Parkland announces 2025 guidance

CALGARY, AB, Nov. 26, 2024 /PRNewswire-HISPANIC PR WIRE/ — Parkland Corporation (“Parkland”, “we”, the “Company”, or “our”) (TSX: PKI), announced today its 2025 guidance and reaffirmed its 2028 ambitions, demonstrating conviction in its strategy and business model.

“We enter 2025 confident in our strategy and plan to achieve our 2028 growth ambitions,” said Bob Espey, President and Chief Executive Officer. “Next year, despite anticipating lower than mid-cycle refining margins, Adjusted EBITDA from our retail and commercial businesses are expected to increase by approximately five percent, in line with our growth commitments. The Parkland team will continue to focus on growing our customer volumes while achieving the synergies and efficiencies from previous acquisitions.”

2025 Guidance2

Adjusted EBITDA of $1,800 million to $2,100 million, which includes Refining Adjusted EBITDA of approximately $300 million. This assumes:

Refinery composite utilization of 90 to 95 percent. We have deferred the previously planned major turnaround to 2026 following the completion of maintenance activities in 2024.

Refining adjusted gross margin of $32 to $33 per barrel. This reflects industry dynamics that are currently below mid-cycle.

Capital expenditures1 of between $475 million to $525 million.

Available cash flow of $5.00 to $6.00 per share1.

Leverage Ratio1 at the low end of our 2 to 3 times target range by year-end 2025.

Completion of the previously announced divestment program, which we expect to exceed $500 million.

________________________________________

1 Specified Financial Measure. See “Specified Financial Measures” section of this news release.

2 See “Forward Looking Statements” section of this news release for assumptions underlying Parkland’s 2025 Guidance and 2028 Ambitions.

Reaffirming 2028 Ambitions2

Adjusted EBITDA1 of $2.5 billion, driven by organic growth, supply optimization, cost efficiencies and returning to mid-cycle refining margins.

Available cash flow of $8.50 per share1.

Return on Invested Capital (ROIC)1 of more than 12 percent.

Disciplined Capital Allocation

We anticipate generating approximately $5 billion in cumulative Available cash flow from 2025 to 2028 and are positioned to deliver sustainable growth while enhancing shareholder returns and strengthening our balance sheet. The Company’s capital allocation framework remains in place with 25 percent of Available cash flow directed toward dividends, 25 percent toward organic growth initiatives, and the remaining 50 percent toward opportunities that generate the greatest returns, including share buybacks and inorganic growth opportunities.

To support organic growth initiatives, we expect to allocate approximately $1.3 billion of growth capital expenditures from 2025 to 2028 as follows:

Approximately 50 percent to strengthen our retail customer advantage, focused on growing market share and loyalty, while enhancing brand recognition through:

Building scale and density with more than 100 new to industry sites, raze and rebuilds or tuck-ins;

Completing more than 175 ON the RUN conversions with differentiated food offers; and

Installing approximately 1,800 additional EV charging ports.

Approximately 20 percent to strengthen our commercial customer advantage, focused on growing volumes through cardlock expansion, multi-product offers and tailored customer solutions.

Approximately 30 percent to strengthen our supply advantage, focused on building scale and purchasing power through strategic infrastructure investments, including increasing co-processing capacity to 7,500 barrels per day by 2028.

For further information, please see the latest investor presentation available on the Parkland website at www.parkland.ca.

About Parkland Corporation

Parkland is an international fuel distributor, marketer, and convenience retailer with operations in 26 countries across the Americas. We serve over one million customers each day. Our retail network meets the fuel and convenience needs of everyday consumers. Our commercial operations provide businesses with industrial fuels so that they can better serve their customers. In addition to meeting our customers’ needs for essential fuels, we provide a range of choices to help them lower their environmental impact. These include renewable fuels sourcing, manufacturing and blending, carbon and renewables trading, solar power, and ultra-fast EV charging. With approximately 4,000 retail and commercial locations across Canada, the United States and the Caribbean region, we have developed supply, distribution and trading capabilities to accelerate growth and business performance.

Our strategy is focused on two pillars: our Customer Advantage and our Supply Advantage. Through our Customer Advantage, we aim to be the first choice of our customers, cultivating their loyalty through proprietary brands, differentiated offers, our extensive network, competitive pricing, reliable service, and our compelling loyalty program. Our Supply Advantage is based on achieving the lowest cost to serve among independent fuel marketers and distributors in the hard-to-serve markets in which we operate, through our well-positioned assets, significant scale, and deep supply and logistics capabilities. Our business is underpinned by our people and our values of safety, integrity, community and respect, which are deeply embedded across our organization.

Forward-Looking Statements

Certain statements contained herein constitute forward-looking information and statements (collectively, “forward-looking statements”). When used the words “expect”, “will”, “could”, “would”, “believe”, “continue”, “pursue” and similar expressions are intended to identify forward-looking statements. In particular, this news release contains forward-looking statements with respect to, among other things: business strategies, objectives and initiatives; expected market trends; expected refining margins; Parkland’s expected increase of approximately 5% in its 2025 Adjusted EBITDA from its retail and commercial lines of business; Parkland’s 2025 Adjusted EBITDA Guidance, including Refining Adjusted EBITDA of approximately $300 million, 2025 Capital Expenditure Guidance, 2025 Available cash flow per share Guidance, 2025 Leverage Ratio Guidance, 2028 Adjusted EBITDA Ambition, 2028 Available cash flow per share Ambition, 2028 ROIC Ambition; Parkland’s divestment program, the completion and timing thereof and the amount relating thereto; Parkland’s disciplined capital allocation; Parkland’s expectation to generate $5 billion in cumulative Available cash flow from 2025 and 2028, and expected uses for such under Parkland’s capital allocation program, including directing approximately 25 percent toward organic growth initiatives and expected allocation of funds to specific initiatives; Parkland’s expectation to allocate approximately $1.3 billion in growth capital expenditures from 2025 to 2028, including with respect to 50% (approximately $650 million) allocated to retail customer advantage initiatives including building more than 100 new to industry sites, raze and rebuilds or tuck-ins, completing more than 175 On the Run conversions and installing approximately 1,800 EV charging ports, which will generate approximately $110 million of incremental Adjusted EBITDA, 20% (approximately $260 million) to commercial customer advantage initiatives including through cardlock expansion, multi-product offers and tailored customer solutions, which will generate approximately $45 million of incremental Adjusted EBITDA, and 30% (approximately $390 million) to supply advantage initiatives through strategic infrastructure investments, including increasing co-processing capacity to 7,500 barrel per day by 2028, which will generate approximately $70 million of incremental Adjusted EBITDA.

These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These forward-looking statements speak only as of the date of this news release. Parkland does not undertake any obligation to publicly update or revise any forward-looking statements except as required by securities law. Actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous risks and uncertainties including, but not limited to: general economic, market and business conditions; micro and macroeconomic trends and conditions, including increases in interest rates, inflation and commodity prices; customer preferences and trends; Parkland’s competitive advantages, including key products and brands, proprietary infrastructure and supply advantage, and ability to maintain such advantages; Parkland’s ability to retain key employees; Parkland’s ability to execute its business objectives, projects and strategies, including the completion, financing and timing thereof, realizing the benefits therefrom and meeting our targets and commitments relating thereto; Parkland’s ability to identify buyers and complete divestments, if any, on terms reasonable to Parkland and in a timely manner; Parkland’s ability to execute on accretive organic initiatives and grow to meet its 2025 Guidance and 2028 Ambitions and expected outcomes; Parkland’s management systems and programs and risk management strategy; Parkland’s ability to pay future dividends and complete share buybacks; competitive environment of our industry; retail pricing, margins and refining crack spreads; availability and pricing of petroleum product supply; volatility of crude oil and refined product prices; ability of suppliers to meet commitments; actions by governmental authorities and other regulators including but not limited to increases in taxes or restricted access to markets; environmental impact; changes in environmental and regulatory laws, including the ability to obtain or maintain required permits; expectations with respect to debt repayment and non-cash working capital; and other factors, many of which are beyond the control of Parkland. In addition, the 2025 Adjusted EBITDA Guidance reflects higher Refinery composite utilization ($100 million), ongoing synergies and cost optimization ($50 million) and strategic organic growth initiatives ($75 million), resulting in an increase in Retail and Commercial Adjusted EBITDA of approximately five percent, as compared to the midpoint of 2024 Adjusted EBITDA Guidance, and the key material assumptions include: Refining adjusted gross margin of $32 to $33 per barrel (reflecting current industry dynamics that are currently below mid-cycle); average Burnaby Refinery utilization of 90 percent to 95 percent based on the Burnaby Refinery’s crude processing capacity of 55,000 barrels per day (and deferral of the previously planned turnaround to 2026 following the completion of maintenance activities in 2024); and ongoing cost reductions across the business. The 2025 Adjusted EBITDA Guidance range reflects Parkland’s sensitivity of approximately $18 million of Adjusted EBITDA for every $1 per barrel of Refining adjusted gross margin. The 2025 Available cash flow per share Guidance assumes increasing cash flow through continued integration of acquired businesses, ongoing cost optimization and organic growth, while maintaining or decreasing the number of outstanding common shares. 2025 Capital Expenditure Guidance assumes no material changes to underlying operations and no planned major turnaround at the Burnaby Refinery. The 2025 Leverage Ratio Guidance assumes increasing the amount of Available cash flow while maintaining or decreasing debt levels. The 2028 Adjusted EBITDA Ambition reflects higher Refinery adjusted gross margins ($125 million), supply optimization ($75 million), cost optimization ($75 million), strategic organic growth initiatives set out in this release ($225 million), and offsets to lost Adjusted EBITDA associated with planned divestments ($50 million), as compared to the midpoint of 2025 Adjusted EBITDA Guidance. 2028 Ambitions reflect continued organic growth from growth capital expenditures in line with historical returns, supply optimization, identified cost efficiencies, potential acquisitions (not identified, but reflective of expected market returns and similar to expected returns from organic growth initiatives), disciplined inorganic growth opportunities in line with our capital allocation framework, mid-cycle Refining adjusted gross margin of approximately $38 to $40 per barrel, a major planned Burnaby Refinery turnaround in 2026, interest rates on long term bank debt and corporate bonds as set out in the Interim Consolidated Financial Statements for the three and nine months ended September 30, 2024 (“Q3 2024 MD&A”), with any maturing debts set to retire in the interim periods extended at current prevailing market rates, income taxes at expected corporate income tax rates, including the impact of Pilar II legislation, and the key material assumptions and risks include: ongoing operations without any material economic, legal, environmental or income tax changes and per share metrics impacted by share buybacks, with the assumption that the outstanding common shares do not change materially. See also the risks and uncertainties described in “Cautionary Statement Regarding Forward-Looking Information” and “Risk Factors” included in Parkland’s most recently filed Annual Information Form, and in “Forward-Looking Information” and “Risk Factors” in the Q3 2024 MD&A, each as filed on the System for Electronic Data Analysis and Retrieval+ (“SEDAR+”) and available on the Parkland website at www.parkland.ca.

Specified Financial Measures

This news release refers to certain non-GAAP financial measures and ratios and supplementary financial measures (collectively “specified financial measures”). Available cash flow is a non-GAAP measure; Available cash flow per share Guidance, Available cash flow per share Ambition, ROIC and ROIC Ambition are non-GAAP financial ratios; and Adjusted EBITDA Guidance, Adjusted EBITDA Ambition, Leverage Ratio Guidance and Capital Expenditure Guidance are supplementary financial measures, all of which do not have standardized meanings prescribed by International Financial Reporting Standards (“IFRS Accounting Standards”) and may not be comparable to similar financial measures used by other issuers who may calculate these measures differently. See below for further information on these specified financial measures. See Section 16 of the Q3 2024 MD&A for a discussion of Adjusted EBITDA Guidance, Leverage Ratio Guidance, Capital Expenditure Guidance and Available cash flow per share Guidance, including an explanation of their composition, and, where applicable, their reconciliations to the nearest IFRS measures, which is hereby incorporated by reference into this presentation. Investors are cautioned that these measures should not be construed as an alternative to net earnings, cash generated from (used in) operating activities, or other directly comparable financial measures determined in accordance with IFRS as an indication of Parkland’s performance.

Available cash flow and Available cash flow per share are a non-GAAP financial measure and a non-GAAP financial ratio, respectively.

Available cash flow is calculated as cash generated from (used in) operating activities, the most directly comparable financial measure, adjusted for items such as (i) net change in (a) non-cash working capital and (b) other assets and other liabilities, (ii) maintenance capital expenditures, (iii) dividends received from investments in associates and joint ventures, (iv) interest on leases and long-term debt, and (v) payments on principal amount on leases. We use this non-GAAP financial measure to monitor Parkland’s ability to generate cash flow for capital allocation, including distributions to shareholders, investment in the growth of the business, and deleveraging.

Available cash flow per share is a non-GAAP financial ratio calculated by dividing Available cash flow by the weighted average number of outstanding common shares. Available cash flow per share Guidance and Available cash flow per share Ambition represent the forward-looking metric of Available cash flow per share.

Three months ended

Trailing twelve
months ended

September 30,2024

($ millions, unless otherwise noted)

December
31, 2023

March 31,
2024 (1)

June 30,
2024

September
30, 2024

Cash generated from (used in) operating activities

417

217

450

406

1,490

Reverse: Change in other assets and other liabilities

(4)

28

3

(68)

(41)

Reverse: Net change in non-cash working capital related to operating activities(1)

17

55

(34)

21

59

Include: Maintenance capital expenditures

(93)

(59)

(53)

(71)

(276)

Include: Dividends received from investments in associates and joint ventures

3

2

8

3

16

Include: Interest on leases and long-term debt

(88)

(85)

(88)

(85)

(346)

Include: Payments of principal amount on leases

(71)

(71)

(64)

(69)

(275)

Available cash flow

181

87

222

137

627

Weighted average number of common shares (millions)(2)

175

TTM Available cash flow per share

3.58

Three months ended

Trailing twelve
months ended
September 30, 2023

($ millions, unless otherwise noted)

December
31, 2022

March 31,
2023

June 30,
2023(1)

September 30,
2023

Cash generated from (used in) operating activities | 629 | 314 | 521 | 528 | 1,992
Reverse: Change in other assets and other liabilities | (23) | 11 | (11) | 7 | (16)
Reverse: Net change in non-cash working capital related to operating activities(1) | (232) | 18 | (145) | (14) | (373)
Include: Maintenance capital expenditures | (118) | (79) | (61) | (52) | (310)
Include: Dividends received from investments in associates and joint ventures | — | 16 | 2 | 4 | 22
Include: Interest on leases and long-term debt | (86) | (92) | (89) | (83) | (350)
Include: Payments on principal amount on leases | (52) | (51) | (56) | (57) | (216)
Available cash flow | 118 | 137 | 161 | 333 | 749
Weighted average number of common shares (millions)(2) | | | | | 175
TTM Available cash flow per share | | | | | 4.28

(1) | For comparative purposes, certain amounts within the net change in non-cash working capital related to operating activities for the three months ended March 31, 2024, and the three months ended June 30, 2023, were revised to conform to the current period presentation.
(2) | Weighted average number of common shares are calculated in accordance with Parkland’s accounting policy contained in Note 2 of the Annual Consolidated Financial Statements.

ROIC is a non-GAAP financial ratio. The measure is calculated as a ratio of Net operating profit after tax (“NOPAT”) divided by average invested capital. NOPAT describes the profitability of Parkland’s base operations, excluding the impact of leverage and certain other items of income and expenditure that are not considered representative of Parkland’s underlying core operating performance. NOPAT is based on Adjusted EBITDA, defined in Section 16A of the Q3 2024 MD&A, less depreciation expense and the estimated tax expense using the expected average tax rate estimated using statutory tax rates in each jurisdiction where Parkland operates. Average invested capital is the amount of capital deployed by Parkland that represents the average of opening and closing debt and shareholder’s equity, including equity reserves, net of cash and cash equivalents. We use this non-GAAP measure to assess Parkland’s efficiency in investing capital. ROIC Ambition represents the forward-looking metric of ROIC.

($ millions, unless otherwise noted)

Three months ended

Trailing twelve
months ended
September 30, 2024

ROIC

December
31, 2023

March 31,
2024

June 30,
2024

September 30,
2024

Net earnings (loss)

86

(5)

70

91

242

Add/(less): | | | | |

Income tax expense (recovery)

(15)

(29)

20

17

(7)

Acquisition, integration and other costs

42

30

46

61

179

Depreciation and amortization

222

206

202

207

837

Finance cost

89

91

99

96

375

(Gain) loss on foreign exchange – unrealized

—

3

4

1

8

(Gain) loss on risk management and other – unrealized

28

3

56

(48)

39

Other (gains) and losses

5

10

(1)

(1)

13

Other adjusting items

6

18

8

7

39

Adjusted EBITDA

463

327

504

431

1,725

Less: Depreciation

(222)

(206)

(202)

(207)

(837)

Adjusted EBIT

241

121

302

224

888

Average effective tax rate

19.0 %

Less: Taxes

(169)

Net operating profit after tax

719

Opening invested capital

9,238

Closing invested capital

9,125

Average invested capital

9,182

Return on invested capital

7.8 %

($ millions, unless otherwise noted)

September 30, 2024

September 30, 2023

Invested capital

Long-term debt – current portion

220

180

Long-term debt

6,104

6,227

Shareholders’ equity

3,164

3,259

Exclude: Cash and cash equivalents

(363)

(428)

Total

9,125

9,238

($ millions, unless otherwise noted)

Three months ended

Trailing twelve
months ended
September 30, 2023

ROIC

December
31, 2022

March 31,
2023

June 30,
2023

September
30, 2023

Net earnings | 69 | 77 | 78 | 230 | 454
Add/(less): | | | | |
Income tax expense (recovery) | 22 | (20) | 18 | 54 | 74
Acquisition, integration and other costs | 41 | 27 | 39 | 38 | 145
Depreciation and amortization | 212 | 190 | 206 | 205 | 813
Finance cost | 94 | 104 | 98 | 93 | 389
(Gain) loss on foreign exchange – unrealized | 8 | 7 | 27 | 1 | 43
(Gain) loss on risk management and other – unrealized | 9 | (32) | (11) | (19) | (53)
Other (gains) and losses | (21) | 21 | 14 | (37) | (23)
Other adjusting items | 21 | 21 | 1 | 20 | 63
Adjusted EBITDA | 455 | 395 | 470 | 585 | 1,905
Less: Depreciation | (212) | (190) | (206) | (205) | (813)
Adjusted EBIT | 243 | 205 | 264 | 380 | 1,092
Average effective tax rate | | | | | 18.3 %
Less: Taxes | | | | | (200)
Net operating profit after tax | | | | | 892
Opening invested capital | | | | | 9,521
Closing invested capital | | | | | 9,238
Average invested capital | | | | | 9,380
Return on invested capital | | | | | 9.5 %

($ millions, unless otherwise noted) | September 30, 2023 | September 30, 2022
Invested capital
Long-term debt – current portion | 180 | 151
Long-term debt | 6,227 | 6,617
Shareholders’ equity | 3,259 | 2,485
Sol Put Option | — | 629
Exclude: Cash and cash equivalents | (428) | (361)
Total | 9,238 | 9,521