Parkland Reports 2024 Second Quarter Results

CALGARY, AB, July 31, 2024 /PRNewswire-HISPANIC PR WIRE/ — Parkland Corporation (“Parkland”, “we”, the “Company”, or “our”) (TSX: PKI), today announced its financial and operating results for the three (second quarter) and six months ended June 30, 2024.

“I would like to thank the Parkland team for delivering record second quarter results,” said Bob Espey President and Chief Executive Officer. “Our focus remains steadfast on improving returns by investing in our customer and supply advantages, and strengthening our robust platform for future growth to deliver shareholder value. I have confidence in the rest of the year and our longer term ambitions.”

Parkland Second Quarter 2024 Results Highlights

Adjusted EBITDA of $504 million, an increase of 7 percent as compared to Q2 2023.

Net earnings of $70 million ($0.40 per share, basic), a decrease of 10 percent as compared to Q2 2023, and Adjusted earnings2 of $156 million ($0.89 per share, basic), an increase of 20 percent from Q2 2023.

TTM Available cash flow2 of $831 million ($4.75 per share), an increase of 60 percent from the same period in 2023, and TTM Cash generated from (used in) operating activities3 of $1,612 million ($9.21 per share), a decrease of 13 percent from the same period in 2023, due to favourable non-cash working capital movements in the prior period.

Purchased for cancellation approximately 700,000 Parkland common shares for $29 million and maintained Leverage Ratio4 of 3.1 times (3.1 times in Q1 2024).

Return on invested capital2 (“ROIC”) increased to 9 percent from 7.7 percent for the trailing twelve months ended June 30, 2024, as compared to the same period in 2023.

Parkland Second Quarter 2024 Segment Results Highlights

Canada delivered Adjusted EBITDA of $172 million, up 15 percent from Q2 2023 ($150 million). This increase was primarily driven by stronger fuel unit margins and the benefits of our supply advantage, partially offset by the impact of softening industry demand in our retail business. Company same-store volume growth (“Company SSVG)5 was (1.0) percent , compared to 9.3 percent in Q2 2023. Food and Company C-Store SSSG (excluding cigarettes)2 was (0.7) percent, for the second quarter of 2024, compared to 3.1 percent, in Q2 2023. These were primarily driven by economic conditions that have reduced discretionary spending for consumers. Canada delivered Food and Company C-store revenue of $82 million, consistent with Q2 2023 ($79 million).

International delivered Adjusted EBITDA of $182 million, up 8 percent from Q2 2023 ($168 million). The increase was primarily driven by improved unit fuel margins in the wholesale business, partially offset by lower volumes, and continued strength in the base retail business and the addition of new sites.

USA delivered Adjusted EBITDA of $49 million, down 34 percent from Q2 2023 ($74 million). Results reflect lower diesel and gasoline market demand and lower unit fuel margins due to unfavorable commodity price movements.

Refining delivered Adjusted EBITDA of $121 million, compared to $109 million in Q2 2023. Composite utilization5 at the Burnaby Refinery was 98 percent, including record co-processing volumes of 3,000 barrels per day, compared to 91 percent in Q2 2023.

Consolidated Operating costs and Marketing, general and administrative expenses decreased $5 million compared to Q2 2023, reflecting ongoing cost-reduction initiatives that have successfully offset the impact of inflationary pressures across the business.

Parkland’s total recordable injury frequency rate5 on a trailing-twelve-months basis was 1.21, compared to 0.87 at June 30, 2023.

____________________________________

1 Total of segments measure. See “Measures of Segment Profit and Total of Segments Measures” section of this news release.

2 Non-GAAP financial measure or non-GAAP financial ratio. See “Non-GAAP Financial Measures and Ratios” section of this news release.

3 Supplementary financial measure. See “Supplementary Financial Measures” section of this news release.

4 Capital management measure. See “Capital Management Measures” section of this news release.

5 Non-financial measure. See “Non-Financial Measures” section of this news release.

2024 Guidance

As a result of the unplanned shutdown at the Burnaby Refinery in the first quarter of 2024, and unfavorable market conditions experienced in the first six months of 2024 that may persist for the rest of the year, Parkland has revised its 2024 Adjusted EBITDA Guidance to $1,900 million to $2,000 million.

Governance Update

Parkland’s Board of Directors has elected Michael Jennings as the Chair of the Board effective at the end of second quarter, July 31, 2024. He replaced Steven Richardson who is retiring. Mr. Jennings joined Parkland’s Board in February 2024 and is a highly experienced executive and board member with over three decades of international integrated energy experience.

“It has been a privilege to serve on Parkland’s Board for the past seven years, including my tenure as Chair,” said Mr. Richardson. “During this time, we have significantly grown the Company and implemented a strategic board renewal process, recruiting highly experienced and qualified directors, including bringing in Mike as a successor. I would like to thank the Board, management and the broader Parkland team for their support; it has been a pleasure working with such a committed and talented group.”

“I am honoured to be elected as Chair of the Board and I look forward to building on the strong foundation that has been established,” said Mr. Jennings. “I would like to thank Steve for his leadership and contributions to Parkland’s Board. I have the utmost confidence in the Parkland business strategy and the management team, led by Bob Espey. Together, we will work in the interest of all shareholders to deliver sustainable long-term value.”

2023 Sustainability Report

Today, Parkland published its fifth Sustainability Report, which outlines our refreshed strategy to better reflect the strong connection between environment, social and governance (“ESG”) considerations and our corporate strategy. The report highlights the sustainability initiatives underway and our ESG performance for 2023. Among these initiatives are efforts on co-processing low-carbon fuels made from renewable feedstocks, including our plans to grow co-processing to 7,500 barrels per day by 2028; building safer, more diverse, and inclusive work environments; and projects to improve energy efficiency within Parkland’s marketing operations.

Parkland’s 2023 Sustainability Report can be viewed here : https://www.parkland.ca/sustainability/sustainability-reporting

Consolidated Financial Overview

($ millions, unless otherwise noted)

Parkland Second Quarter Results
Three months ended June 30,

Financial Summary

2024

2023

Sales and operating revenue

7,504

7,819

Adjusted EBITDA(1)

504

470

Canada(2)

172

150

International(2)

182

168

USA(2)

49

74

Refining(2)

121

109

Corporate(2)

(20)

(31)

Net earnings (loss)

70

78

Net earnings (loss) per share – basic ($ per share)

0.40

0.44

Net earnings (loss) per share – diluted ($ per share)

0.39

0.43

Trailing-twelve-month (“TTM”) Cash generated from (used in) operating activities(3)

1,612

1,868

TTM Cash generated from (used in) operating activities per share(3)

9.21

10.99

TTM Available cash flow(4)

831

519

TTM Available cash flow per share(4)

4.75

3.05

TTM Return on invested capital(4)

9.0 %

7.7 %

1

Total of segments measure. See “Measures of Segment Profit and Total of Segments Measures” section of this news release.

2

Measure of segment profit (loss). See “Measures of Segment Profit and Total of Segments Measures” section of this news release.

3

Supplementary financial measure. See “Supplementary Financial Measures” section of this news release.

4

Non-GAAP financial measure or non-GAAP financial ratio. See “Non-GAAP Financial Measures and Ratios” section of this news release.

Q2 2024 Conference Call and Webcast Details

Parkland will host a webcast and conference call on Thursday, August 1, 2024 at 6:30 am MT (8:30 am ET) to discuss the results. To listen to the live webcast and watch the presentation, please use the following link: https://app.webinar.net/gaV9np4n75j

Analysts and investors interested in participating in the question and answer session of the conference call may do so by calling 1-888-390-0546 (toll-free) (Conference ID: 41672249). International participants may call 1-800-389-0704 (toll-free) (Conference ID: 41672249).

Please connect and log in approximately 10 minutes before the beginning of the call. The webcast will be available for replay two hours after the conference call ends at the link above. It will remain available for one year and will also be posted at www.parkland.ca.

MD&A and Interim Condensed Consolidated Financial Statements

The Management’s Discussion and Analysis for the three and six months ended June 30, 2024 (the “Q2 2024 MD&A”) and Interim Condensed Consolidated Financial Statements for the three and six months ended June 30, 2024 (the “Q2 2024 Interim Condensed Consolidated Financial Statements”) provide a detailed explanation of Parkland’s operating results for the three and six months ended June 30, 2024. An English version of these documents will be available online at www.parkland.ca and the System for Electronic Data Analysis and Retrieval + (“SEDAR+”) after the results are released by newswire under Parkland’s profile at www.sedarplus.ca. The French versions of the Q2 2024 MD&A and the Q2 2024 Interim Condensed Consolidated Financial Statements will be posted to www.parkland.ca and SEDAR+ as soon as they become available.

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 in this news release, 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; Parkland’s revised 2024 Adjusted EBITDA guidance; Parkland’s sustainability initiatives, including plans to expand the co-processing capacity of the Burnaby Refinery to 7,500 barrels per day by 2028; and confidence in the rest of the year and our long-term ambitions.

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, many of which are beyond the control of Parkland, including, but not limited to: general economic, market and business conditions; Parkland’s ability to execute its business strategies, objectives, and initiatives, including the completion, financing and timing thereof, realizing the benefits therefrom, and meeting our targets and commitments relating thereto; realization of the expected impact of the maintenance and refining optimization work completed on the Burnaby Refinery’s utilization and profitability; and the assumptions and risks described under “Cautionary Statement Regarding Forward-Looking Information” and “Risk Factors” in Parkland’s most recent Annual Information Form, and under “Forward-Looking Information” and “Risk Factors” in the Q2 2024 MD&A, which are incorporated by reference herein, each as filed on SEDAR+ and available on the Parkland website at www.parkland.ca.

In addition, the revised 2024 Adjusted EBITDA guidance reflects continued integration of acquired businesses, synergy capture, and organic growth initiatives, and the key material assumptions include:

An increase in Retail and Commercial Fuel and petroleum product adjusted gross margin of approximately 5 percent and Food, convenience and other adjusted gross margin of approximately 5 percent as compared to the year ended December 31, 2023

The realization of $100 million of run-rate marketing, general and administrative expense cost efficiencies by the end of 2024; Refining adjusted gross margin of approximately $40 to $41 per barrel and average Burnaby Refinery composite utilization of 75 percent to 80 percent (factoring in the unplanned outage) based on the Burnaby Refinery’s crude processing capacity of 55,000 barrels per day

Enhancements to operations, utilization and optimization of supply at the Burnaby Refinery during 2024

Implementation of ongoing cost reductions across the business.

The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Specified Financial Measures

This news release contains total of segments measures, non-GAAP financial measures and non-GAAP financial ratios, supplementary financial measures and capital management measures (collectively, “specified financial measures”). Parkland’s management uses certain specified financial measures to analyze the operating and financial performance, leverage, and liquidity of the business. These specified financial measures do not have any standardized meaning under International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) and are therefore unlikely to be comparable to similar measures presented by other companies. The specified financial measures should not be considered in isolation or used in substitute for measures of performance prepared in accordance with the IFRS Accounting Standards. See Section 16 of the Q2 2024 MD&A, which is incorporated by reference into this news release, for further details regarding specified financial measures used by Parkland.

Non-GAAP Financial Measures and Ratios

Adjusted earnings (loss) is a non-GAAP financial measure and Adjusted earnings (loss) per share is a non-GAAP financial ratio, each representing the underlying core operating performance of business activities of Parkland at a consolidated level. The most directly comparable financial measure to Adjusted earnings (loss) and Adjusted earnings (loss) per share is Net earnings (loss).

Adjusted earnings (loss) and Adjusted earnings (loss) per share represent how well Parkland’s operational business is performing, while considering depreciation and amortization, interest on leases and long-term debt, accretion and other finance costs, and income taxes. The Company uses these measures because it believes that Adjusted earnings (loss) and Adjusted earnings (loss) per share are useful for management and investors in assessing the Company’s overall performance, as they exclude certain significant items that are not reflective of the Company’s underlying business operations.

See Section 16 of the Q2 2024 MD&A, which is incorporated by reference into this news release, for the detailed definition and composition of Adjusted earnings (loss) and Adjusted earnings (loss) per share.

Please see below for the reconciliation of Adjusted earnings (loss) to net earnings (loss) and calculation of Adjusted earnings (loss) per share.

Three months ended June 30,

($ millions, unless otherwise stated)

2024

2023

Net earnings (loss)

70

78

Add: | |

Acquisition, integration and other costs

46

39

(Gain) loss on foreign exchange – unrealized

4

27

(Gain) loss on risk management and other – unrealized

56

(11)

Other (gains) and losses

(1)

14

Other adjusting items(1)

8

1

Tax normalization(2)

(27)

(18)

Adjusted earnings (loss)

156

130

Weighted average number of common shares (million shares)(3)

175

176

Weighted average number of common shares adjusted for the effects of dilution (million shares)(3)

177

178

Adjusted earnings (loss) per share ($ per share) | |

Basic

0.89

0.74

Diluted

0.88

0.73

1 Other adjusting items for the three months ended June 30, 2024 include: (i) the share of depreciation, income taxes and other adjustments for investments in joint ventures and associates of $3 million (2023 – $3 million); (ii) other income of $3 million (2023 – $3 million); (iii) adjustment to foreign exchange gains and losses related to cash pooling arrangements of $2 million (2023 – $1 million); (iv) realized risk management loss related to underlying physical sales activity in another period of $1 million (2023 – $4 million gain); and (v) adjustment to realized risk management gains related to interest rate swaps as these gains do not relate to commodity sale and purchase transactions of $1 million (2023 – nil). Other adjusting Items for the first six months of 2024 include: (i) the share of depreciation, income taxes and other adjustments for investments in joint ventures and associates of $7 million (2023 – $6 million); (ii) other income of $5 million (2023 – $6 million); (iii) realized risk management loss related to underlying physical sales activity in another period of $4 million (2023 – $3 million gain); (iv) adjustment to foreign exchange gains and losses related to cash pooling arrangements of $4 million (2023 – nil); (v) adjustment to realized risk management gains of related to interest rate swaps as these gains do not relate to commodity sale and purchase transactions of $2 million (2023 – nil); and (vi) the effect of market-based performance conditions for equity-settled share-based award settlements of nil (2023 – $13 million).

2 The tax normalization adjustment was applied to net earnings (loss) adjusting items that were considered temporary differences, such as acquisition, integration and other costs, unrealized foreign exchange gains and losses, unrealized gains and losses on risk management and other gains and losses on asset disposals, changes in fair value of redemption options, changes in estimates of environmental provisions, loss on inventory write-downs for which there are offsetting associated risk management derivatives with unrealized gains, impairments of non-current assets and debt modifications. The tax impact was estimated using the effective tax rates applicable to jurisdictions where the related items occur.

3 Weighted average number of common shares is calculated in accordance with Parkland’s accounting policy contained in Note 2 of the Annual Consolidated Financial Statements.

Available cash flow is a non-GAAP financial measure and Available cash flow per share is a non-GAAP financial ratio. The most directly comparable financial measure for Available cash flow and Available cash flow per share is cash generated from (used in) operating activities. Parkland uses these measures to monitor its ability to generate cash flow for capital allocation, including distributions to shareholders, investment in the growth of the business, and deleveraging.

Available cash flow is calculated as cash generated from (used in) operating activities 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 amounts on leases. Available cash flow per share is calculated as Available cash flow divided by the weighted average number of outstanding common shares. See following table for a calculation of historical Available cash flow and Available cash flow per share and a reconciliation to cash generated from (used in) operating activities.

Three months ended

Trailing twelve
months ended

June 30,2024

($ millions, unless otherwise noted)

September
30, 2023

December
31, 2023

March 31,
2024

June 30,
2024

Cash generated from (used in) operating activities

528

417

217

450

1,612

Reverse: Change in other assets and other liabilities

7

(4)

28

3

34

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

(14)

17

63

(34)

32

Include: Maintenance capital expenditures

(52)

(93)

(59)

(53)

(257)

Include: Dividends received from investments in associates and joint ventures

4

3

2

8

17

Include: Interest on leases and long-term debt

(83)

(88)

(85)

(88)

(344)

Include: Payments of principal amount on leases

(57)

(71)

(71)

(64)

(255)

Available cash flow

333

181

95

222

831

Weighted average number of common shares (millions)(3)

175

TTM Available cash flow per share

4.75

Three months ended

Trailing twelve
months ended June
30, 2023

($ millions, unless otherwise noted) | September 30, 2022 | December 31, 2022 | March 31, 2023 | June 30, 2023(1)
Cash generated from (used in) operating activities | 404 | 629 | 314 | 521 | 1,868
Exclude: Adjusted EBITDA attributable to NCI, net of tax | (11) | — | — | — | (11)
| 393 | 629 | 314 | 521 | 1,857
Reverse: Change in other assets and other liabilities | 23 | (23) | 11 | (11) | —
Reverse: Net change in non-cash working capital related to operating activities(1) | (132) | (232) | 18 | (145) | (491)
Include: Maintenance capital expenditures(2) | (62) | (118) | (79) | (61) | (320)
Include: Dividends received from investments in associates and joint ventures | 5 | — | 16 | 2 | 23
Include: Interest on leases and long-term debt | (76) | (86) | (92) | (89) | (343)
Include: Payments on principal amount on leases | (50) | (52) | (51) | (56) | (209)
Exclude: Payments on principal amount on leases attributable to NCI | 2 | — | — | — | 2
Available cash flow | 103 | 118 | 137 | 161 | 519
Weighted average number of common shares (millions)(3) | | | | | 170
TTM Available cash flow per share | | | | | 3.05

1

For comparative purposes, certain amounts within net change in non-cash working capital related to operating activities for the three months ended June 30, 2023 were revised to conform to the current period presentation.

2

For the three months ended September 30, 2022, and for the trailing twelve months ended June 30, 2023, represents the amounts attributable to Parkland.

3

Weighted average number of common shares is calculated in accordance with Parkland’s accounting policy contained in Note 2 of the Annual Consolidated Financial Statements.

Return on invested capital (“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 16 of the Q2 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.

($ millions, unless otherwise noted)

Three months ended

Trailing twelve
months ended June
30, 2024

ROIC | September 30, 2023 | December 31, 2023 | March 31, 2024 | June 30, 2024

Net earnings (loss)

230

86

(5)

70

381

Add/(less): | | | | |

Income tax expense (recovery)

54

(15)

(29)

20

30

Acquisition, integration and other costs

38

42

30

46

156

Depreciation and amortization

205

222

206

202

835

Finance cost

93

89

91

99

372

(Gain) loss on foreign exchange – unrealized

1

—

3

4

8

(Gain) loss on risk management and other – unrealized

(19)

28

11

56

76

Other (gains) and losses

(37)

5

10

(1)

(23)

Other adjusting items

20

6

10

8

44

Adjusted EBITDA

585

463

327

504

1,879

Less: Depreciation

(205)

(222)

(206)

(202)

(835)

Adjusted EBIT

380

241

121

302

1,044

Average effective tax rate(1)

19.9 %

Less: Taxes

(208)

Net operating profit after tax

836

Opening invested capital

9,191

Closing invested capital

9,310

Average invested capital

9,251

Return on invested capital

9.0 %

(1)

Includes the impact of Pillar Two rules substantively enacted in Canada on June 20, 2024.

($ millions, unless otherwise noted)

June 30, 2024

June 30, 2023

Invested capital

Long-term debt – current portion

213

178

Long-term debt

6,275

6,278

Shareholders’ equity

3,138

3,080

Exclude: Cash and cash equivalents

(316)

(345)

Total

9,310

9,191

($ millions, unless otherwise noted)

Three months ended

Trailing twelve
months ended June
30, 2023

ROIC | September 30, 2022 | December 31, 2022 | March 31, 2023 | June 30, 2023
Net earnings | 118 | 69 | 77 | 78 | 342
Add/(less): | | | | |
Income tax expense (recovery) | (2) | 22 | (20) | 18 | 18
Acquisition, integration and other costs | 45 | 41 | 27 | 39 | 152
Depreciation and amortization | 202 | 212 | 190 | 206 | 810

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