, which you see here on the page representing an investment of approximately $1 2 billion.
Excluding purchase price adjustments in aggregate. These deals represent our fourth largest acquisition to date and highlight the impact of our disciplined consolidation strategy.
Transactions are immediately accretive to distributable cash flow per share and are approximately 9% accretive after expected synergies and EBITDA enhancement initiatives.
Our acquisitions are a reminder of our stated growth strategy and provide us with integration and organic growth opportunities, which will further strengthen our supply advantage and generate attractive returns.
At the end of quarter three our total funded debt to credit facility EBITDA of $3. Two times reflect the completion of some previously announced acquisitions. Following the anticipated synergy captor, we expect to return to our targeted leverage levels of two to three times the.
There are no material credit facility or bolt maturities until 2026, and we have significant financial liquidity.
As always we are focused on creating long term shareholder value and we are confident in our ability to reach our ambition of $2 billion of adjusted EBITDA run rate by the end of 2025.
I'll pass back to Bob to wrap things up.
Great.
Thanks, Marcel and Doug that was a great overview and it sets the tone for what we expect will be a strong finish to the year.
I'd also like to welcome the <unk> team to the parkland team really look forward to.
Working with the team in southern Florida, and establishing a retail presence there.
This acquisition is our largest U S acquisition to date and is a solid example of the accretive opportunities in our pipeline that will continue to support our growth strategy.
Turning to slide eight another critical aspect of our strategy is our sustainability journey.
I am pleased to share that we continue to make strides in advancing our environmental social and governance efforts during the quarter. We welcome two new board members, Angela John and Richard hopefully they bring extensive global experience in supply low carbon technologies and in creating value across the entire downstream chain and I can.
The company and its shareholders will benefit greatly from their contribution.
I look forward to their contribution of working with them.
As mentioned earlier, our Burnaby refinery continues to extend its leadership position when it comes to renewable fuel manufacturing our proven capabilities are delivering tangible environmental benefits to our customers coupled with financial benefit to parkland through cost effective compliance, it's a true win win.
We have a lot more to share on the progress of our sustainability journey and we will publish our sustainability report before the end of the year.
Moving to slide nine our record quarterly results highlight the capabilities of our teams and the underlying strength and trajectory of our business. These results clearly demonstrate the value of our integrated model, which includes supply logistics and marketing and we have high confidence in achieving the upper end of our one year adjusted EBITDA guidance the bump.
$2 5 billion plus or minus 5%.
We have not reduced our 2021 capital expenditure guidance at this time, but due to anticipated timing of capital spend including some COVID-19 related delays, we expect to be at the lower end of our range of $3 $50 million to $500 million.
To wrap things up before we invite our VP for invite your questions I'd summarize by saying that I am extremely grateful to the parkland team for delivering a record quarter and a record year to date performance.
Pipeline of organic growth initiatives and accretive acquisition opportunities gives us confidence that we will achieve our $2 billion two.
$2 billion adjusted EBITDA run rate by the end of 2025.
Park lamps growth program is firmly on track, we look forward to seeing you at our upcoming Investor day on November 16th and Toronto.
<unk> will include presentations from parkland leadership team outlining our long term growth and energy transition strategy, which will position <unk> for continued success, while generating superior shareholder returns.
I'd now like to turn the call back to the moderator for questions.
Thank you ladies ladies and gentlemen, we will now begin our question and answer session.
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One moment for your first question.
Your first question will be coming from Ben Isaacson from Scotiabank. Please go ahead.
Good morning, everyone. Congrats on the good quarter.
I have two questions. My first question is just to get a.
Just to provide investors a bit of an update in terms of where you are on EBITDA. So.
You ended 19, I think you were at one <unk>.
Two six in that ballpark and we had called that you've made lots of great acquisitions.
Are you is your run rate one for right now and is that.
Does that go higher once we see the recovery of Covid could you just give us an update in terms of what you think run rate EBITDA is right now and where do you think it could be.
In a COVID-19 free world.
Hi, Ben and thanks for the question, we will be providing guidance later this year on our 2022 bits as well, which will incorporate the impact of the M&A that we've announced and we'll be closing subs.
Subsequent to the announcement and into the beginning of next year.
I think.
So we will certainly see the benefit of those plus the associated synergies start to flow through in 2022 and on top of that we do still have.
Some COVID-19 headwinds, it's a business that has as.
As public health measures continue to have an impact in incidents go down and we expect we will have.
Positive impact of providing a tailwind for parkland. So look I'm confident that we're setting up for a really strong 2022 here.
On the back of record performance in 'twenty one.
Great. Thank you for that Bob and then just as a follow up question really impressed with the 20%.
Volume growth year over year in international wanted to take a little bit deeper there.
What do you think the run rate volume is an international or are we getting close to five to $5 3 billion leaders I think we were at five one back in 2019, how much about 20% growth can you break that up into the three buckets that you usually do.
Is any of that from M&A or is it a lot of that.
Covid.
Recovery. Thank you.
I guess, there's three buckets. So part of it is M&A. So we have done some M&A.
In the region and Youre seeing the impact of that.
In the volumes.
And that is sustainable going forward and the second thing is growth in our wholesale business across.
Multiple customers within the region. So we've talked a lot about Guyana, and Suriname and the impact of natural resources in the economies of those markets, let's say on top of that the team has been making wins across the region base.
Based on the strength of our supply system in the region. So again, we expect that to continue going into next year and then the third thing is we have seen some recovery in Covid, we've seen aviation volumes come back, but there is certainly not at the level, where they were in 2019 and.
Some markets are still closed so that will increase both diesel and gasoline demand as we see those markets come back in full force. So so again.
Hitting on.
First of all I like the team has done an amazing job there and filling the gaps that occurred through Covid and then sitting on the upside of full year over year run rate on our acquisitions and then continued.
Positive impact of the Covid recovery.
Thank you. Your next question comes from David Newman from David Barden. Please go ahead.
Good morning, guys, great great quarter, good to see in the acquisition as well.
Just a couple of thoughts on a couple of questions on first of all I guess it would be out of any any financial metrics you can point out to.
It's obviously a real estate play out of the 54 sites and then I look at the volume that you are getting any financial metrics that you could say in terms of run rate EBITDA that we should be should be thinking about here it looks like it could be.
$10 million to $20 million in terms of run rate and what you might have paid is eight nine still kind of the run rate on what you pay for valuations.
Yes, David.
Thanks, and great question.
We'll certainly incorporates the EBITDA into our guidance when we release that later in the year, so youll be able to see that.
We're not disclosing those details at this point.
But I will turn it over to Doug and he can give some more insights into the quality of the business that we're buying and the type of sites that we're buying.
Thanks, Bob.
Yes, no I appreciate the question it's a.
It's a fantastic business a couple of aspects to appreciate about it in terms of its fit with us strategically.
It's not just 94 locations, but it's 94 locations on virtually irreplaceable real estate debt.
As extremely dense so theyre all in two counties.
Which is important as we think about rolling out on the run in the U S.
Really wanted a launch pad that would give us density in a market to have impact on marketing advertising branding.
While we love our sites in the Rockies, we don't there's not a place in the Rockies, where we can have 94 locations in one town.
In a rapidly growing town at that like Miami. So that's what gets US there is a great quality business today.
One that we are positioned to really add synergies to both from a supply standpoint of course, but in this case on the retail marketing branding side of things as we as we rollout on the run across the U S. So that's that's what gets us really pumped about this business going forward.
And that's sort of.
It's a great segue to.
The amount of real estate that you actually own here taken with your corporate sites in Canada.
I mean, you guys are upwards, what 700 sites now Corporately owned which is I would think no matter what in terms of energy transition that real estate does have a lot of utility.
Yes.
No for sure.
Corporate owned site counts.
We are starting to build a good portfolio.
That number I'm not sure we disclose but it's roughly three quarters that our loans and 25% that are leased across our network.
Your next question comes from Neil Mehta from Goldman Sachs. Please go ahead.
Hi, Good morning. This is Charlie on for Neil Thanks for taking the questions and congrats on a great quarter.
The first one was just around capital allocation. So you've completed a number of transactions this year, which have driven higher EBITDA and really strong earnings execution, but its not necessarily clear you've gotten credit for the deals and the equity price performance. So just wanted to get your latest thoughts on how you think about the optimal capital allocation strategy across the balance sheet.
And thinking about incremental capital returns.
Yes, great Great question.
Again.
We are really pleased with the growth that we've been able to achieve in the business.
And.
With support from our shareholder base.
That's great I appreciate the color there and then the follow up is just around the co processing initiative, which continues to track wallet Burnaby and it seems like you're on track to reach that $100 million liter goal for the year. So can you talk a little bit about the opportunities that might exist beyond that initial goal and as it relates to the renewable fuels.
And also how that could further offset any regulatory obligations you might have.
Yeah. So.
Jim.
And we're really pleased with what the teams achieve the other areas that we continue to make great progress we do have.
Carbon compliance trading business and carbon offset business, we continue to grow that substantially and we've seen enormous growth there over the last 24 months and then we are a large.
Wholesaler of renewables, certainly within Canada, where we leverage our rail fleet to bring product.
And move it around the market so that.
Space, we're seeing exponential growth right now and expect to see that here going forward over the next few years.
Your next question comes from the Fisher Street, San National Bank. Please go ahead.
Hi, and thanks for taking my questions.
I was hoping you could comment a little bit on the Canada results you're per year, and what caused you feel margins to soft soft and you'll be you and sequentially.
Obviously product costs were a factor however, I wanted to clarify that in Canada that fluctuation of product costs. It isn't as significant of an impact to retail fuel margins as it is in the U S number one if that's in fact, the case and number two if the business model that you have which focuses more on lots of corporate stores more.
Miller, if that'd also insulates the products the product costs.
Cause fluctuation in there and maybe you can help me understand if that margin that we saw this quarter is that because of the part of course is that less than a normalised level that you would otherwise expect.
Yes, I think so thanks for sure and thanks for the question.
I'd say the pure margins first of all there's what the market is forgiving and where it's pricing at and if you do look on the Kent data and you'll see that it has come in year over here.
That thing is mix.
And not so much between art dealer in our corporate business, but.
Our commercial business has some good growth and.
Some of the lower margin distillate delivery business, so that pulled the the.
The aggregate margin down, but look the margin environment and the business is extremely healthy given that the volumes are off.
And compared to 2019 I'm in the business and performed on a year to date basis is shown growth and in the quarter.
We certainly run the same level, where we were in 2019. So look I'm very pleased with the performance of what the team has been able to achieve.
As always in that channel there is a bit of volatility and margins, but over time, they certainly work out and.
Again provide stable cash flow from that.
Business.
Okay. Thank you for that color and in the prepared remarks, I think I heard management's comments on Capex reduction sounds so I heard that correctly just wanted to get your perspective on what projects have been deferred and uhm. The total of that Capex production. There was another one earlier.
<unk>, if I recall correctly, if that will just be added to to the 2022 number.
Yeah, I would say.
So we are at the lower end of the guidance.
We currently provided than it is substantially less than what we indicated at the beginning of the year.
We did have.
One project canceled that was within our supply group, because we were able to achieve some of the benefits without the capital required.
And.
And and then we had some delays and some particularly in some of our retail.
Due to just just constraints in and contractor capacity and getting materials. So we expect to pick that up on next year, but not incrementally to growth capital that we would normally have on that channel.
And I would say.
Those are the two two main items that are really impacting every are optimized Sophia capital spend as well with our emanate that we have done some of the emanated is just kind of display some of the epic Archie would about all of them.
So organically yeah.
Your next question comes from Michael <unk>. Some tedious. Please go ahead.
Hi, good morning, congrats on a quarter.
You talked to a couple of times on the acquisition and contribution and particularly on the synergies and it seemed like the synergies are coming in stronger than what you would have originally anticipated so.
I was hoping that you could talk about the.
The source of that in particular, I think you pointed out.
Supply is introduced in the Pacific Northwest.
And supplies energies.
As part of the.
Acquisition. So can you talk about the source of those in the sustainability of those senators.
Yes, Hi, Michael and thanks for the question.
Consistent with what we've talked about it in the past as we look for synergies and sort of three buckets. The first is.
In supply, which.
Tends to come quite quickly and we are seeing that benefit certainly through.
The majority of the M&A that.
We've done.
This year.
The second thing is making operating improvements and that can be things like rebranding it can be optimizing the network.
Some cases.
We've been able to close sites in the commercial business in aggregate that into our our.
Or other locations and then the third is in our operating system and back office.
One of the things that I'm really pleased with the team has been able to achieve as are the.
The speed at which we're integrating into the back office and maybe you can give some color on some of the great work. The team has been doing in the U S. But we've accelerated the pace and the speed at which we get businesses onto our back office platform, enabling.
US to get those those transactional synergies quicker.
Oh, that's a great point about I think the and it's due to the ERP back office systems, but it's also.
Our logistics platform, our sales and marketing CRM systems are people and culture platforms.
All along with palms, which is from a safety and environmental health standpoint.
Critical, especially as we integrate some of these smaller entrepreneurial businesses, having to have that kind of support in the past so really all five.
Lanes of integration process have continued to improve we continue to get better at execution. We've continued to add to the team in terms of expertise and horsepower and.
Yeah, the the pace of getting that work done really does lead us to <unk>.
Faster synergy capture and faster growth because it's a lot of those capabilities really allow us to move forward more aggressively so similar to what has been able to achieve in the west we seeing that in our international business and the three acquisitions that have been done.
<unk>.
The other thing you did ask is are those sustainable and certainly they are sustainable and that's it.
Will will.
Baked into our guidance for next year.
Great. Thank you and just as a follow up.
Can you talk about what the pipeline looks like right now in terms of size of the opportunities.
More commercial retail wholesale what are what are you what are you seeing right now as well as the valuations.
Yeah I can consistent.
With with what we've been seeing in in the market, we do see a broad range of opportunities available.
Quite frankly across all of our markets right now which is great.
We're able to.
Find good high quality businesses are well run.
And work with vendors.
Mostly on an exclusive basis to.
To work.
To provide a value that works really well for them and us and I would say valuations are still very much consistent with what we've.
Guided in the past.
Certainly on a post synergy basis, we're still seeing some really good accretion.
On these deals so again quake quake bullish on our M&A pipeline and.
That we can continue to grow the business and need are 2 billion target.
Your next question comes from Peter Slash and PMO. Please go ahead.
Good morning Ah first.
A question on the co protesting youre doing in in Burnaby. So.
As your co processing continues to ramp up can you talk just a little bit about how that impacts your financial return at the refinery I mean is that is.
Is that.
Does that give you higher returns then processing a barrel of oil or or a lesser returns just like I understand that you have.
That you are meeting the regulatory requirements, but what's the bottom line impact on financial returns at the refinery, yes, no for sure and thanks for the question Peter.
So the way the market works as we have certain compliance obligations, if we weren't manufacturing or cope processing, we would have to import more expensive renewable diesel from from age over the U S.
And what this allows us to do is meet that compliance requirement without having to purchase the more expensive renewable diesel. So there is.
A significant EBITDA benefit to that which has us again.
Return as I've indicated of this year, we're on track to saving $35 million and the equivalent based on an equivalent investments in the facility for co processing. So it is quite.
The returns are quite healthy there.
Okay and then my follow up question is on this Florida acquisition that you've done that you've announced this morning.
You haven't given financial statistics, but just the way you have described it in the press release in your discussion on the call. This morning. This sounds like a very high quality asset and.
Given where your stock is currently trading and we're parked line is being valued it sounds like to me that like you you.
You paid a higher multiple for this business than what you're what part client is currently being a valued at so Bob I just wanted to know about.
How are you and the board.
Think about that issue that that you are considering acquisitions that.
Although high quality may be.
Higher valuation than your own company. So there's kind of the valuation arbitrage opportunity is not there it's kind of dilutive pre synergies until I was just wondering is that an issue. When you hold these discussions with the management team and the board.
Well look I mean, certainly.
R capital allocation process looks at returns and looks at the return so we can get.
On a post synergy basis.
And I would assure you that this is accretive.
The other thing is to look at our business in two different pieces right. We've got our supply and refining business and then our marketing business.
The trade at two different multiples and when you look at some of the park's basis.
This is accretive.
Both on a multiple basis and then.
Most importantly on a post synergy basis.
Accretive to to the shareholder at the current multiple.
Maybe just if I, if I may appropriate by accident, so does that position as a huge component of valuable real estate. So when we look at the multiples I think the real estate is a bit separate from the run rate ebitdas into business retreat paid for and I think that looks also very attractive.
Even compared to wherever wherever you traipse today as a company reaches box that is accomplished.
Yeah.
Your next question comes from Directv Some Canaccord Genuity. Please go ahead.
Yeah, Hi, everyone I just want to follow up just quickly on the on the M&A.
In the past you've talked a lot about obviously the U S where you continue to grow aggressively in international but I think you. Just mentioned you are seeing lots of opportunity to cross all markets. Just wondering what would be the white space. That's left in Canada that you'd be potentially pursuing.
Yeah.
Thanks for the question Derek and.
We do see opportunities on in the three channels that we operate or certainly the two channels retail and commercial and I would say within.
Within commercial we're seeing some opportunities and propane.
And then on the retail side, we've often stated how we do have areas within.
Certain markets, where we don't have.
Good good network and we'd certainly look at those and do see smaller opportunities within the markets to continue to fill that in.
Okay. Thanks for that that's helpful.
And then I just wanted to turn to the cost side quickly in Canada. You mentioned, there was a $9 million increase in operating costs, partly due to the elimination of the emergency wage subsidy, but should we expect that number I guess that quantum to sort of continue going forward and and what are you seeing in terms of cost inflation if.
Any.
On the operating cost side in in North America.
Yeah certainly.
Certainly the the the.
Hughes impact.
We have had to replace.
[noise] costs that were funded by by the government and look I would say accuse enabled us to make sure that we could continue to provide service in all communities that we operate during the very tough time through Covid. So we were very grateful for that.
But these costs.
Are there.
We did through the pandemic it did allow us to achieve some structural cost savings, which were hanging on too, but ultimately we do need that costs back and to make sure that we can service our customers.
And.
And and and make sure that we can continue to run the business. So so costs will come up but look they will stabilize and as always will continue to focus on those.
Make sure that we're getting the benefits of the scale of the business.
Your next question comes from John where else have J P. Morgan. Please go ahead.
Hey, good morning, and thanks for taking my question can you talk about how refinery turnaround one uhm, a cough respected relatives near our technicians. It sounds like it went well we have some from the time you constructed and.
And then I think in past turnaround dude called out cause when you report the quarter turnaround.
The capital and your Opex.
Anything in high level, you can share their that'll help us model for Q and then.
<unk> related where you can remind us that often.
As a reminder of turnarounds occur in a moment the next one thanks.
Yes, Hi, John and thanks for the question I would say on time and on budget.
The headline which is great and again the team has done a great job in.
And managing this particular turnaround which was smaller than some of the others that we've had.
Did you want to comment specifically on the cost and capital sure since that.
Around happened in the month of October.
R Q4 results will provide that information and.
As Bob said on time on budget, so very happy with them ramping up their production.
Okay. Thanks, and then the international business trip any color on the tour and keeps going to travel to you you need then.
Anything that might help us think about your organic growth.
Condition growth going into.
And I need the next year.
Great specifically in the international on organic.
So look.
We do see some there is still some recovery to happen in markets. There are markets that are just.
Opening so we expect to see a tailwind they're both on our aviation business, where we have an aviation presence in the markets and then based on the economic activity in the base business again on top of that we've got.
The the great work that the team has done to win business on the wholesale side and then the M&A that will start to flow through on a year over year basis. So so we are certainly looking to increase the run rate of that business in our guidance that will provide later in the year.
Your next question comes from Stephen Hanson from Raymond James. Please go ahead.
Hey, guys just Ah maybe a narrower question to follow up on the last is you know.
Can you give us perhaps some description or understanding of what kind of lead time, you might get from your large cruise or crime related customers in the Caribbean and just just thinking in the context of you needing to preposition Geo volume in advance of that season did you get good lead time advantage information on that or some of the IraQ2 more.
On a short term basis.
Yeah. It's a good question and it still is a headwind in the business or.
I'll, let them talk about it because the marine business a lot of it runs out of Miami.
And.
The U S team illness Sol team worked very closely together on a lot of that so if you can provide some color that would be helpful. Yes, thanks, Bob I think and that whole sector.
First to the point of lead times, we do we do collaborate with.
A large number of the cruise lines in particular.
On forward demand.
And we've seen.
Expectations for that demand for fourth quarter rich.
Return modestly certainly not the full run rates that one would've seen him 19, but.
Very nice recovery versus.
Essentially a full shutdown we saw in 2020 so.
That's quite encouraging across the.
Just domestic market that as well as the international markets.
Across the Caribbean.
We service as well so the commercial lines are far less collaborative.
Kind of show up when they show up they do have shipping schedules, but they don't they don't tender ahead of time as much as the cruise lines that we get to collaborate with.
Usually a quarter ahead and a minimum.
Great. That's very broad minded just one quick follow up with me on the the latest acquisition to just thinking about the loyalty opportunity. There do they have an existing worthy program in place of scale or subsequent then how do you relate that to the journey opportunity going forward. Thanks.
Yeah, I know, it's great question, I think they do not and.
When we look at the if you look at the composition of this network.
What's what.
What gets us really excited as these are fantastic locations fantastic real estate.
Infrastructure.
But without the support of the brand the marketing loyalty.
Supply chain support category management, you know a lot of the sort of retaining on the components of retail excellence that that we deliver I think are are absent in most cases in this network. So that that's what gets US excited about the upside from here with what are really high quality infrastructure assets, but without the scale.
Marketing and sales support that we bring to the table, so really bringing those two together gives us gives us quite excited.
That's a great color bankrupt.
Your next question would be coming from David Newman from t-shirt. It. Please go ahead.
Hi, guys just a quick follow up in terms of the pace of recovery overall.
Outlines sort of the gas demand and how how recovering sort of by province, but are you are a great <unk> player and I'm just kind of wanted to get a sense of where you feel like we are in the diesel jet fuel and other fuel types and do you think there's going to be any sort of permanent impairment I guess in a hybrid world that we can't get.
Back in 2019 levels may just thoughts on other other fuel tight.
Now.
So I would say the great thing about parkland is diversified products and diesel tracks GDP and as GDP has come back here, we seem diesel demand track that.
And on top of that our team has continued to wind market share. So we're seeing that in all three businesses.
Canada, the U S and international where we've been able to grow our diesel volume at a far higher rates in our gasoline volume because of the underlying connection with the economy and again, our ability to to win in the marketplace.
And Bob quick one just a quick follow up on that just where we can all track the gas where the gasses, but just on diesel and jet fuel, where where are you versus 2019 do you believe in like what's what's the delta.
That's a good question I don't have it on the top of my head, but I do know certainly in.
Like say in all jurisdictions, where ahead.
I don't know the exact number right now, but we can follow up on that.
Yeah, I think sector was dark Hawk here I think the.
A couple of Broadway's to think about that.
Certainly jet is still off I think we all recognize that we would expect that to come back to 19 levels and beyond because aviation's can still be a growth industry going forward.
When you look across the industrial and commercial sectors, obviously oil and gas has been off hard.
August related to Covid, but just also related to the commodity collapsed occurred with Covid those are coming back at.
At these crude values for sure so that's encouraging but.
Certainly not as fast as the what I call the kind of daily living categories from a food distribution waste management transportation freight.
General freight those are all have come Roaring back and we're seeing volumes consistently ahead of 19 across those sectors and then the other sector. We mentioned was marine where marine in general has been off substantially through the pandemic coming back quite nicely now and we would expect that to fully restore.
Certainly throughout twenty-two, but not there yet.
There are no further questions at this time. Please proceed.
Great. Thank you I appreciate everybody dialing in today and look forward to sharing our investor day coming up in a couple of weeks here.
Ladies and gentlemen, does conclude your conference call for today. Thank you for participating and ask that you. Please disconnect your lines.
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