Q2 2024 Parkland Corp Earnings Call

Chris: Good morning, my name is Chris and I will be your conference operator today. At this time I would like to welcome everyone to the Parkland Q2 Analyst Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: At this time, I would like to welcome everyone to the Parkland Q2 Analyst Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. Thank you.

Chris: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad.

Valerie Roberts: I would now like to turn the conference over to Valerie Roberts, Director and Investor Relations for Parkland. Please go ahead.

Valerie Roberts: If you would like to withdraw your question, please press star 2. Thank you. I would now like to turn the conference over to Valerie Roberts, Director, Investor Relations for Parkland. Please go ahead.

Valerie Roberts: Thank you, operator. With me today on the call are Bob SB, President and CEO, and Marcel Teunissen, Chief Financial Officer. This call is webcast, and I encourage listeners to follow along with the supporting slides. We will go through a prepared remarks and then open it up for questions with the investment community. Please let me ask you one question, and a follow-up is necessary; and if you have other questions, re-enter the queue.

Valerie Roberts: Thank you, Operator. With me today on the call are Bob Espey, President and CEO , and Marcel Teunissen, Chief Financial Officer.

Valerie Roberts: This call is 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 with the investment community. Please limit yourself to one question and a follow-up as necessary, and if you have other questions re-enter the queue.

Valerie Roberts: We would ask analysts to follow up directly with the Investor Relations team afterwards for any detailed modeling questions. During our call today, we immediately make forward-looking statements related to expected future performance. These statements are based on current views and assumptions and are subject to uncertainties, which are difficult to predict. These uncertainties include, but are not limited to, expected operating results and industry conditions, among other factors.

Valerie Roberts: We would ask analysts to follow up directly with the investor relations team afterwards for any detailed modeling questions.

Valerie Roberts: During our call today, we may make forward-looking statements related to expected future performance. These statements are based on current views and assumptions and are subject to uncertainties which are difficult to predict. These uncertainties include, but are not limited to, expected operating results and industry conditions, among other factors.

Unknown Executive: These uncertainties include, but are not limited to, expected operating results and industry conditions, among other factors. These measures are identified and defined in Parkland's Continuous Disclosure Documents, which are available on our website or on CDAR+.

Valerie Roberts: Risk factors applicable to our business are set up on our annual information form and management discussion and analysis. We will also be discussing non-GAAP and other financial measures which do not have any standardized meanings prescribed by the IFRS accounting standards. These measures are identified and defined in the parklands, continuous disclosure documents which are available on our website or on Cedar Plus. Please refer to these documents as they identify factors which may cause actual results to differ materially from any forward-looking statements.

Valerie Roberts: Risk factors applicable to our business are set out in our Annual Information Form in Management's Discussion and Analysis.

Valerie Roberts: We will also be discussing non-GAAP and other financial measures, which do not have any standardized meanings prescribed by the IFRS accounting standards. These measures are identified and defined in Parkland's Continuous Disclosure Documents, which are available on our website or on CDAR+.

Valerie Roberts: Please refer to these documents as they identify factors which may cause actual results to differ materially from any forward-looking statements.

Valerie Roberts: Dollar amounts discussed in today's call are expressed in Canadian dollars unless otherwise noted, and will now turn the call over to Bob.

Valerie Roberts: Dollar amounts discussed in today's call are expressed in Canadian dollars and otherwise noted. I will now turn the call over to Bob.

Valerie Roberts: Thank you, Val, and good morning, everyone. We appreciate you joining us today.

Robert Espey: Thank you, Val, and good morning everyone. We appreciate you joining us today. I'm very proud of our accomplishments in the second quarter, which demonstrate the quality of our business and the capabilities of our team. Following a slow start to the year, we delivered a record Q2 with adjusted EBITDA of $504 million. This is consistent with a $2 billion run rate, despite pockets of economic weakness and continued underperformance in our US business. After the unplanned refinery outage in Q1, it was running at full capacity in Q2 and continues to perform well. We set a new co-processing record for the quarter, which provided an opportunity to capture additional margins.

Bob Espey: Thank you, Val, and good morning, everyone. We appreciate you joining us today.

Bob Espey: I'm very proud of our accomplishments in the second quarter, which demonstrate the quality of our business and the capabilities of our team.

Justa Deepita: Following a slow start to the year, we delivered a record Q2 with the Justa Deepita of $504 million.

Justa Deepita: This is consistent with the $2 billion run rate.

Justa Deepita: Despite pockets of economic weakness and continued underperformance in our U.S. business.

Robert Berthold Espey: It was running at full capacity in Q2 and continues to perform well. We set a new co-processing record for the quarter, which provided an opportunity to capture additional margin. Our U.S. business has made significant improvements and is trending to plan, except for our Florida retail and supply business. As you read in our news release, we have lowered our 2024 full-year adjusted EBITDA guidance to between $1.9 and $2 billion. This represents a recovery from our Q1 Burnaby unplanned refinery shutdown due to cold weather.

Justa Deepita: After the unplanned refinery outage in Q1, it was running at full capacity in Q2, and continues to perform well. We set a new coprocessing record for the quarter, which provided an opportunity to capture additional margins.

Robert Espey: Our US business has made significant improvements and is trending to plan, except for our Florida retail and supply business. This is an ongoing area of focus for the team.

Justa Deepita: Our U.S. business has made significant improvements and is trending to plan except for our Florida retail and supply business.

Robert Espey: As you read in our news release, we have lowered our 2024 full-year adjusted EBITDA guidance to between $1.9 and $2 billion. This represents a recovery from our Q1 Burnaby unplanned refinery shutdown due to cold weather. However, it reflects ongoing weaknesses in the consumer and fuel demand in some markets due to ongoing macroeconomic trends.

Justa Deepita: This is an ongoing area of focus for the team.

Robert Espey: As you know, the Parkland team likes to win. We are focused on executing our strategy and improving our returns specifically by growing our market share through investing in our brands and customer experience.

Robert Berthold Espey: As you know, the Parkland team likes to win. We are focused on executing our strategy and improving our returns, specifically by growing our market share through investing in our brands and customer experience and Building Our Supply Advantage across our business through a common supply platform, ensuring we can sustain future growth by investing in our core processes and services.

Robert Espey: and building our supply manager across our business through a common supply platform, ensuring we can sustain future growth by investing in our core processes and systems. This gives me confidence in our ability to finish the year strong, on-route to achieving our 2028 targets.

Justa Deepita: This gives me confidence in our ability to finish the year strong, en route to achieving our 2028 target.

Robert Espey: With that, let's turn to slide three to review our Q2 results in more detail.

Justa Deepita: With that, let's turn to slide 3 to review our Q2 results in more detail.

Marcel Teunissen: Thank you, Bob, and good morning, everyone. In the second quarter, Parkland delivered adjusted EBITDA of $504 million. This is up 7% from the prior year and is, as Bob indicated, one of our best quarters on record. Many of our peers have spoken about the macro environment, so I'll provide some color on what we are seeing in terms of consumer behavior. Conversely, retail consumers are feeling stretched with overall discretionary spending down versus both the prior year and quarter. While we don't control the macro environment, we do control how we react.

Marcel Teunissen: Thank you both, and good morning everyone. Canada was up 15% year-over-year with an adjusted EBDA of $172 million. This performance demonstrates consistent execution, the ongoing uplift from organic growth investments, and the successful integration of strategic acquisitions such as ASCII and VOPAC. Canadian fuel margins remain strong through the quarter, and we maintain market share after growing it materially earlier this year. Many of our peers have spoken about the macro environment, so I'll provide some color on what we are seeing in terms of consumer behavior. While overall commercial demand was weak in the first quarter due to warm weather, we saw this recovering Q2, and our results are tracking to plan.

Justa Deepita: Every segment delivered year-over-year growth, except for USA, which represents approximately 10% of our total adjusted EBITDA.

Marcel Teunissen: Conversely, retail consumers are feeling stretched, with overall discretionary spending down versus both the prior year and quarter. Retail fuel volume demand was weaker during the quarter, particularly in June, as the start of the driving season was slow due to poor weather and resulted in fewer people on the road. While consumers in each market are different, this macro environment has resulted in some seeking value in response to increasing cost of living. Across the country, we saw lower volume fields, but a higher frequency of visits from our customers. In BC, where pump prices were the highest in Canada, we saw the largest volume decline.

Justa Deepita: Conversely, retail consumers are feeling stretched with overall discretionary spending down versus both the prior year and quarter.

Justa Deepita: Across the country, we saw lower volume fills, but a higher frequency of visits from our customers.

Justa Deepita: In B.C., where pump prices were the highest in Canada, we saw the largest volume decline. In that province, some consumers are crossing the border to the U.S. to purchase fuel, convenience items, and groceries. We believe these effects are transitory.

Marcel Teunissen: In that province, some consumers are crossing the border to the US to purchase few convenience items and groceries.

Marcel Teunissen: We believe these effects are transitory. While we don't control the macro environment, we do control how we react to it. We have demonstrated capability to continuously evolve our customer offer as their needs change due to economic pressures. During the quarter, we attracted consumers to our sites with targeted fuel incentives, in-store convenience offers, and cross promotions between the forecourt and backcourt. Through the quarter, food and convenience growth margins remained robust at 35%, and our basket sizes remained steady.

Unknown Executive: We have demonstrated the capability to continuously evolve our customer offer as their needs change due to economic pressure. Driven by the work we have done to optimize our store design and merchandising capabilities and our experience in the alcohol category in Quebec, we aim to sell alcohol in 120 stores by the end of the year, which is 8% higher than last year. Our USA segment delivered adjusted EBITDA of $49 million in the quarter.

Justa Deepita: We have demonstrated capability to continuously evolve our customer offer as their needs change due to economic pressures.

Marcel Teunissen: The Ontario government announced their plan to expand the sale of alcohol in convenience, grocery, and big box stores by the end of October 2024. In addition to providing consumers with more convenience, this will create new revenue opportunities for our on-the-run convenience stores. Driven by the work we have done to optimize our store design and merchandising capabilities and our experience in the alcohol category in Quebec, we aim to sell alcohol in 120 stores by the end of the year. We expect this will become a top category for us and help bring more consumers into our stores where we can cross-promote other items. Our international segment delivered an adjusted EBITDA of $182 million in quarter two.

Justa Deepita: In addition to providing consumers with more convenience, this will create new revenue opportunities for our on-the-run convenience stores.

Justa Deepita: Driven by the work we have done to optimize our store design and merchandising capabilities and our experience in the alcohol category in Quebec, we aim to sell alcohol in 120 stores by the end of the year.

Justa Deepita: Our international segment delivered adjusted EBITDA of $182 million in Q2. This is 8% higher than last year.

Marcel Teunissen: This is 8% higher than last year. We continue to see strong demand with good unit margins in the region, and in Guyana, demand return to normal after a softer Q1. During the quarter, we benefited from an extended tourism season and ongoing supply optimization, and I'm pleased to report that our operations sustained minimal damage during Hurricane Barrel shortly after the quarter. We are bullish on the growth prospects for the region where the macroeconomic environment is much more constructive. We are well positioned to participate in expected economic growth in fast growing economies such as Puerto Rico, Jamaica, and the Dominican Republic, as well as in the tourism and natural resources sectors.

Justa Deepita: We continue to see strong demand with good unit margins in the region and in Guyana demand returned to normal after a softer Q1.

Speaker Change: During the quarter, we benefited from an extended tourism season and ongoing supply optimization, and I'm pleased to report that our operations sustained minimal damage during Hurricane Beryl shortly after the quarter.

Speaker Change: We are well positioned to participate in expected economic growth in fast-growing economies such as Puerto Rico, Jamaica, and the Dominican Republic, as well as in the tourism and natural resources sectors.

Marcel Teunissen: Our USA segment delivered an adjusted EBITDA of $49 million in the quarter. This is down from the prior year but up nearly 50% from Q1. Across the US market, unit margins improved as wholesale prices were declining most of the quarter. We continue to see declines in retail commercial fuel volumes across the US compared to 2023 and specifically in the markets we operate in. We believe these are driven by higher fuel prices, weather, changes in consumer behavior, and some indications of economic slowdown. If we look at our US business by region, we see differences in performance.

Speaker Change: Our USA segment delivered adjusted EBITDA of $49 million in the quarter.

Unknown Executive: We continue to see declines in retail and commercial fuel volumes across the U.S. compared to 2023, and specifically in the markets we operate in. We believe these are driven by higher fuel prices, weather, changes in consumer behavior, and some indications of an economic slowdown. If we look at our U.S. business by region, we see differences in performance. For example, our Northern Mid-Continent business, which includes Idaho, Utah, Montana, and the Dakotas, is tracking to plan, despite some industry-wide volume declines.

Speaker Change: If we look at our U.S. business by region, we see differences in performance.

Marcel Teunissen: Our northern mid-continent business, which includes Idaho, Utah, Montana, and the Dakotas, is tracking to plan despite some industry-wide volume declines. There, the team has been able to offset these trends with targeted cost-saving initiatives. These include over 300 staff reductions in January 2023, the elimination of 150 underutilized trucks, and the consolidation of regional branches. In Florida, the commercial businesses don't track, but our retail and supply business have yet to reach their full potential. Following the loss of market share in the first quarter, we went back to our suppliers and our renegotiating pricing that was negatively impacted our competitiveness in the region.

Speaker Change: Our Northern Mid-Continent business, which includes Idaho, Utah, Montana, and the Dakotas, is tracking to plan, despite some industry-wide volume declines.

Speaker Change: There, the team has been able to offset these trends with targeted cost-saving initiatives.

Unknown Executive: In Florida, the commercial business is on track, but our retail and supply business have yet to reach their full potential. We are encouraged by the improvement in the U.S. in the second quarter. However, there is more work to do. The team remains focused on executing our integrated strategy, rebranding stores, implementing merchandising and procurement initiatives, and optimizing our labor and logistics operations. The refinery delivered composite utilization of 98% during the quarter, including record coprocessing volumes of 3,000 barrels per day. Across the business, we remain focused on improving our cost base. Both OPEX and MG&A were lower year over year as the impact of inflationary pressures was offset by successful ongoing cost-saving initiatives.

Speaker Change: In Florida, the commercial business is on track, but our retail and supply business have yet to reach their full potential.

Speaker Change: Following the loss of market share in the first quarter, we went back to our suppliers and are renegotiating pricing that was negatively impacted our competitiveness in the region.

Marcel Teunissen: We are encouraged by the improvement in the US in the second quarter. However, there is more work to do. The team remains focused on executing our integrated strategy, rebranding stores, implementing merchandising and procurement initiatives, and optimizing our labor and logistics operations. Our refinery segment reported adjusted EBITDA of $121 million, which is 11% higher than last year. The refinery delivered composite utilization of 98% during the quarter, including record co-processing volumes of 3,000 barrels per day. We expect high utilization rates for the remainder of the year, and while the crack spread environment has suffered in Q2, refining margins are now in line with our mid-cycle planning.

Speaker Change: We are encouraged by the improvement in the U.S. in the second quarter, however, there is more work to do. The team remains focused on executing our integrated strategy, rebranding stores, implementing merchandising and procurement initiatives, and optimizing our labor and logistics operations.

Speaker Change: The refinery delivered composite utilization of 98% during the quarter, including record co-processing volumes of 3,000 barrels per day.

Speaker Change: We expect high utilization rates for the remainder of the year, and while the crack spread environment has softened in Q2, refining margins are now in line with our mid-cycle planning assumptions.

Marcel Teunissen: assumptions. Across the business, we remain focused on improving our cross-base. Both OPEX and MGNA, who are lower year-over-year, as the impact of inflationary pressures was offset by successful ongoing cross-saving initiatives. Parkland delivered in 2023. Over the past 12 months, we use these funds to invest in organic growth initiatives. They are increased dividend, reduced debt, and buyback more than 3 million shares. This balanced approach is in line with our capital allocation priorities communicated last year. During the quarter, we maintain the leverage ratio of 3.1 times. Without the impact of unfavorable foreign exchange, our leverage would have been 3 times.

Speaker Change: Both OPEX and MG&A were lower year over year as the impact of inflationary pressures was offset by successful ongoing cost-saving initiatives.

Speaker Change: Parkland delivered available cash flow of $831 million on a trailing 12-month basis or $4.75 per share. This is up more than 50% from 2023.

Unknown Executive: This is up more than 50% from 2023. During the quarter, we maintained a leverage ratio of 3.1 times. Without the impact of unfavorable foreign exchange, our leverage would have been 3.2. We continue to see a clear pathway to reducing leverage to a low two times by the end of 2024. And with that, I will turn it back over to both. Thanks, Marcel.

Speaker Change: Over the past 12 months, we used these funds to invest in organic growth initiatives, pay our increased dividend, reduce debt, and buy back more than 3 million shares.

Speaker Change: During the quarter, we maintained a leverage ratio of 3.1 times. Without the impact of unfavorable foreign exchange, our leverage would have been 3 times.

Marcel Teunissen: We continue to see a clear pathway to reducing leverage to the low two times by the end of 2025.

Speaker Change: We continue to see a clear pathway to reducing leverage to the low 2x by the end of 2025.

Robert Espey: And with that, I will turn it back over to both. Thanks, Marcel. In addition to delivering strong quarterly results, the team continues to focus on improving returns from strategic acquisitions through integration and synergy capture. I'm pleased with progress we've made with many of our recent acquisitions, including Husky, M&M, Bowback, Jamaica, and our joint venture in Dominican Republic. We are implementing tactical improvements in Florida. These actions aim to increase margins, reduce costs, and optimize in-store results through refreshed merchandising strategies, rebrands, and targeted promotions. The US team is making sound progress on integration. Examples include optimizing scheduling practices, which will reduce retail site labor and over time by over 300,000 hours per year.

Unknown Executive: The team continues to focus on improving returns from strategic acquisitions through integration and synergy CAP. Refreshing more than 40 on-the-run sites, which includes an in-store upgrade and merchandising plan, along with major site upgrades to truck stops, which will lead to more consistent and efficient execution of our business processes and integrated artificial intelligence in our operations, plus a 10-year exclusive supply agreement to the new owner. We also continue to advance the retail disposition plan, with sites in Canada and the US being in progress. In closing, I'm proud of the team for delivering an excellent quarter. The second quarter has demonstrated our run rate, and we continue to focus on improving our business despite some softness in the economic environment.

Speaker Change: We are implementing tactical improvements in Florida. These actions aim to increase margins, reduce costs, and optimize in-store results through refreshed merchandising strategies, rebrands, and targeted promotions.

Speaker Change: The U.S. team is making sound progress on integration. Examples include optimizing scheduling practices, which will reduce retail site labor and overtime by over 300,000 hours per year.

Robert Espey: Refreshing more than 40 on-the-run sites, which includes an in-store upgrade and merchandising plan, along with major site upgrades to truck stops. And divesting of several non-core commercial operations and retail sites, which will simplify operations and improve returns. I'm encouraged by the improvements the team has been able to make in the USA. While certain supply margins were challenged during the quarter, we have seen these subsequently improved. And I know our talented supply team will be able to take advantage of this to improve results. I have confidence that the team will overcome these temporary setbacks and deliver the run rate EBITDA that was previously guided in the upcoming quarters.

Speaker Change: Refreshing more than 40 on-the-run sites, which includes an in-store upgrade and merchandising plan, along with major site upgrades to truck stops.

Speaker Change: and divesting of several non-core commercial operations and retail sites which will simplify operations and improve returns.

Speaker Change: I have confidence that the team will overcome these temporary setbacks and deliver the run rate EBITDA that was previously guided in the upcoming quarters.

Robert Espey: We continue to invest in a creative, organic growth and optimization initiatives. Parkland has achieved significant scale through M&A, and there are many opportunities within the existing platform to further strengthen our customer and supply advantages. As laid out in our five-year capital allocation framework, we have earmarked 25% of available cash flow to grow the business organically. This includes strategic investments in our refinery, marketing businesses, and supply platform, which targets 15% unleavored IRR. Optimization work is currently underway to implement an enterprise-wide ERP platform, which will lead to more consistent and efficient execution of our business processes and integrate our artificial intelligence in our operations.

Speaker Change: As laid out in our five-year capital allocation framework, we have earmarked 25% of available cash flow to grow the business organically.

Speaker Change: This includes strategic investments in our refinery, marketing businesses, and supply platform, which targets 15% unlevered IRR.

Speaker Change: Optimization work is currently underway to implement an enterprise-wide ERP platform.

Speaker Change: which will lead to more consistent and efficient execution of our business processes and integrated artificial intelligence in our operations.

Robert Espey: We have also centralized our supply and trading organization, which will help us leverage the global scale of Parkland for lower cost product and better manage our commodity exposure across the business. Ultimately, we are strengthening our existing business platform to support future growth. This includes the simplification of our business through the disposition of non-core assets, which will streamline operations and reduce overhead.

Speaker Change: We have also centralized our supply and trading organization, which will help us leverage the global scale of Parkland for lower cost product and better manage our commodity exposure across the business.

Speaker Change: Ultimately, we are strengthening our existing business platform to support future growth. This includes the simplification of our business through the disposition of non-core assets which will streamline operations and reduce overhead.

Robert Espey: We recently announced the agreement to dollar Canadian commercial propane business for cash proceeds of $115 million, plus a 10-year exclusive supply agreement to the new owner. We also continue to advance the retail disposition plan, with sites in Canada and the US being in progress. At the end of June, more than $460 million are included in assets held for sale on our balance sheet, and have received our entered into agreements for approximately 200 million of cash proceeds to date. I'm confident we will achieve our target of $500 million by the end of 2025.

Speaker Change: We recently announced the agreement to sell our Canadian commercial propane business for cash proceeds of $115 million.

Speaker Change: At the end of June , more than $460 million are included in assets held for sale on our balance sheet and have received or entered into agreements for approximately $200 million of cash proceeds to date. I am confident we will achieve our target of $500 million by the end of 2025.

Robert Espey: Journey is another critical part of our business platform and customer advantage. It is an example of the capability we are building for future growth. It has grown significantly since being launched in 2020 and is one of the top loyalty programs in Canada. In addition to partnerships with CIBC and Aeroplan, we continue to expand our ecosystem in the second quarter through a pilot with Walmart Canada. Partnering with these super brands offers consumers tremendous choice and value, and broadens the reach of our fuel and convenience brands. In closing, I'm proud of the team for delivering an excellent quarter.

Speaker Change: Journey is another critical part of our business platform and customer advantage.

Speaker Change: It is an example of the capability we are building for future growth. and is one of the top loyalty programs in Canada.

Speaker Change: In addition to partnerships with CIBC and Aeroplan, we continue to expand our ecosystem in the second quarter through a pilot with Walmart Canada. Partnering with these super brands offers consumers tremendous choice and value and broadens the reach of our fuel and convenience brands.

Speaker Change: In closing, I'm proud of the team for delivering an excellent quarter. The second quarter has demonstrated our run rate and we continue to focus on improving our business despite some softness in the economic environment.

Robert Espey: The second quarter has demonstrated our run rate, and we continue to focus on improving our business despite some softness in the economic environment. We continue to focus on delivering the strategy outlined in our Investor Day that will create shareholder value in the long term. These activities put us on track to deliver our 2028 ambitions related to leverage adjusted EBITDA and cashflow per share. We have an amazing team at Parkland, and I have every confidence that they will succeed.

Speaker Change: We continue to focus on delivering the strategy outlined in our Investor Day that will create shareholder value in the long term.

Unknown Executive: These activities put us on track to deliver our 2028 ambitions related to leverage, adjusted EBITDA, and cash flow per share. We have an amazing team at Parkland, and I have every confidence that they will succeed. Before I turn it over to the operator for questions, I'd like to personally thank Steve Richardson, the chair of the board, who has announced his retirement for his leadership and dedication over the past seven years. Mike joined the board in February 2024 and is a highly experienced executive with over three decades of international integrated energy experience. We share confidence in Parkland's strategy and growth strategy.

Speaker Change: We have an amazing team at Parkland, and I have every confidence that they will succeed. Before I turn it over to the operator for questions, I'd like to personally thank Steve Richardson, the chair of the board, who has announced his retirement, for his leadership and dedication over the past seven years.

Robert Espey: Before I turn it over to the operator for questions, I'd like to personally thank Steve Richardson, the chair of the board, who has announced his retirement, for his leadership and dedication over the past seven years. Steve has made significant contributions to Parkland's growth and governance. While Chair, he stewarded his strategic board renewal process that led to the recruitment of highly qualified directors, including the recruitment of Mike Jennings as his successor. Mike joined the board in February 2024 and is a highly experienced executive with over three decades of international integrated energy experience. We share confidence in Parkland's strategy and growth trajectory, and I look forward to working with them in the interest of all Chair.

Speaker Change: Steve has made significant contributions to Parkland's growth and governance. While chair, he stewarded a strategic board renewal process that led to the recruitment of highly qualified directors, including the recruitment of Mike Jennings as his successor.

Speaker Change: Mike joined the board in February 2024 and is a highly experienced executive with over three decades of international integrated energy experience.

Mike Jennings: We share confidence in Parkland's strategy and growth strategy.

Mike Jennings: and I look forward to working with them in the interest of all shareholders.

Operator: With that, I will turn it over to the operator for questions. Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch tone phone. You will hear a three-tone prompt acknowledging a request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question.

Speaker Change: With that, I will turn it over to the operator for questions.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging a request, and your questions will be polled in the order they are received.

Speaker Change: Should you wish to decline from the polling process, please press star followed by 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question.

Operator: One moment, please, for your first question. Your first question comes from Michael Van Aelst, TD Cowan. Michael, please go ahead.

Michael Van Elft: Your first question comes from Michael Van Elft, TD Cowan. Michael, please go ahead. Thank you and good morning. I just wanted to start on the US side. This is three quarters in a row where your US retail fuel volumes were under pressure, and Bob I know you alluded to it in your opening remarks, but.

Robert Espey: Can you just give us more color as to whether the problems that you're seeing in the Florida division are the same problems that you that that you pointed out a few quarters ago, or I think it was had more to do with pricing, your price optimization software and things like that. So what are the problems the same and what are the more specific solutions to addressing this and getting it back to the number? Because you did express some confidence in hitting your targeted run rate within the next couple of quarters. Yeah, good morning, Lake, and thanks for the question. We see, across the US, we do see some headwinds on volumes, both in our retail and commercial business.

Speaker Change: Hey, can you just give us more color as to whether the problems that you're seeing in the Florida division are the same problems that you

Michael Van Aelst: And what are the more specific solutions to addressing this and getting it back to the number because you did express some confidence in hitting your targeted run rate within the next couple of quarters?

Robert Espey: You know, with that, I would say our northern business and commercial business within Florida are on track or at expectation at this point, and as you pointed out, we continue to see some weakness in our Florida business. Now that's the root cause of that is two items: one is, again, we have seen volumes come off; we've had a margin issue there because some of the supply contracts that were previously negotiated. Didn't give us enough room to maneuver in a tough price environment, so we're in the process of fixing that, and that'll enable us to be more responsive on the pricing side. So I would say we've worked hard; the teams worked hard there to make a number of improvements, many of which both Marcel and I alluded to in script, but there's still work to do specifically.

Unknown Executive: Now the root cause of that is two items. One is, again, we have seen volumes come off, and we've had a margin issue there, because some of the supply contracts that were previously negotiated didn't give us enough room to maneuver in a tough price environment. So, we're in the process of fixing that, and that'll enable us to be more responsive on the pricing side. So, you know, I would say we've worked hard, the team's worked hard there to make a number of improvements, many of which both Marcel and I alluded to in the script, but there's still work to do specifically around supply, which will enable a more dynamic pricing environment.

Speaker Change: Now that's, that's, the root cause of that is two items. One is...

Speaker Change: Again, we have seen volumes come off. We've had a margin issue there because some of the supply contracts that

Speaker Change: were previously negotiated, didn't give us

Speaker Change: enough room to maneuver in a tough price environment so we're in the process of fixing that and that'll enable us to be more responsive on the pricing side so

Speaker Change: But there's still work to do specifically around supply, which will enable a more dynamic pricing environment.

Robert Espey: So the volume reduction is due to your lack of competitiveness. Yeah, again in overall, the businesses had some, the macro environment has been tougher, and we do see volumes down. When we look at Opus Calms and PLO Florida, we're roughly tracking to where industry is. Florida has like underperformed and again, you know, with the right supply in place, we expect to be able to recover that to be more responsive on our pricing.

Unknown Attendee: So the volume reduction is due to your lack of competitiveness.

Speaker Change: So the volume reduction is due to your lack of competitiveness?

Speaker Change: Yeah, again, in overall, the business has had some, the macro environment has been tougher and we do see volumes down and when we look at Opus comps.

Robert Espey: Okay, and when would you expect these new pricing agreements or supply? Yeah, look, we're in markets negotiating that right now. We want to make sure we get the right deal in place before we lock in. So the team's working on that. So expect that, you know, presumably to be done in the quarter, and we'll see the full impact of that in Q4. Okay, thank you. I'll get back in the queue.

Speaker Change: Okay, and when would you expect these new pricing agreements or supply? Yeah, look, we're in markets negotiating that right now. We want to make sure we get the right deal in place before we lock in. So the team's working on that. So expect that.

Speaker Change: Presumably to be done in the quarter and we'll see the full impact of that in Q4.

Ben Isaacson: Thank you. Your next question comes from Ben Isaacson, Scotia Bank. Ben, please go ahead. Thank you very much, and good morning, everyone. Bob, two questions for you. First one is you mentioned in your script that supply margins are already beginning to improve.

Speaker Change: Okay, thank you. I'll get back at you.

Speaker Change: Thank you. Your next question comes from Ben Isaacson, Scotiabank. Ben, please go ahead.

Unknown Attendee: Thank you very much and good morning everyone. Bob, I have two questions for you. The first one is, you mentioned in your script that supply margins are already beginning to improve. Can you just give us a couple examples of where you're seeing that and the magnitude of those improvements?

Robert Espey: Can you just give us a couple of examples of where you're seeing that, and the magnitude of those improvements? Yeah, when you look at our business, you know, there are a number of sort of key supply differentials that we look at on a continual basis. And I would say, two of those which have been depressed would be going into the US business. So the first is North to South. So, out of Canada into the US, particularly in Q2, we had a tough environment where at those differentials tend to be quite constructive to us. And, you know, they basically were on a neutral basis.

Ben Isaacson: Yeah, when you look at our business

Unknown Executive: You know, there are a number of sort of key supply Key Supply Differentials

Speaker Change: Key Supply Differentials that we look at on a continual basis and I would say two of those which have been depressed would be going into the US business. So the first is

Speaker Change: North to South, so out of Canada into the U.S. particularly in Q2 we had a tough

Robert Espey: So, and we have seen that start to recover here in the early days of Q3. And then also we do have a pipeline position that goes from California into Nevada. And again, on the first half of the year, that was quite, there was some pressure there, and we have seen that recover here in Q2. So, you know, why was that? It goes back to the fundamentals in the market where we've seen slow diesel demand and a market that's usually tight to short. There was excess diesel in the market, and that put pressures on those differentials.

Speaker Change: Q3, and then also we do have a pipeline position that goes from California into Nevada and again in the first half of the year that was quite

Ben Isaacson: There was some pressure there, and we have seen that recover here in Q2. So, you know, why was that? It goes back to the fundamentals in the market where we've seen slow diesel demand and a market that's usually tight to short.

Speaker Change: There was excess diesel in the market and that put pressures on those differentials. We have seen some refiners

Robert Espey: We have seen some refiners cut back on diesel runs, which is enabled as the market to recover. And again, you know, with some planned shutdowns should enable that differential to recover for the balance of the year. Thank you.

Speaker Change: cut back on diesel runs which has enabled the market to recover and again you know that with some planned shutdowns should enable that differential to recover for the balance of the year.

Unknown Attendee: And then just my follow-up, maybe similar to Mike's question, if we look at Canada volume, we've seen year-over-year declines three-quarters in a row, and I just want to understand how much of that is macro or structural or just even adjustments to your portfolio.

Ben Isaacson: And then this might follow up.

Ben Isaacson: Maybe similar to my question, if we look at Canada volume, we've seen year-over-year declines three quarters in a row.

Speaker Change: Thank you. And then just my follow-up, maybe similar to Mike's question, if we look at Canada volume, we've seen year-over-year declines three-quarters in a row, and I just want to understand, can you parse out how much of that is macro or structural or just even adjustments to your portfolio?

Robert Espey: And I just want to understand, can you parse out how much about is macro or structural or just even adjustments to your portfolio? So, I think when you look at our business, so the three chunks to the volume, the first is the retail, which again in our corporate side. And in actually corporate and dealer, we're lapping a tough comp. So last year we had plus 9% same store sales growth, and this year was slightly, you know, slightly lower than zero. So, you know, overall, if you look on a 24-month trend, the trend is very constructive.

Robert Espey: So again, lapping a tough quarter commercial, which is our diesel channel. You know, we're holding in year-over-year. And then the third is our wholesale channel where volumes are lighter. And again, in our wholesale channel, it is, you know, we're selling to other smaller independents in the marketplace, and some of those have been feeling, you know, feeling more pressure than us in a top market. So, you know, when I look at the core volumes in terms of core retail business, our company network is in fact tracking up; our dealers are slightly off. And then our core commercial business is certainly on track right now.

Speaker Change: Commercial, which is our diesel channel. You know, we're holding in year-over-year and then the third is our wholesale channel where volumes are lighter and again in our wholesale channel it is

Robert Espey: And it really is that wholesale business. And that's a that's also a factor in the US and then in international. You know, again, it's that marginal sale that, you know, really isn't driving a lot of gross profits.

Speaker Change: marginal sale that, you know, really isn't driving a lot of gross profit.

Ben Isaacson: That's helpful, Clark. Thank you very much.

Adam Wijaya: Thank you. Your next question comes from Adam Wijaya, Goldman Sachs. Adam, please go ahead. Hey, thank you for taking my questions, and good morning, Bob Marcell and team. Really wanted to start on the international segment, and we look at this segment versus our model. We've seen relatively strong performance here. Maybe drill down on what you're seeing real time from an end market demand standpoint and then talk about where demand is either surprising to the upside or the downside versus your expectations. Yeah, you know, it's interesting.

Speaker Change: Hey, thank you for taking my questions, and good morning, Bob, Marcel, and team. Really wanted to start on the international segment, and when we look at this segment versus our model, we've seen relatively strong performance here. Maybe drill down on what you're seeing real-time from an end-market demand standpoint, and then talk about where demand is either surprising to the upside or the downside versus your expectations.

unknown: [inaudible]

Robert Espey: And this is the beauty of Parkland's diversified portfolio where, you know, while we have seen some challenges in our North American business, Canada, the US, the international is kind of the opposite. There, we've continued to see robust demand across all of our segments. And I'll point to a couple, you know, our commercial business. Particularly in Guyana, where we are a key service provider into the oil exploration business. We've seen that behavior a robust and it it shows that can be continued demand growth because exploration continues to grow. So again, we're the prime supplier into that market in diesel.

Bob Espey: Yeah, you know, it's interesting, and this is the beauty of Parkland Diversified Portfolio.

Unknown Executive: Yeah, you know, it's interesting. And this is the beauty of Parkland's diversified portfolio, where, you know, while we have seen some challenges in our North American business can in the US, the international is kind of the opposite. There, we've continued to see robust demand across all of our segments.

Speaker Change: where, you know, what we have seen.

Bob Espey: Some challenges in our North American business, Canada and the U.S. The international is kind of the opposite. There we've continued to see robust demand across all of our segments.

Bob Espey: And I'll point to a couple, you know, our commercial business, particularly in Guyana, where we are a key service provider into the oil exploration business. We've seen that be very, very robust.

Bob Espey: and it shows that continued demand growth because exploration continues to grow. So again, we're the prime supplier into that market in diesel, so very pleased with that. And overall, natural resources have been robust.

Robert Espey: So very pleased with that. And overall, natural resources have been robust. You know, the other big sector is gold. And you know, what we're seeing is certainly in the commodities that are present in market. We're seeing continued high prices and driving demand. And then the other thing is tourism; you know, tourism lasted a little longer. There were some international sporting events in the market to throw people in. And also, you know, we continue to see people going to the market to vacation. So, you know, I would say those are the two primary drivers, and they manifest themselves in the tourism-driven markets in detail.

Bob Espey: Now the other big sector is gold and you know what we're seeing is certainly in the commodities that are present in market we're seeing continued

Speaker Change: go into the market to vacation. So, you know, I would say those are the two primary drivers and they manifest themselves.

Robert Espey: So again, retail kind of floats along with the economy. The second thing is jet fuel demand was really good as people were moving in and out of the market and finally distill it. Again, mainly driven through our natural resource markets. So overall, very pleased. We did see some drop-off in wholesale. Again, you know, these are the marginal sale for us. And you know, we'll pull out of those when we don't, when we can't get enough margin to justify the underlying working capital and business. Got it. That's super helpful.

Adam Wijaya: Then maybe just want to switch gears here and ask about the leverage profile.

Marcel Teunissen: So software the quarter leverage ratio came in at 3.1 times, which was relatively flat quarter of a quarter.

Marcel Teunissen: So given the current margin environment and some of your commentary on the macro, how should we be thinking about the cadence of the leverage reduction and then maybe put that in the context in terms of shareholder returns as well. Thanks. Let me take a good question at them. So I think overall our leverage profile in general, and we've said this before, we delivered around half a turn a year, given the cash flow we've had. And we have allocated our capital in line with the application framework, which we laid out last year. So young dividend was increased, of course, earlier this year.

Speaker Change: So given the current margin environment and some of your commentary on the macro, how should we be thinking about the cadence of the leverage reduction? And then maybe put that in the context in terms of shareholder returns as well. Thanks.

Speaker Change: Let me take that question, Adam. So I think overall our leverage profile in general, and we've said this before, we deliver at around half a turn a year given the cash flow we've had.

Speaker Change: And we have allocated our capital in line with the capital allocation framework which we laid out last year. So, year-end dividend was increased, of course, earlier this year.

Marcel Teunissen: Road capital we've invested. And then, between paying back some of our debt this quarter, we've also used the opportunity, you know, to buy back some shares and continue to do that, you know, kind of measured in a measured way. And you know, I'm bringing leverage down. As I mentioned, the weaker Canadian dollar or the stronger US dollar, how do you look at it? You know, added some leverage to it. So otherwise you would be in a 3.0. So kind of down on that that life path.

Speaker Change: We've invested in growth capital. And then between paying back some of our debt this quarter, we've also used the opportunity to buy back some shares. And we'll continue to do that kind of measured in a measured way.

Speaker Change: you know and bring leverage down.

Speaker Change: or the stronger US dollar, however you look at it, you know, added some leverage to it. So otherwise, we would be in a 3.0. So calm down on that, that light path. And I expect that to happen over the next few quarters, and to continue being that low to range, you know, by the end of next year.

Marcel Teunissen: I expected to happen over the next few quarters and to continue being that low to range, you know, by the end of next year. Thank you. Thanks so much.

Luke Hannan: Thank you. Your next question comes from Luke Hannan, Can Accord Genuity. Luke, please go ahead. Thanks. Good morning, everyone. I wanted to ask about the rollout of beverage alcohol and your stores in Ontario. Is there anything that we should be considering as far as what you guys will be doing in advance of this, either expanding shelf space within the fridge in the store to accommodate these new skews? Anything to think about as far as employee training? Anything in advance of this rollout happening as well?

Robert Espey: Yeah, good morning, Luke. And we do see the rollout of beer and wine in Ontario to be a great opportunity for Parkland and should really start to drive some good same-store sales growth. So our team has identified roughly 100 sites, 120 sites, where we can add beer, wine, and look, when you're working with a legacy network, sometimes you're constrained. But generally, what it will mean is expanding coolers. A lot of the repurposing coolers were expanding coolers where we can to make sure that we can maximize the opportunity. And we'll expect to see that come through here, mainly in 25. 24 will be, or we're investing in the sites.

Unknown Executive: You know, our team has identified roughly 100 sites.

Speaker Change: We have 120 sites where we can add beer, wine, and look, you know, when you're working with a legacy network, sometimes you're constrained, but generally what it will mean is expanding coolers. It will either be repurposing coolers or expanding coolers where we can.

Robert Espey: And to your point, I mean, look, our retailers, so our retailing partners, are very excited about this opportunity. And our model there where we have aligned incentives to join ownership works really well. You know, the folks there will be keen to learn and make sure that they can support this. And our channel has always been a very reliable channel for age control substances. So it fits very well within our current operating model. Again, very positive and expect that to drive some good same-store here for the next couple of years hopefully.

Speaker Change: Our retailers, so our retailing partners, are very excited about this opportunity, you know, and our model there where we have aligned incentives to joint ownership works really well. You know, the folks there will be keen to learn and make sure that they can support this.

Speaker Change: And our channel has always been a very reliable channel for age-controlled substances, so it fits very well within our current operating model. Again, very positive, and expect that to drive some good same-store here for the next couple of years, hopefully.

Luke Hannan: That's great.

Marcel Teunissen: And then my follow-up here is more of a broader question on consumer behavior. Marcel, you give great color on sort of what you're seeing as far as the macro environment in Canada and really across your footprint. But I guess my question is on the responsiveness of the consumer or your ability to drive traffic. I know that there's a coordinated offer, of course, so you guys have the pump as well as in store, and certainly, if you can match up those incentives, that's going to help drive traffic. But I guess my question is, in this sort of environment, are you seeing any promotional strategies or tactics that seem to be working well compared to others when it comes to driving traffic or capturing more fuel market share.

Marcel Teunissen: Yeah, so I think, and we talked a little bit about it. I think the beauty of course, the convenience store is that we can quickly adapt to where the consumer looks for value. Similarly on the M&M segments, right, so where you know we see that's a bit more discretionary spend, where we see that in, and there again to targeted promotions. And we lot of experience during the well targeted promotions and at the right time still drives that consumer that seeks value back to the store. And that's what we've kind of been seeing, you know, earlier this year, but definitely in quarter two that the consumer is more sensitive to that.

Speaker Change: is that we can quickly adapt to where the consumer looks for value, right? And so whether that is two-for-one kind of promotions or otherwise, we can do that, and we've seen that as being successful. You know, people always like a freebie. So, you know, those that are part of Journey, one is we can do this with targeted discounts on fuel. And so for those value-seeking customers, that helps.

Speaker Change: that within our, you know, within our Canadian market, clearly we have those tools available and we're using them.

Speaker Change: Similarly, on the M&M segment, right, so where, you know, we see that's a bit more discretionary spent where we see that in, and there again, to targeted promotions and a lot of experience doing it well targeted promotions at the right time, still drive that consumer that seeks value back to the store.

Marcel Teunissen: And what we've seen in the past as well, and we talked a little bit about it on the fuel site, people tend to fill up a fixed amount of dollars rather than a fixed amount of leaders. And that just means that if prices go up, the absolute price goes up a bit; they come less, they come more frequently as they fill up less. And then overall, of course, the resilience of our second, and that's what's quite different from what you hear more broadly in the industry. People still need to drive. M&M people go to our stations; they still buy convenience items, and both of those are quite resilient. And you know, in a general week, macro environments, but we definitely see consumers looking at all about it.

Speaker Change: What we've seen in the past as well, and we talked a little bit about it, on the fuel side, people tend to fill up a fixed amount of dollars rather than a fixed amount of liters. And that just means that if prices go up, the absolute price goes up a bit, they come more frequently as they fill up less.

Speaker Change: And when people go to our stations, they still buy convenience items, and both of those are quite resilient in a general weak macro environment, but we definitely see consumers looking out for more value.

Marcel Teunissen: Very helpful.

Steve Hansen: Thank you. Your next question comes from Steve Hansen, Raymond James. Steve, please go ahead. Oh, yeah, good morning, guys.

Operator: Thank you. Your next question comes from Steve Hansen, Raymond James. Steve, please go ahead.

Speaker Change: Very helpful, thank you.

Speaker Change: Thank you. Your next question comes from Steve Hansen, Raymond James. Steve, please go ahead.

Steve Hansen: Just a quick one on the journey program you mentioned, perhaps just a little more detail around this pilot's Walmart, the scope it stands today and perhaps the longer term vision there. We'll be helpful in just as a derivative for that, as if there's any other marquee brands that you might be contemplating. Some work with. Is there a roadmap that you've developed? Probably can give us names, but is there a roadmap here for a distant brand for a capture over time as well with the broader program we helpful thanks. Yeah, good question. Look, we're really pleased with the journey and the continued rollout and leverage we get off our partnerships.

Steve Hansen: The scope at it stands today and perhaps the longer term vision there would be helpful. And just as a derivative to that is if there's any other marquee brands that you might be contemplating some work with, is there a roadmap that you've developed?

Speaker Change: Yeah, good question. Look, we're really pleased with Journey and the continued rollout and leverage we get off our partnerships.

Robert Espey: You know, CIBC initially, a Arrow plan has been very successful at driving incremental volume. The pilot with Walmart is small; initially, it really is some cross promotion. And it's what we're trying to do is develop a relationship with them and see if there's a broader opportunity. You know, the particularly the food segment within Walmart, you know, that and fuel or high frequency purchases. And if we can link those in a successful way, I think it can drive some nice ice. I'm going forward. You know, the other item that we're rolling out this year or later in Q4 will be a fully integrated loyalty program with them.

Speaker Change: The pilot with Walmart is small initially, it really is some cross-promotion, and what we're trying to do is develop a relationship with them and see if there's a broader opportunity.

Unknown Executive: the particular food segment within Walmart, you know that and fuel or high-frequency purchases. And if we can link those in a successful way, I think it could drive some nice, nice volume going forward. The other item that we're rolling out this year or later in Q4 will be a fully integrated loyalty program with M&M. So if you recall, when we bought that business, one of the assets was an active loyalty program with about 2 million participants.

Speaker Change: the particular food segment within Walmart you know that and fuel or high frequency purchases and if we can link those in a successful way I think it could drive some nice nice volume going forward.

Robert Espey: So, if you recall, when we bought that business, one of the assets was an active loyalty program with about 2 million participants. And what we've seen there on cross promotion is has demonstrated that we can get some good same store left out of both both into our fuel network and back into M&M. So again, a tighter integration there should continue to drive a good adoption of Journey. You know, in terms of other partnerships, I mean, it's interesting as the program gains momentum and we get more and more participants. You know, we are sought after as a good partner in loyalty, and we have ongoing discussions.

Unknown Executive: And what we've seen there on cross promotions has demonstrated that we can get some good same-store lift out of both into our fuel network and back into M&M's. So again, a tighter integration there should continue to drive a good adoption of Journey. You know, in terms of other partnerships, I mean, it's interesting as the program gains momentum and we get more and more participants. You know, we are sought after as a good loyalty partner, and we have ongoing discussions with other retailers about opportunities to connect and promote.

Speaker Change: has demonstrated that we can get some good same-store lift.

Speaker Change: good adoption of Journey. You know, in terms of other partnerships, I mean, it's interesting as the program gains momentum and we get more and more participants.

Speaker Change: You know, we are sought after as a good partner in loyalty and we have ongoing discussions, you know, with other retailers about opportunities to connect and promote.

Robert Espey: You know, with other retailers about opportunities to connect and promote.

Steve Hansen: That's very helpful.

Robert Espey: Thanks. And just one quick follow-up around the buyback cadence. It does tell some one of the earlier questions. I think I'll leverage reduction.

Speaker Change: That's very helpful, thanks. And just one quick follow-up around the buyback cadence.

Robert Espey: But just how you feeling about the kid into the buyback here going forward. It's been active, of course, but there's been some, you know, I'd call it volatility, at least in the magnitude of the buyback here last quarter or two. I mean, how should we think about that going forward relative to your other objectives out there, whether it's organic growth or even leverage session. Yeah, me, you know, as I said, we balance that overall within the framework, you know, with, you know, with Q1. You know, we, of course, with less cash available today, we have to make some adjustments in the way that we're looking at buybacks.

Speaker Change: It dovetails on one of the earlier questions, I think, on leverage reduction, but...

Speaker Change: Just how are you feeling about the buyback here going forward? It's been active, of course, but there's been some, I'd call it volatility, at least in the magnitude of the buyback here at the last quarter or two. I mean, how should we think about that going forward relative to your other objectives out there, whether it's organic growth or even the leverage structure?

Unknown Executive: Yeah, we, you know, as I said, we balance that overall within the framework, you know, with, you know, with Q1. We, of course, with less cash available today, we had to make some adjustments in the way that we're looking at buybacks. And we prioritize bringing leverage down over buybacks. So you see that the pace has slowed down after that initial faster pace early in the year. And, you know, and I think we have, we don't on the growth side.

Speaker Change: Yeah, we, you know, as I said, we balance that overall within the framework, you know, with, you know, with Q1, you know, we of course, with less cash available today, we had to make some adjustments in the way that we're looking at buybacks.

Robert Espey: And we prioritize bringing leverage down over over buyback. So you see that the pace is slow down after the initial pass; the pace early in the year. And, you know, and I think we have no, we don't on the growth sites and growth investment. There's no opportunities that we have to go, you know, within that overall framework. So, you know, bring leverage down, continue to invest in our business, and then buying back shares, that's the word, which we look at it. Thanks.

Speaker Change: and we prioritize bringing leverage down over buyback so you see that the pace has slowed down after that initial faster pace earlier in the year.

Speaker Change: I think we have no, we don't, on the growth side, so in growth investment, there's no opportunities that we have to forego, you know, within that overall framework. So, you know, bringing leverage down, continue to invest in our business, and then buying back shares, that's the order in which we look at it.

Unknown Executive: So in growth investment, there are no opportunities that we have to forego, you know, within that overall framework. So, you know, bringing leverage down, continuing to invest in our business, and then buying back shares, that's the order in which we look at it.

Operator: Thank you, ladies and gentlemen. As a reminder, should you have a question? Please press star one on your touchstone phone.

Speaker Change: Brilliant. Well, thanks.

Speaker Change: Thank you, ladies and gentlemen. As a reminder, should you have a question, please press star 1 on your touchtone phone. Your next question comes from Vishal Shreedhar, National Bank Financial. Vishal, please go ahead.

Vishal Shreedhar: Your next question comes from Vishal Shreedhar, National Bank Financial. Vishal, please go ahead. Hi, is Gabriel off of Vishal? Thanks for taking our questions. I just had a couple of clarifications. First one on the 200 million in retail sales. I was wondering if you had any timeline on that. And then secondly, just a follow-up on the international. Appreciate the color earlier. Just want to come. What do you think about the distance? Two volumes going forward? Like two, one, excellent, impacted. Now we're on Samsung wholesale price. Vishal, we're having a hard time hearing you. You you broke up.

Speaker Change: and Marcel. Thank you all. Bye bye. Thank you.

Vishal Shreedhar: I think your first question was around divestitures and specifically the retail sites. Is that correct? Yes, sorry about that. Can you show me better now? Yeah, the first one was better. That's 100 million. This is running on the timing on that. And then second. Secondly, the following up on international. What do you think about the business going forward with Q to be a good run rate? Understanding Q on that. It's unpacking. And now there's some drop up on the whole set. So just wondering on that. Yeah.

Speaker Change: We're having a hard time hearing you. You broke up. I think your first question was around divestitures and specifically the retail sites. Is that correct?

Unknown Attendee: Yeah, sorry about that. Can you tell me better now?

Vishal Shreedhar: Yeah, sorry about that. Can you hear me better now? Yeah, the first one was on the radio, the 200 million.

Marcel Teunissen: So on the divestitures. Again, our divestiture program is progressing well. We've now either closed or locked in. Roughly 200 million dollars of up disposals. It does not include broader retail. A divestiture that we were doing. And. And so we expect that during subsequent quarters. On on the low low value sites are high value sites. You know, we've. We have good firm commitments and close some of those and expect several more of those to come here through. So I would say on the high value, you know, we definitely see that being on track on the lower value sites.

Speaker Change: We've now either closed or locked in roughly $200 million of disposals.

Speaker Change: It does not include broader retail.

Speaker Change: And so we expect that to come here in subsequent quarters. On the low-value sites or high-value sites, you know, we have good, firm commitments and have closed some of those and expect several more of those to come here through subsequent quarters.

Speaker Change: I would say on the high value you know we definitely see that being on track on the lower value sites.

Marcel Teunissen: You know, look, there's a lot of work all that many sites. We'll see it through the system here. And, you know, our compliment that we can hit our 2025 target.

Speaker Change: You know, look, there's a lot of work, all that many sites, but we'll continue to see it move through the system here and, you know, are confident that we can hit our 2025 target.

Marcel Teunissen: And then maybe on just your second question was on the run rate for international as Q to a good marker. I think it is. You know, you know, we have been, you know, over the last couple of years, you've seen that it's less the international seconds become less seasonal. That's, you know, with the kind of the growth of the resource sector, which, of course, you know, it's more steady throughout the year. So we've seen it as well. And I think you two is a good demonstration of that. Thank you.

Unknown Attendee: Yeah, the first one was on retail, the $200 million. I was just wondering about the timing on that. And then secondly, following up on the international. How do you think about the business going forward with Q2 being a good run rate? I'm just saying Q1 had some impact, and now there's some drop off in the wholesale. So I'm just wondering about that.

Unknown Executive: Yeah, so on the divestitures, again, our divestiture program is progressing well. We've now either closed or locked in roughly $200 million in disposals. It does not include broader retail.

Unknown Executive: Oh, no, I would say on the high value sites, you know, we definitely see that being on track on the lower value sites. Um, you know, look, there's a lot of work, all that many sites, but we'll need to see it move through the system here. And, you know, we're confident that we can hit our 2025 target.

Speaker Change: And maybe on just your second question was on the run rate for international as Q2 a good marker I think it is, you know, we

Speaker Change: You know, we have been, you know, over the last couple of years, you've seen that

Unknown Attendee: And maybe just your second question was on the run rate for international. Is Q2 a good marker?

Michael Van Elft: Your next question comes from Michael Van Ells, TD Cowan. Michael, please go ahead. Thanks again. So firstly, on the guidance reduction, I don't think anybody's over the surprise, but I. Okay.

Unknown Executive: I think it is. You know, we, you know, we have been, you know, over the last couple of years, you've seen that the international sector has become less seasonal. That's, you know, with the kind of growth of the resource sector, which, you know, is more steady throughout the year. So we've seen that as well. And I think Q2 is a good demonstration of that.

Speaker Change: Thank you. Your next question comes from Michael Van Eels, TD Cowan. Michael, please go ahead.

Speaker Change: Thanks again. So, firstly, on the guidance reduction, I don't think anybody's overly surprised, but I

Operator: Thank you. Your next question comes from Michael Van Elst, TD Cowan. Michael, please go ahead.

Robert Espey: When, when you missed your, your estimates in Q want to run you. Yeah, I mean, it was tied to the refinery shutdown. You reedery guiding the time. It seemed like at the time it was mostly because crack spreads were strong and there was other some other opportunities to recapture that shortfall and Q1. Is it just the crack spreads that led you to reduce guidance at this point? Now, look, I would say, first of all, we have a robust recovery plan in place. And we're tracking well against that. And at the time, we hadn't factored in outsized crack spreads.

Speaker Change: When you missed your estimates in Q1, or when you...

Michael Van Aelst: I when when you missed your estimates in Q1 or you Yeah, I mean, it was tied to the refinery shutdown. You reiterated guidance at the time. It seemed like at the time it was mostly because crack spreads were strong and there were some other opportunities to recapture that shortfall in Q1. Is it just the crack spreads that's led you to reduce guidance at this point?

Speaker Change: You reiterated guidance.

Speaker Change: at the time. It seemed like at the time it was mostly because crack spreads were strong and there was some other opportunities to recapture that shortfall in Q1. Is it just the crack spreads that's led you to reduce guidance at this point?

Speaker Change: No, look, I would say, first of all, we have a robust recovery plan in place and we're tracking well against that.

Speaker Change: and and at the time we hadn't factored in outsized crack spreads so

Robert Espey: So, you know, what caused us to reduce is more of the macro environment. Suddenly continuing to Edwin's, we're seeing, you know, we're not able to generate enough short-term opportunity to fully offset that. But again, if you look at, you know, where the shortfall and Q1, you know, being roughly. 130 million. And we've lowered guidance by 50, right? So, it would show that we're making good progress on our initiatives, and the teams continues to deliver. So, and again, you know, we haven't factored in outsized crack spreads. You're going forward as part of that. You know, should they come?

Unknown Executive: You know, we haven't factored in outsize crack spreads here going forward, and should they come, we'll get that as a bonus through the balance of the year.

Robert Espey: We'll get that as a bonus through the balance of the year.

Michael Van Elft: Okay. And then just confirming or clarifying what you said earlier, Bob, about hitting your annualized run rate or your target run rate for the US. So, I think your guidance for the US was supposed to be 230 to 250 annually this year. And obviously, there's been some headwinds that have prevented you from getting there. But is that the run rate that you're talking about getting back to by the end of the year? Yes. Perfect. Great.

Unknown Attendee: Okay, and then just confirming or clarifying what you said earlier, Bob, about hitting your annualized run rate or your target run rate for the US. So I think your guidance for the US was supposed to be 230 to 250 annually this year. And obviously, there's been some headwinds that have prevented you from getting there. But is that the run rate that you're talking about getting back to by the end of the year? Yes,

Speaker Change: Okay and then just confirming or clarifying what you said earlier Bob about the hitting your annualized run rate or your target run rate for the US so I think your guidance for the US was supposed to be to 30 to 250 annually this year

Operator: Thank you. There are no further questions at this time. Please proceed.

Speaker Change: and obviously there's been some headwinds that have prevented you from getting there. But is that the run rate that you're talking about getting back to by the end of the year?

Michael Van Elft: Thank you.

Bob Espey: Yes, perfect.

Operator: There are no further questions at this time. Please proceed. Great.

Speaker Change: Thank you. There are no further questions at this time. Please proceed.

Unknown Executive: Great. Well, thank you for listening in, and look forward to connecting with folks next quarter. We have some time off over the summer here, and we'll speak to you in November.

Robert Espey: Well, thank you for listening in and look forward to connecting with folks next quarter.

Speaker Change: Great, well thank you for listening in and look forward to connecting with folks next quarter. Have some time off over the summer here and we'll speak to you in November .

Robert Espey: Have a have some time off over the summer here, and we'll speak to you in November.

Operator: Thank you, ladies and gentlemen.

Operator: This concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.