Q4 2024 Parkland Corp Earnings Call
Sylvie: Good morning, my name is Sylvie, and I will be your conference operator today.
Speaker Change: I would like to welcome everyone to the Parkland, Q4 and Year End, Amalice Comfort Call. Note that all lines have been placed on view to prevent any background noise.
Sylvie: After the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, simply press start and number one on your telephone keypad. And if you would like to withdraw from the question queue, simply press start and number two. Thank you.
Speaker Change: I would now like to turn the conference over to Adam McKnight, director and investor relations for Parkland. Please go ahead sir.
Adam Mcknight: Thank you, and good morning. With me today on the call, Bob Espey, President and CEO , and Brad Monaco in term Chief Financial Officer.
Adam Mcknight: This calls webcast, so I encourage listeners to follow along with the supporting slides.
Adam Mcknight: We'll go through our 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 as necessary. And if you have additional questions, please re-enter the queue.
Adam Mcknight: Analysts are encouraged to follow up with the Investor Relations team for any detailed modeling questions that you might have.
Adam Mcknight: During today's call, 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 that are difficult to predict.
Adam Mcknight: These uncertainties include but are not limited to 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 discuss non-GAAP and other financial measures which do not have any standardized meanings prescribed by IFRS accounting standards.
Adam Mcknight: These measures are identified and defined in Parkland's continued disclosure documents which are available on our website and through our plus.
Adam Mcknight: Please refer to these documents as they identify factors that may cause actual results to differ materially from any forward-looking statements. Dollar amounts discussed today are in Canadian dollars, unless otherwise noted, I will now turn in the call over to Bob.
Good morning, everyone, and thank you for joining us today.
Adam Mcknight: Before we get into our financial results, I'd like to briefly discuss the strategic review that was announced with our earnings last night.
Adam Mcknight: The review is a board-led initiative overseen by a special committee of independent directors.
Adam Mcknight: We acknowledge that Parkland shares have underperformed and do not currently reflect the intrinsic value of the company.
Adam Mcknight: Initiating a review is appropriate at this time. Its primary intention is to explore opportunities to maximize value creation.
Adam Mcknight: while also offering a potential path to seek resolution with Simpson Oil. It is unfortunate that Simpson's remain unwilling to engage in constructive dialogue with Parkland's Board of Directors.
Adam Mcknight: Our offer to join our board remains open and we would welcome them to participate in the strategic review process.
Adam Mcknight: The process will explore a variety of strategic alternatives as laid out in our press release.
Adam Mcknight: The review will evaluate the existing business strategy and current portfolio of assets and will also consider catalysts including mergers, the vestitures, acquisitions and the sale of the company.
Adam Mcknight: We will continue to actively engage with shareholders throughout the process and provide periodic updates.
Adam Mcknight: Turning now to the US tariffs which are naturally top of mind for all of us.
Adam Mcknight: More broadly, political instability will have negative implications for both Canadian and US businesses.
As well as consumers on both sides of the border.
Adam Mcknight: Given our focus on locally sourced, and sold fuels, and communion items, we believe the overall impact will be largely neutral, with puts and takes across the business. One potential tailwind would come through lower refinery input costs of Canadian crude is further discounted.
Adam Mcknight: While tariffs and trade restrictions are not beneficial to either economy, our resilient business model, diverse geographic footprint, and supply advantage enable us to navigate economic and political uncertainties effectively.
Adam Mcknight: Moving to our financial results, I'd like to recognize the Parkland team for their dedication and strong execution during a challenging 2024.
Adam Mcknight: The team successfully navigated a macroeconomic environment that saw weak fuel demand and soft consumer discretionary spending and delivered adjusted EBITDA from our combined retail and commercial business that was consistent with expectations.
Adam Mcknight: This is a testament to the success of our organic initiatives that strengthen our customer and supply advantages.
Adam Mcknight: We also made great progress executing our strategy and building a platform for growth. During the year, the team increased
Adam Mcknight: leading to impressive market share gains in 2024, completing the restructuring of our U.S. business. Consolidated our supply team and enhanced our supply advantage with the expansion of strategic terminals in the Caribbean.
Adam Mcknight: Simplified our business processes by progressing the implementation of our enterprise-wide ERP system
Adam Mcknight: Evidence by the successful launch in St. Lucia, and reduced operating and MGNA cost by 50 million compared to 2023, more than offsetting inflationary pressures. In addition, we've identified approximately 1,500 position reduction through the vestments in ongoing synergy and cost initiatives.
within the next 24 months.
Adam Mcknight: This lays the foundation for additional savings in 2025 and beyond.
Adam Mcknight: Unfortunately, the refinery and the U.S. segment results did not meet expectations in 2024. Refinery utilization was impacted by an unplanned outage in Q1 due to record low temperatures.
Adam Mcknight: Margins Ram below mid-cycle in the second half of the year due to unfavorable North American crack spread.
Adam Mcknight: Adjusting for typical refinery utilization and mid-cycle margins would have resulted in 2024 being near the low end of our original 2024 guidance. Our US business also faced unfavorable market conditions.
Adam Mcknight: Industry volumes declined year-over-year, primarily due to lower demand, while at the same time, lengthened pat four, put pressure on supply margins.
Adam Mcknight: Similarly, Tough Market Conditions were experienced by our public and private peers [inaudible]
as evidenced by their recent results.
I have full confidence in our U.S. team's execution capabilities.
Adam Mcknight: In 2024, we continue to invest in organic growth initiatives to deliver significant improvements.
Adam Mcknight: This included backward conversion, standardization of offer and pricing and labor and fleet optimization. With these foundational changes in place, the business is positioned to capture increased volumes and margins as market conditions improve.
Adam Mcknight: Despite the challenges faced in 2024, Parkland's diversified business model proved to be resilient as we maintained focus on our growth initiatives.
Adam Mcknight: Broga, we made in 2024, provides us with a strong foundation heading into 2025. Our Q1 results are tracking the plan and are expected to significantly exceed prior year.
Adam Mcknight: As part of our commitment to strong leadership and succession planning, we recently announced some management changes. Marcel Teunissen has been promoted to President North America.
Overseeing the Retelling Commercial Businesses
Adam Mcknight: is deep industry experience and strategic leadership will drive the anticipated longer term growth.
Brad Monaco has stepped in as Interim T Financial Officer
Adam Mcknight: Many of you know Brad from his time in capital markets and most recently was VP of finance for Canadian business, Parkland's largest business segment.
Adam Mcknight: Brad's diverse experience and capabilities ensure strong continuity in the finance function while I proceed with our global search for a permanent CFO . Welcome, Brad. I'll turn it over to you to walk through our fourth quarter and year end financial results in more detail.
Adam Mcknight: Thank you Bob, and good morning everyone. In the fourth quarter, Parkland delivered adjusted EBITDA of $428 million, which puts us just under a revised full-year guidance.
Adam Mcknight: Starting with Canada, adjusted EBITDA of 190 million was consistent with last year.
Adam Mcknight: We are proud to hold the business flat in Q4 through continued supply and margin optimization, along with disciplined cost control.
Adam Mcknight: This offset weather-related commercial volume impacts the divestment of our propane business and slightly softer gasoline volumes
Adam Mcknight: Same-store sales growth was negative for the quarter, primarily driven by reduced traffic at M&M Food Market.
Adam Mcknight: This was tied to a more budget focused consumer and the impact of the Canada post strike for a large part of our key sales season.
Adam Mcknight: Excluding M&M and the impact of declining cigarette sales, sea stores, same-store sales were up approximately 3% in Q4. [inaudible]
Adam Mcknight: We continue to solidify our position as a top fuel and convenience retailer in Canada, advancing many of our core retail initiatives in 2024.
Adam Mcknight: We have held fuel market share through challenging macroeconomic conditions, grown convenience market share in core categories such as snacks and package beverages, and rapidly expanded our alcohol sales in Ontario after regulatory changes allowed the sale of beer and wine in convenience stores.
Adam Mcknight: Our international segment delivered a justity of 171 million, up 9% year-over-year. This was primarily driven by strong volume and margin growth in a retail business in Guyana, in CERNAM, and a reduction in total costs.
Adam Mcknight: We also saw higher volumes and unit margins in our marine business, particularly in Barbados.
Adam Mcknight: We're excited about the visible and sustained growth potential in this region. We continue to see increasing tourism and strong economic growth within the larger countries like Jamaica and the Dominican Republic.
Adam Mcknight: Guyana and Suriname's economies also continue to expand, underpinned by offshore development and associated infrastructure requirements.
Adam Mcknight: We are well positioned to service this demand with strategic infrastructure in region and exposure to the follow on consumer impacts.
Adam Mcknight: Although these markets currently represent approximately 10 percent of the diversified Caribbean business, it demonstrates the inherent upside we have throughout the region and we expect it to contribute significantly to the growth and strength of our international operations over time.
Adam Mcknight: In the US, we delivered 32 million in-adjusted EBITDA, down 7 million from prior year.
Adam Mcknight: While the team continued to focus on delivering committed synergies in our acquired businesses, as Bob mentioned, market headwinds persisted.
Adam Mcknight: Overall, we view much of a shortfall linked to macro pressures being felt by many industry participants, namely compressed retail fuel margins, a weaker consumer, and the impact of hurricanes which hit our southeastern rock.
Adam Mcknight: That said, we did lose some market share due to an oversupply situation in the Northern Rockies Rock, which increased competition in that area. Overall, it was a tough quarter and year for Parkland USA, however the improvements that Bob highlighted positioned us well for the long term as market conditions improve.
Adam Mcknight: Our refining segment reported the justity of a $60 million, down from 106 million last year.
Adam Mcknight: The decrease was entirely driven by lower refining margins, which remained below mid-cycle in the fourth quarter and $10 per barrel lower than Q4 2023.
Composite utilization was in line with last year at 89% [inaudible]
Adam Mcknight: The refining margin environment has been constructive in 2025, which we believe reflects some announced closures and seasonal plant maintenance across the industry.
Adam Mcknight: In the first quarter 2025, the Vernaby Refinery underwent scheduled maintenance for approximately three weeks and returned to full operation on February 25th.
Adam Mcknight: This plan maintenance was included in our 2025 Utilization Guidance of 90-95%
Adam Mcknight: In 2024, Parkland generated available cash flow of $556 million or $3.19 per share. This fully funded to our organic growth and dividends, but is down from 2023, primarily due to the lower refining
Turning to slide five now.
Adam Mcknight: We remain disciplined in our capital allocation. Our top priorities are maintaining our asset integrity, investment in the long-term growth and success of our core business, and modest growth of our annual dividend.
Adam Mcknight: Together with our previously announced maintenance and growth capital guidance for 2025, we have announced a 3% dividend increase. This marks our 13th consecutive annual increase and reinforces our commitment to returning capital to shareholders through sustainable and compounding dividend growth.
Adam Mcknight: Exiting 2024, our leverage ratio increased to 3.6 times based on our trailing 12-month EBITDA.
Adam Mcknight: This was mainly driven by lower refining margins as compared to 23, which negatively impact our leverage ratio by approximately half a turn. The weaker Canadian dollar also increased our leverage ratio through the translation of USD-denominated debt balances at your end.
Adam Mcknight: In 2025 we are committed to strengthening the balance sheet. We have good line of sight to returning to leverage within the target range of two to three times through the normalization of our EBITDA in year and anticipated debt reduction through positive cash flow generation. Thank you very much.
Adam Mcknight: Once within a range, we will evaluate further deliberating versus share buybacks or accelerated growth investments ensuring we allocate capital to where it delivers the greatest long-term value for our stakeholders
With that, I'll turn it back over to Bob.
Bob: Thanks, Brad. It is clear to me that Parkland's business model positions as well for a potentially uncertain and volatile year. While there will be bumps along the way, our diversified portfolio of products and geographies is well proven. And the team has demonstrated their ability to navigate a volatile environment successfully.
Bob: I am confident we can achieve 2025 guidance through the improvements made in our cost structure, continued investment in organic growth and operational execution, including higher utilization at the refinery.
Bob: In the long term, our resilient business model, strong execution and customer and supply advantages position us to provide value for our shareholders.
Bob: I'm confident in the team's ability to deliver our near-term priorities in our 2028 ambitions.
Bob: Thank you and with that we'll turn it over to the operator for questions from our analysts.
Thank you, sir.
Speaker Change: Ladies and gentlemen, as stated earlier, if you would like to ask a question, please press star followed by one unjudged on phone. You will hear a prompt that your hand has been raised. And Chiu Chiu is true withdraw from the question queue, please press star followed by two. And out of courtesy to other callers on the line today, we do ask to two please limit yourself to one question and one follow up. Thank you.
Bob: Your first question will be from Kevin Chiang at CRBC. Please go ahead, Kevin.
Kevin Chang: Hi, good morning. Thanks for taking my questions here. Maybe just on the strategic view that you're initiating, just wondering how...
Kevin Chang: That might impact maybe your near-term priorities like the asset sales or some of the capital allocation items you had listed at your updated investor presentation late last year.
Kevin Chang: to join the fold. I'm not sure if that impact how you might pursue your strategic review here.
Hi, Kevin, it's Bob Espey. Thanks for a question.
Bob Espey: With regard to running the business, our intent is not to change the way that we're running business, including the amount of growth capital that we've...
identified in our long-term plan and certainly forecast for...
the upcoming year, so. [inaudible]
Bob Espey: Again, we're confident on our 2028 goals and a large part of that is continuing to invest in our organic growth initiatives.
I think the next question was around the.
Speaker Change: If the Simpsons, like I know you've extended an invitation for them to rejoin your board, does a strategic review, does the process differ or change whether or not they accept that offer?
Speaker Change: Yeah, you know, look, we continue to have dialogue with the Simpsons, you know, our view and our hope is the best way to do a strategic review is to include them in that so that we can get the best outcome for all of our shareholders.
Okay, just maybe just, sorry go on.
Speaker Change: Albil and that little bit of spread here. If I think regardless, like the process will be robust, we're going to look at all options. You've got world class advisors that are supporting it and whether they participate or not, we'll look out for all shareholders including them.
Speaker Change: Okay, that's helpful. Just maybe a question on your inventory within your sea stores. Obviously there's a bit of a by-cannotive movement. Is that changing how you have to inventory some of your locations just given or maybe it's not having material impact at all? I'm not sure but just wondering if you're having to adjust your inventory management just given some of the some of the by-cannotive movement we're seeing across the headlines? [inaudible]
Speaker Change: Our business tends to be very local, and I would say on sea-store everything from the fuel that we sell to the bulk of the sea-store items are source-local, or within Canada, not a lot of that travels cost-porters.
Perfect. Thank you for taking my questions.
Speaker Change: Thank you. Next question will be from Ben Isaacson at Scotiabank. Please go ahead Ben.
Ben Isaacson: Thank you very much and good morning everyone. I have two questions. The first question is in regards to page four of the Q4 slide deck. So giving this for key to review that was announced, I imagine there's going to be a lot of people working on some of the parts.
Ben Isaacson: Can you give some kind of broad strokes on page four of the deck? You have line of business contribution, you know roughly 10% for the refinery 50 for retail and 40 for commercial. How did we think about that 1.95 billion fitting into those buckets?
Ben Isaacson: We're scrambling around here to find the guidance by a line of business.
Hang on.
Let's see what you got here.
Sorry, we've got on everything scripted except this decking promise.
Sorry, ask that question again, then, please.
Ben Isaacson: So it's basically on page four of the Q4 deck or on page six of the March 2025 deck.
Ben Isaacson: You've got a line of business contribution which says 11% refining 51% for retail and then 38% for commercial and you know as investors are looking to start some of the parts works in conjunction with this strategic review. My question is how do we parse out your the midpoint of your guidance into those three buckets. [inaudible]
even just broad strokes.
Ben Isaacson: Event, why don't I handle that one then, thank broad strokes, the main change from this 2024 number to looking forward on a next 12 month basis will be the change in refining.
Speaker Change: We've got your over-year quite a big increase due to the normalization of the utilization. The rest should be fairly consistent and growing in line with how we have, and I'll leave it up to you to determine the sum of the parts valuation.
Great, thanks, and then my second question.
Speaker Change: is when I talk to the buy side or my peers on the sell side, I keep getting told that the Burnaby Refinery is special and warrant a premium multiple. I'm not an energy guy, so I don't know what that means. And so my question is, what makes the Burnaby Refinery unique? [inaudible]
Speaker Change: and are there measurable ways that we can support that, either through better margins or lower volatility, higher capture rates, market share? Can you talk about that? Thank you.
when it comes to the refinery.
Speaker Change: The reason why the Burnaby Refinery has been exceptionally exceptional for us from a cash flow perspective, it really comes down to two things. So one is it is an integrated asset and in a market that really has no...
Speaker Change: Opportunity to bring the product to end, and as it was, and everybody in the market, markets through branded channels.
So, um...
Speaker Change: It's and on the other side is we're buying a crude.
Speaker Change: And certainly we've seen as some proof here recently with some of the tariff, but...
Speaker Change: announcements crewed at below market. So, you know, those two factors results in a high capture rate, as you said. We've been able to increase that capture rate by moving volume back to the refinery and reducing exports.
Speaker Change: that would have typically been done out of that facility. So, as a result, in Parkland's hands, we've been able to optimize it in a way that have led to some very good returns in that asset.
Thank you.
Speaker Change: Thank you. Next question will be from John Royale at J.P. Morgan. Please go ahead, John .
Hi, good morning. Thanks for taking my question.
Speaker Change: Corporate Actions, and M&A, but thinking more internally, what do you think are the controllable things that...
Robert Teunissen, Robert Espey, Valerie Roberts, Ian White
Speaker Change: Thanks, John . A couple of things. Look, the base plan is the one that we reviewed with the cell side in November of last year.
Speaker Change: and certainly against that, you know, we'll look at various scenarios in terms of...
Speaker Change: to grow to have and making sure that we can impact the cheese on. And then the second component is, again, looking at our portfolio and doesn't make sense to architect the business differently going forward. Thank you very much.
Speaker Change: Great. Thanks, Bob. And then my follow-ups just on the US business. Can you?
Robert Teunissen, Robert Espey, Valerie Roberts, Ian White
Yeah, look, that's a good question.
Speaker Change: You know, I would say the team has done a tremendous job in restructuring that business over the last couple of years.
Speaker Change: You know, in terms of that team now has a very focused retail commercial, you know, we've got all the marketing and category management support in place.
Speaker Change: And look, we have seen some benefits of that, I would say.
Speaker Change: So we've taken a lot of cost out in the last 24 months, but also focused on the team quite dramatically.
Speaker Change: You know, when it comes to Q4, we did see some good recovery in our Florida business, but the northern business lagged.
Speaker Change: and I would say the two things that can really help that business, so one is volume, so part of the markets that we're in have seen...
Speaker Change: Volume Off, Year Over Year, and you know, we're able to see that through industry data, but also some of our peers both in the public and private area of showing that volume. It was a tough quarter for volume.
The other, so expect to see volume start to come back.
Speaker Change: The other thing is, margins have been impact, it knows it's big.
Robyn Margins, year-over-year, particularly on the supply side where you tend to move volume from Canada down into the US, particularly on the diesel side.
Speaker Change: That trade was closed through Q4, so we weren't able to benefit from that, actually from most of the year, it was closed, and then we also saw in some other markets this supply margin tighter.
Speaker Change: and as a result, not as robust as he would have seen 24 months ago.
Thank you.
Speaker Change: So, you know, that goes back to, you know, again, the business is in a good position to capture both volume and margin increases here, you know, as they come back here over the next year.
Thank you.
Speaker Change: Hello, Michael, are you on the line? You can't seem to hear the operator. Sorry, I didn't.
Thank you.
Speaker Change: Hello. Please go ahead, Michael. Hi. Okay, sorry. I didn't hear my amgle before.
Michael: I wanted to continue on the US side because it seems to be a primary source of weakness aside from the refinery but refineries more identifiable the challenges there but on the US side
Michael: Can you help us understand the source of the competitive pressures that you're seeing there, both on the fuel side? I think you point out, particularly on the commercial side business seems to be weak and then as well as on the sea store side. [inaudible]
Michael: where the same Sir Sales seem to be lagging in the industry.
Yeah, so on the, on the boy inside.
You know, again, we've got [inaudible]
Speaker Change: Our data would show that in Q4, we were a little lighter than markets.
Upgrades, so part of our initiative has been upgrade.
are
Speaker Change: Imaging and also bringing the sights up to a more modern standard, so that does effect the same store in the quarter. To what extent, I'm not sure we can potentially look at that and follow up.
Speaker Change: We spent a lot of effort last year on the Southern business and we talked about so the fact that our supply was out, we rectified that in Q3. We started to see the benefit of that in Q4 on our northern business.
Speaker Change: We have seen some of our competitors open new sites close to ours and in any market those will have an impact but that's that's a small part of it.
Speaker Change: Okay, how about on the commercial side, though, when it comes to the competition in the U.S., is there a new veteran thing there?
Speaker Change: We've held swell there, and quite frankly, I think that's more driven economically at a very local level. We've seen particularly in markets that were...
Energy Sensitive, we saw we saw hesitation of companies to invest.
Speaker Change: and the amount of drilling was down. So, you know, there's just...
Uh...
A slower market that we were selling into.
Speaker Change: You know, we certainly haven't been losing customers or losing markets share in those markets. So again, you know, I would say the other factor that I talked about previously is the margins have been light throughout the market, both on the gasoline and diesel side.
Speaker Change: And look, margins are cyclical. This is all about I think the business as well, position to grab an increase in margin and we'll certainly see the sensitivity to that improved from where the business was before because of the lower cost base.
Speaker Change: Thank you. Just a quick one on the balance sheet. You said on slide five that you want to maintain leverage within the target range of two to three. I'm not sure if any were on here. It also says that you want it to be in the lower end by the end of the year still. Is that still your plan or would you consider starting up or ramping up the NCIB once you get below three times? I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: I think that, Michael, I'll take that, my comments in the script, I think alluded to, when we get into the range, we'll evaluate by backspurs as additional growth and additional be leveraging, I think on our plan for 2025, should see us get to around the middle of the range
Speaker Change: Investments would bring us to the low end of the range and as we enter the review and look at the investments, I think we'll determine the next steps for that and how hard we push on namely the bigger investments going forward or if that falls into the scope of the review.
Harris, thanks there.
Speaker Change: Thank you. Next question will be from the south radar at National Bank, please go ahead.
Vishal Sridhar: Hi, thanks for taking my questions. With respect to the Strategic Review, do you have an idea of how, of when it might conclude and will we get?
Vishal Sridhar: at the very least an update on their thinking before the AGM.
Thank you for watching. See you next time.
Vishal Sridhar: You know, we've committed to providing periodic updates, you know, as we get information and as we reach critical milestones, you know, in terms of duration, you know, our commitment is to, you know, work through this as quickly as we can with these things take time and it's hard to put a finite duration on it.
Thank you. Thank you.
Vishal Sridhar: and many more. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Okay, thank you. With respect to the crack spread environment, for Bernan B. there.
Speaker Change: It seems to be much stronger than contemplated in your guidance and obviously early days.
Speaker Change: But if these trends do continue, or are these somewhere in this neighborhood, at what point would you feel comfortable of updating your guidance to reflect the stronger environment? And I ask in the context of
Speaker Change: You know, what is a very volatile backdrop across many frames, be it political or operational?
Speaker Change: Yeah, look, I think you're your last point about volatile environments is very accurate. Yeah, look so far, you know, our business is tracking well out of the gate early in the year.
However …
with the trades.
Speaker Change: Basically, the trade war that's going on, we expect that they'll drive volatility into the economy and look, our business is very reliable through the ups and downs of the economic environment and we've seen that repeatedly through various...
Speaker Change: various economic trends over the last couple of decades at Parkland.
Speaker Change: But that being said, you know, I think our biggest concern would be the economy, the impact on the economy and just lower demand.
Um, you know, that could potentially be offset by
Speaker Change: Some outsized contribution from the refinery, but difficult to predict right now and look as the situation unfolds, you know, will it just accordingly. You know, I would say our first assessment is we're kind of neutral in the in the scenarios that we've run.
Speaker Change: But again, it's early to tell and we'll update our shareholders accordingly if our guidance is impacted.
Thank you.
Thank you.
Speaker Change: Thank you. Next question will be from Adam Hodea at Goldman Sachs. Please go ahead Adam.
Adam Hodea: Hey, good morning team and thank you for taking my questions. Bob would love to get your view on the pulse of the state of the consumer across operating regions. Are you starting to see any material changes in behavior? And then as we think about the evolving macro backdrop here, you tell us about how you see this climbing out maybe over the next six, 12 months. Thanks. Thank you very much.
Adam Hodea: Yeah, you know, I would say the start of 25 has actually been quite positive across all of our operating regions, the consumer, we did see the consumer.
Spending more. So, you know, that's very positive for us.
Adam Hodea: You know, in terms of the go forward. Again, it's difficult to predict at this point. You know, the situation seems to be changing daily, if not hourly in terms of
Adam Hodea: You know, are there tariffs or not in the expense and how that will impact our business? You know, I would say, you know, we're not a big cross-border shipper, you know, we...
Adam Hodea: Crossed between Canada and the US and our system rights were very local in terms of our supply.
Adam Hodea: because we're not dependent on any one market or any one consumer.
Adam Hodea: The other thing is, you know, volatility from our supply and trading side tends to be quite constructive.
Adam Hodea: So again, as we step back, we're kind of neutral at this point. There are some areas where we would expect to see some headwinds, but others where we would see tailwinds. And right now, we're not...
Adam Hodea: You know, we're not in a position where we'd be adjusting our guidance.
Speaker Change: Great. Thank you. And then my second question is just on the international segment. So this came in stronger than expected for street numbers and it looks like Guyana and Cernam or key drivers here. And we've seen more of a radical earnings profile over recent quarters. I know we've talked about that over the past year or so from this segment. So as we think about the past forward, how should we be thinking about potential upside, downside earnings from this segment and then just talk to us about some potential growth opportunities there? Thanks. Thank you very much.
Speaker Change: Yeah, no, good. I mean, look, I think the thing to look at an international is the trend over the last five years, you know, where we've doubled that business.
Speaker Change: And look, we did see a good quarter. Again, you know, our quarters can bump around a bit because of our participation in the wholesale market and also supply margins of times can bump around. But overall the trend there is quite positive.
Speaker Change: You know, we've just been through a remarkable growth in Diana driven by the oil discoveries offshore and we're about to witness that in in Cernam. So those two markets combined.
Speaker Change: will be a significant growth driver in the business and it takes place in two forms. I mean the first is...
Speaker Change: The initial exploration, where we're supplying a lot of diesel into the exploration platforms.
Speaker Change: then both markets continues to grow and we'll expect to see that and then the second part is just the economic growth that we see
Speaker Change: Now a great example is in Diana, we'll be putting in four or five new sites into that market this year as the country builds new roads as population grows and as a middle class starts to form and people are...
You know, investing in mobility. [inaudible]
Speaker Change: So you kind of get two ways to growth. You get the initial exploration growth and then the follow on.
Speaker Change: Economic Road, which again is quite exciting for us and quite positive.
Speaker Change: Across that region, we continue to see tourism holding in very nicely and certainly in other markets we're seeing the impacts of natural resources tribe growth.
So again, quite, quite... [inaudible]
Speaker Change: Quite optimistic about that region as we're going to do there.
Great. Thank you.
Speaker Change: Thank you. Next question will be from Luke Hannan at Canacor, January . Please go ahead, Luke.
Speaker Change: Thanks, good morning everyone. First just a housekeeping question for me on the AGM specifically the timing. Is the intent to still hold it during early May?
Speaker Change: That is correct. I don't think we've released a day yet
Speaker Change: Okay, great, thanks. And then my second question, Bob, is on the Strategic Review, specifically on the refinery, if I remember correctly, it was around maybe two years ago that you did the Strategic Review for the refinery and ultimately concluded that it made more sense to hold it within the business.
Speaker Change: Fair. Do they need some of the other? We'll call it more downstream assets associated with that as well.
Speaker Change: You know, look, it's a good question. And certainly, you know, we don't want any asset to be affected by the recent sea.
Speaker Change: Recent performance, right? We need to look at these assets as long-term assets that will perform over the next decade.
Speaker Change: You know, with that in mind, I think what the strategic review allows us to do is just put a fresh set of eyes on it.
and look at the entire portfolio including the refinery.
Speaker Change: You know, again, I'll go back to it. It's been a great asset. It's delivered far better than we ever anticipated in the original investment case, but that also needs to be considered in light of some of the parts and where the business trades.
Good, appreciate it. Thank you very much.
Speaker Change: Thank you. Again, a reminder to press star one if you have any questions.
Speaker Change: Next will be John Gibson at BMO Capital Markets. Please go ahead John .
John Gibson: Well, thanks for taking my questions. Just first on the refinery, I know we talked about the crack spread environment being a bit stronger to start here. I'm just wondering if you've seen...
Any changes in the renewable diesel credit environment? Intenda!
John Gibson: You know what, when you take into account the guidance of 300 million for the refiner of the cheer, um...
What does that sort of imply for the credit environment? [inaudible]
Yeah, very good question. You know, I would say...
John Gibson: One of the things we're seeing on the spreads is in fact the differential between WTI and sin-crued widening, which typically traits above WTI, it's not trading at a discount. And also the light-sweep spread has widened out, so if that's constructed for the refinery.
John Gibson: on the carbon markets, you know, your accurate, the carbon markets it's...
John Gibson: I've come in in the latter half. We've been working with the number of players and with the government. So look at, you know, what makes sense for that market and our confidence that it'll restore here over the year.
Speaker Change: So maybe to build on that, we have seen a bit of an oversupply in R.D., which results in lower carbon credit pricing. Do you think it's a little bit temporary and in the long term that governments are motivated to grow investments in low carbon projects?
and Ian White. Thank you. Thank you.
Speaker Change: You may not be able to provide specifics on timing, but I guess they're you closer now to a final sales process or versus Q4, there's still a lot of moving parts here.
Speaker Change: That now needs to be weighed against the broader strategic review and looking at...
Speaker Change: and others. Thank you. We appreciate it. All right. Thank you.
Speaker Change: You know, trying to run multiple work streams here. So right now, you know, the intent is to finalize, but that may trade the change as we go through the revenue process.
Speaker Change: Okay, great. I really appreciate the response. I'll turn it back.
Speaker Change: Thank you. Next is a follow up from Michael Van Elst at TD Cowan. Please go ahead Michael.
Speaker Change: It's probably just too short once there. First of all, the three weeks of the refineries down in Q1 for scheduled maintenance. Was it offline fully or was there partial production?
Speaker Change: Now, it was what we call a pit stop, so we were down for three weeks.
Speaker Change: But back off the running, no issues, no challenges. The team did a great job.
OK.
Speaker Change: Thank you, and then just with respect to the buyback, is that something that you're able to do while you're actively negotiating or looking for a sale of the business or do you have you put in an automatic plan?
Speaker Change: so that you can keep buying and can show you that you could buy backstock.
Speaker Change: We do have an automatic plan in place, but it's not active at the moment.
Perfect. All right. Thank you.
Speaker Change: Thank you. Ladies and gentlemen, this does conclude your conference call for today. Want thank you very much for attending and taking the time to join us. At this time we do ask that you please disconnect your lines. Enjoy the rest of your day.