Q3 2024 Parkland Corp Earnings Call
We would like to withdraw your question. Please press the star followed by the number two thank you I would now like to turn the conference over to Adam Mcknight Director Investor Relations for parkland.
Please go ahead.
Adam Mcknight: Thank you and good morning with me today on the call are Bob Espey, President and CEO, and Marcel Tunison Chief Financial Officer.
Adam Mcknight: This call's webcast. So I encourage those listening on the phones to follow along with the supporting slides.
Adam Mcknight: Let's start with some prepared remarks, and then open it up for questions from the investment community.
Adam Mcknight: Please limit yourself to one question and a follow up question as necessary and if you have additional questions. Please reenter the queue.
Adam Mcknight: The Investor Relations team will be available after the call for any detailed modeling questions that you might have.
Adam Mcknight: During today's call we may refer to forward looking information related to expected future performance. These.
Adam Mcknight: These statements are based on current views and assumptions and are subject to uncertainties, which are difficult to predict.
Adam Mcknight: These uncertainties include but are not limited to <unk>.
Adam Mcknight: Expected operating results and industry conditions among other factors.
Adam Mcknight: Risk factors applicable to our business are set out in our annual information form and management's discussion and analysis.
Adam Mcknight: We will also be discussing non-GAAP and other financial measures, which do not have any standardized meetings prescribed by the Ifr S. Accounting standards. These measures are identified and defined in parkland continuous disclosure documents, which are available on our website or on SEDAR plus please.
Adam Mcknight: Please refer to these documents as they identify factors, which may cause actual results to differ materially from any forward looking statements.
Adam Mcknight: Dollar amounts discussed in today's call are expressed in Canadian dollars unless otherwise noted.
Speaker Change: I will now turn the call over to Bob.
Bob Espey: And building new retail sites Rich for instance is driving double digit same store sales volume growth in Guyana.
Bob Espey: We remain bullish on the region's growth potential with one example, being the recent investment announcement in offshore oil by total energies in Suriname, where we are positioned to win.
In the U S. We delivered $54 million in adjusted EBITDA up 4% from the prior year.
Bob Espey: We are seeing the positive effects of renegotiated supply contracts in Florida, as well as tactical improvements aimed at increasing margins, reducing costs and boosting in store sales.
Bob Espey: Company same store volumes were negative four 4% during the quarter, which was better than industry in the markets, where we operate.
Bob Espey: This is due to the team's ability to recover market share in Florida and.
Bob Espey: And we expect to achieve an adjusted EBITDA quarterly run rate of $60 million as we exit 2024.
Bob Espey: Refining segment's reported adjusted EBITDA of $49 million, which was down from $88 million last year.
Bob Espey: The decrease was driven entirely by lower refining margins, which were well below our mid cycle planning assumptions. This overshadowed the strong operational performance of the team who delivered composite utilization of 102% on.
Bob Espey: On a trailing 12 months basis parkman generated available cash flow of $627 million or $3 58 per share.
Structural that might be impacting or any any concerns that might be impacting how you think that recovery might take place.
Speaker Change: I guess, there's been some concerns that.
Speaker Change: The expansion of the <unk> might be a contributing factor there is obviously excess supply in the overall north American market, just any thoughts there as you think about the recovery in that in that refining segment.
Steve: Hey, Kevin it's Steve.
Steve: Thanks for the question.
Speaker Change: Let me just start off I'll answer the question in two parts, let me just put into context the results for the quarter.
Speaker Change: Last year at $5 85, Q3 was a very tough comp that was a record quarter.
Speaker Change: And if you look at that.
Speaker Change: The delta between last year and this year, it's $154 million 140 of that is the refinery.
Speaker Change: Difference in the crack spreads so the refinery ran well in the quarter.
Speaker Change: And.
Speaker Change: And the biggest impact if you were to normalize it to mid cycle.
Speaker Change: Our refining margin would put us at five four and so it would have been a very good year and it shows that the business is well on track to hitting the $2 billion run rate. So just to put that into context in terms of the dynamics that are causing.
Speaker Change: Sure.
Speaker Change: The crack spreads to come down.
Speaker Change: You've hit certainly one of them, which is there is a period here, where we're seeing lots of supplies of the market's sloppy.
Speaker Change: And generally what we see in times like that which we've seen in the past.
Speaker Change: Investment continues in.
Speaker Change: Carbon abatement and.
Speaker Change: We expect sits.
Speaker Change: Hanging onto those credits is the right thing and there'll be more valuable either late this year or early next year.
Speaker Change: Thank you. Your next question comes from Ben Isaacson Scotiabank.
Speaker Change: Please go ahead.
Ben Isaacson: Thank you very much and good morning, everyone.
Ben Isaacson: Just a non operational high level question.
Ben Isaacson: Bob the stock price has disconnected from any reasonable valuation of $8 50, a share in free cash flow by 28 I'm sure you'll agree when you consider that in the context of <unk>.
Ben Isaacson: Several guidance cuts and balance sheet not going the way you want to at least over the last quarter or so.
Ben Isaacson: What gives you the confidence that $2 5 billion in 2008 is achievable, but the market doesn't seem to have right now what is the market missing if anything thank you.
Ben Isaacson: Look.
Speaker Change: Hey, good morning, Ben and thanks for the question look I would say the.
Speaker Change: The key thing is if you look at the performance of the business, particularly the Mark ill first start with the refinery.
Speaker Change: Ran the refinery really well in the quarter, we achieved a composite utilization over of over 100%.
Speaker Change: To kind of be a healthy dividend.
So it goes to that.
Speaker Change: What drove that capital goes to organic growth.
Speaker Change: And then the remaining half of what we have available we initially prioritize.
Speaker Change: Kind of getting the balance sheets.
Speaker Change: And getting that leverage down to getting the balance sheet.
Speaker Change: Kind of shored up and then with the remaining cash we have the choice to either invest in our business or to buy back our stock and we continue to kind of do that.
Speaker Change: And we run that through what's the best allocation of capital for the best returns for our shareholders in deciding that so that's how we look at this I don't see a change overall index I know the cash this quarter is a bit is a bit soft, but as the market recovers that will come in and we will stay in line with this and as I mentioned a bit earlier.
Speaker Change: Some of the divestment proceeds that we expect over the next at mix.
Speaker Change: The next 18 months or so.
Speaker Change: We'll keep it in that overall capital allocation framework.
Speaker Change: Thank you. Your next question comes from Lou <unk> Canaccord Genuity.
Speaker Change: Please go ahead.
Speaker Change: Good morning, everyone.