- Traction on Parkland Penny Plan and Refining Margins Leads to Record EBITDA of $60.5 million - RED DEER, AB, Nov. 8, 2012 /CNW/ - Parkland Fuel Corporation ("Parkland" or the "Corporation") (TSX: PKI), Canada's largest independent distributor and marketer of fuels and lubricants, today announced the financial and operating results for the three and nine months ended September 30, 2012. Q3 2012 Operational Highlights: For the three months ended For the nine months ended September 30, September 30, 2012 2011 % Change 2012 2011 % Change (in millions of litres) Total fuel 1,091 1,098 (1) 3,179 3,065 4 volume Retail fuel 491 508 (3) 1,364 1,223 12 volume Commercial fuel 343 403 (15) 1,120 1,308 (14) volume* (in millions of Canadian dollars) Net earnings 31.8 24.5 30 75.2 36.5 106 EBITDA ((1)) 60.5 43.0 41 157.8 114.9 37 Distributable 44.9 52.7 (15) 109.6 100.1 9 cash flow ((1) (2)) Dividend to 38% 30% 46% 44% distributable cash flow payout ratio *Fuel volumes of 53.1 million litres and 154.2 million litres for the three and nine months ended September 30 respectively were re-allocated from the commercial division to the wholesale division in 2012. Grow -- Volume down 7 million litres primarily due to planned closures in the Cango network that reduced Retail Fuel volumes by 10 million litres partially offset by organic growth in other divisions; -- Diversification keeps commercial volumes relatively level with 2011; and -- Subsequent to the quarter Shell lubricants distributor Magnum Oil was acquired adding approximately 6 million litres in annual lubricants volumes. Supply -- Strong refiners' margins continued in the quarter; -- 35 million litre (220,000 barrel) Bowden Terminal operational on schedule and on budget; and -- Three year (~30 million litres/year) terminal services agreement signed with Gibson Energy ULC for fracking fluid. Operate -- 34% year-over-year reduction in net unit operating costs due to reductions in operating costs, marketing general and administrative costs and improvements in non-fuel gross profit, with a third of the reduction due to the elimination of one-time items reported in 2011; -- Strong operating cash flow continues to improve balance sheet; and -- Give me Five! cost savings budgeted into 2013. "Continued execution on Parkland's Penny Plan, coupled with strong refiners' margins, resulted in record earnings for the third quarter," said Bob Espey, President and Chief Executive Officer of Parkland. "Lower operating and administration costs and a seven percent increase in gross profit from our fuel marketing divisions led to great results for our base business." "Organic volume growth has been lower this year due to planned retail closures, competitive pressures in certain markets, and lower drilling activity in Western Canada's oil and gas sector. However, we made progress this quarter on regaining lost volume from earlier in the year, adding net new volumes across all our divisions through the concerted efforts of our sales teams," added Mr. Espey. Consolidated Highlights: For the three months ended For the nine months ended September 30, Sepember 30, ((in millions of Canadian dollars, except volume and per ) (Share amounts)) 2012 2011 % Change 2012 2011 % Change Income Statement Summary: Sales and operating revenues 1,066.2 1,060.8 1 3,145.5 2,966.2 6 Gross profit 112.5 102.6 10 333.0 305.3 9 Operating costs 33.2 39.9 17 113.1 128.1 12 Marketing, general and administrative 18.5 20.6 10 57.8 64.5 10 Depreciation and amortization expense 12.3 14.3 14 38.7 51.7 25 48.5 27.8 74 123.4 61.0 102 Customer finance income (0.8) (0.9) (11) (2.5) (2.2) 14 Finance costs 4.6 8.9 48 16.1 26.2 39 Loss (gain) on disposal of property, plant and equipment (0.6) (14.3) 96 0.1 (14.8) Realized risk management loss 0.8 - 5.3 - Unrealized risk management loss 0.3 - 1.5 - Earnings before income taxes 44.2 34.1 30 102.9 51.8 99 Income tax expense 12.4 9.6 (29) 27.7 15.3 (81) Net earnings 31.8 24.5 30 75.2 36.5 106 Net earnings per share - Basic 0.48 0.41 16 1.14 0.62 85 - Diluted ((1)) 0.44 0.36 23 1.08 0.57 87 Non-GAAP Financial Measures: EBITDA((2)(3)) 60.5 43.0 41 157.8 114.9 37 Distributable cash flow((2) (4)) 44.9 52.7 (15) 109.6 100.1 9 Distributable cash flow per share ((2)) 0.67 0.84 (20) 1.63 1.59 3 Dividends 17.1 16.0 6 50.5 44.2 14 Dividend to distributable cash flow payout ratio ((2)(4)) 38% 30% 46% 44% Key Metrics: Fuel volume (millions of litres) 1,091.0 1,098.0 (1) 3,179.0 3,065.0 4 Return on capital employed (ROCE)((2)(5)) 23.9% 12.8% Net unit operating cost (NUOC)((2)) 2.37 3.57 34 2.94 3.93 25 Employees 1,155 1,267 (9) Fuel Key Metrics - Cents per litre: Average Retail fuel gross profit 4.36 4.69 (7) 4.77 5.09 (6) Average Commercial fuel gross profit 8.54 7.30 17 9.55 8.48 13 Operating costs 3.04 3.63 16 3.56 4.18 15 Marketing, general and administrative 1.70 1.88 10 1.82 2.10 14 Depreciation and amortization expense 1.13 1.30 13 1.22 1.69 28 Liquidity and bank ratios: Net Debt:EBITDA ((2)) 1.05 2.16 Senior Debt:EBITDA((2)) 0.34 1.21 Interest coverage ((2)) 7.06 2.90 ((1)) Diluted earnings (loss) per share can be impacted by an anti-dilutive impact of conversion of the debentures. Quarterly diluted earnings (loss) per share may therefore not accumulate to the same per share value as the year-to-date calculation. ((2)) Please refer to the Non-GAAP Measures section in the MD&A for definitions. ((3)) Please see EBITDA discussion in the MD&A. ((4)) Please see Distributable Cash Flow reconciliation table in the MD&A. ((5)) Please see ROCE discussion in the MD&A. Parkland Penny Plan Update The Parkland Penny Plan, announced on May 15, 2012, is targeting: -- Growth to seven billion litres in fuel volumes by 2016 through organic growth and acquisitions; and -- 1 cent per litre in additional EBITDA margin by 2016 through economies of scale, better supply options, and efficiencies. Penny Plan Scorecard Summary: Area Commitment Analysis 2016 2012 2011 Target Regaining Lost Ground An 11 million litre improvement over the second quarter. Year-to-date base volumes were down due to planned closures in the Cango network (10 million litres), a warm first quarter, and 0.5 (15.7) YTD 224 Organic an early billion million million growth spring litres litres litres break-up in the oil patch. However, strong sales efforts in Grow the commercial and wholesale areas have begun to offset these volume losses, despite challenging conditions in certain regions. Additional 2.5 volumes billion identified litres While no major acquisitions 425 million Major have been litres acquisitions signed to - (annualized date, the volumes) mergers and acquisitions environment has become increasingly active. On Track Parkland remains on track to replace the average normalized profit (†) of its refiners` margin 100% Supply contract by Normalized Supply Margins 2014 through profit On Track N/A the plus 1/3 negotiation cent of supply contracts, supply management, and terminal options. No problems are foreseen in replacing the volume. Deeper efficiencies Operating costs have improved 6.1% on a cpl basis Operating relative to 3.60 cpl 3.69 cpl* 3.93 cpl(*) costs normalized TTM 2011 costs that were adjusted for one-time items and the acquisition of Cango Slow but steady progress on MGA Normalized twelve trailing Operate Marketing, months MG&A General and costs have 1.81 cpl* Administration decreased 1.59 cpl TTM 1.92 cpl* costs 5.7% on a cpl basis relative to normalized 2011 MGA costs that were adjusted for one-time items. Safety improves During the third quarter Lost Time Parkland had Injury two lost time Less than 0.44 YTD 1.80 Frequency injuries 0.75 compared with six injuries in the third quarter of 2011. * Normalized for Cango and one-time costs; (†)The average annualized benefit under this contract excluding performance from outlier years Note: 2016 cost targets will be updated in the event of a significant change to Parkland's business mix. Abbreviations: CPL = Cents per litre YTD = Year-to-date TTM = Trailing twelve months This five year strategic plan aims to double 2011 normalized EBITDA of $125 million by the end of 2016. (Normalized EBITDA ignores one-time costs and irregular profits). $70 million is expected to be derived through a one cent increase in EBITDA margin, $55 million is expected to be derived through acquisitions. A more detailed explanation of the Parkland Penny Plan and the full scorecard can be found in this quarter's Management's Discussion and Analysis. Reduced Distributable Cash Related to 2011 Disposal of Long-haul Trucking Assets Q3 2012 vs. Q3 2011 Distributable cash flow decreased 15% to $44.9 million in the third quarter of 2012 compared with $52.7 million in the third quarter of 2011. The decrease was primarily due to $22.3 million in proceeds from the disposal of Parkland's long-haul trucking assets in the third quarter of 2011, partially offset by a $17.5 million increase in EBITDA during the third quarter of 2012. As a result, the dividend payout ratio for the third quarter of 2012 was 38% compared with 30% in the third quarter of 2011. Year-to-date ("YTD") 2012 vs. 2011 Distributable cash flow increased 9% to $109.6 million for the nine months ended September 30, 2012 compared with $100.1 million for the same period in 2011. The increase was due to a $42.9 million year-over-year increase in EBITDA, a $10.1 million decrease in finance costs partially offset by a $20.1 million decrease in proceeds on disposal of capital items, a $14.4 million increase in current income tax expense, and a $5.2 million increase in maintenance capital expenditures. The dividend payout ratio for the nine months ended September 30, 2012 was 46% compared with 44% for the nine months ended September 30, 2011. The increase is principally due to a $6.2 million increase in dividend payments in the first three quarters of 2012 compared to the prior year. Commercial Team Improves EBITDA despite Weakness in Oil and Gas Sector Q3 2012 vs. Q3 2011 For the three months ended September 30, 2012, Parkland Commercial Fuels' volumes decreased 15% to 343 million litres compared with 403 million litres for the same period in 2011 primarily due to the reallocation of 53 million litres of high volume low margin accounts to the Wholesale, Supply and Distribution division, lower activity in the oil patch, partially offset by strong sales activities. When the reallocated wholesale volumes are added back to the Commercial Fuels results for a comparable basis with 2011, volumes are down by 2% in the third quarter. Volatile commodity prices in Western Canada for natural gas and crude led to a draw back in oil field activity in the third quarter of 2012. The average rig utilization rate for the three months ended September 30, 2012 dropped to 42% compared with 57% for the same period in 2011 according to the Canadian Association of Oilwell Drilling Contractors. However, strong sales activity helped Parkland Commercial Fuels maintain volumes, positioning Parkland well once commodity prices rebound in Western Canada. Average net fuel gross profit on a cents per litre basis for the third quarter of 2012 was 8.54 cpl, an increase of 17% or 1.24 cpl compared with 7.30 cpl in the third quarter of 2011 due to the re-allocation of high-volume, low-margin accounts to the Wholesale, Supply, and Distribution Division. YTD 2012 vs. 2011 For the nine months ended September 30, 2012, Parkland Commercial Fuels' volumes decreased 14% to 1,120 million litres compared with 1,308 million litres for the same period in 2011 due to the reallocation of 154 million litres of high volume low margin accounts to the Wholesale, Supply and Distribution division, the loss of volumes during the first quarter due to warmer than normal weather, and a pullback in oil and gas activity resulting in reductions in same client sales. Average net fuel gross profit on a cents per litre ("cpl") basis for the nine months ended September 30, 2012 was 9.55 cpl, an increase of 13% or 1.07 cpl compared with 8.48 cpl for the same period of 2011. The year to date increase is due to the same reasons described for the quarter. Divisional Outlook Lower realized pricing for natural gas and crude oil in the Western Canadian Sedimentary Basin continues to affect the exploration and production community. Overall, management continues to expect drilling activities to remain below 2011 levels for the remainder of 2012. Strong sales efforts in other areas across Canada, and in other industries, are expected to offset further reductions in a similar fashion as they did for the third quarter. More than 145 million litres in annual new fuel business and 5 million litres in annual new lubricant sales have been added across Canada year-to-date. Subsequent to the end of the third quarter of 2012, Parkland purchased Magnum Oil, a Shell lubricants distributor based in Manitoba, adding approximately 2 million litres in direct sales volumes, and 4 million litres in Shell delivered business. This new branch will allow Parkland to better serve national customers. Retail Team Delivers Improved EBITDA despite Margin Pressure from Rising Oil Prices Q3 2012 vs. Q3 2011 For the three months ended September 30, 2012, Parkland Retail Fuels' volumes decreased 3% to 491 million litres compared with 508 million litres for the same period in 2011. The decrease was the result of a 10 million litre reduction in volume contribution from the Cango network due to site rationalization, temporary closures for the purpose of upgrades, competitive pressures in certain markets, partially offset by network growth in Parkland's company-owned and dealer network. The third quarter of 2012 financial results for Parkland Retail Fuels were favourably impacted by lower costs that helped offset the contraction in volumes described above and the impact of rising crude prices on margins during the period. Average gross profit on a cents per litre basis decreased by 7% to 4.36 cpl in the third quarter of 2012 compared with 4.69 cpl in the third quarter of 2011 due to an increase in the proportion of dealer operated sites versus company owned sites coupled with the impact of rising crude prices through the quarter. The proportion of dealer operated sites increased in the quarter due to closures in company owned sites and the conversion of company owned sites to dealer operated sites. Rising crude prices impact margins by increasing the wholesale prices of petroleum products, which in turn creates increased pressure on the wholesale to retail marketing margin as increases in the "street" price for fuel products often lags increases in the wholesale price of petroleum products. YTD 2012 vs. 2011 For the nine month period ended September 30, 2012, Parkland Retail Fuels' volumes increased 12% to 1,364 million litres compared with 1,223 million litres in 2011. The increase was the result of 130 million litres in additional fuel volumes attributable to the acquisition of Cango. Retail Fuels' gross profit decreased by 6% to 4.77 cpl for the nine months ended September 30, 2012 compared with 5.09 cpl for the same period of 2011 which reflects the addition of Cango`s Ontario locations to Parkland`s results in the first two quarters of 2012 and the impact of rising crude prices in the third quarter. Cango`s network is dominated by dealers, and its locations have higher volume throughput but lower margin compared to Parkland`s Western network. Divisional Outlook Margins, volumes, and cost management continue to dictate the performance of Parkland's Retail Division. The retail management team will continue to manage prudently, and will work towards signing additional business over the remainder of 2012. Refiners' Margins Continued at Historic Highs in Third Quarter Wholesale, Supply and Distribution is responsible for managing Parkland's fuel supply contracts, purchasing fuel from refiners, distribution through third party long-haul carriers, and serving wholesale and reseller customers. This division includes profits from Parkland's participation in refiners' margins, profits derived through superior supply management, and profits from wholesale fuel sales. Q3 2012 vs. Q3 2011 For the three months ended September 30, 2012 Parkland Wholesale, Supply and Distribution fuel volumes (factoring out intersegment sales) increased 37% to 257 million litres compared with 187 million litres for the same period in 2011 primarily due to the reallocation of 53 million litres of high-volume low-margin accounts from Commercial Fuels and organic volume growth due to the division's sales activities. Fuel gross profits for the three months ended September 30, 2012 increased 29% to $36.0 million compared with $28.0 million for the same period in 2011 primarily due to increased refiners' margins, supply management activities and wholesale profits. Parkland recorded a $1.1 million expense related to put option contracts put in place to hedge and secure a portion of the future economic benefit that Parkland receives on its refiners' margins based contract. This is expected to protect against the potential earnings volatility that would be caused by a normalization of refiners' margins from their current highs. Refiners' margins refer to the profit made between the cost of the crude oil required to produce fuel and the wholesale price received by refiners for the fuel they sell. YTD 2012 vs. 2011 Fuel gross profits from Parkland Wholesale, Supply and Distribution for the nine month period ended September 30, 2012 increased 40% to $83.6 million compared with $59.8 million in 2011 primarily due to historically high refiners' margins in 2012. Divisional Outlook Fuel supplies are expected to be sufficient in all Canadian markets for the remainder of 2012. Refiner's margins for gasoline continued to exceed the historical five year maximum during the first half of October. Diesel refiners' margins were below the five year maximum in the first part of October, but still in the upper half of the five year range. Should conditions be favourable, Parkland may enter into additional protective put options to hedge and secure a portion of the future economic benefit that Parkland receives on its refiners' margins based contract for future periods. To date in 2012, weak mid-continent and Canadian crude prices relative to Brent crude prices have driven strong refiners' margins. This is primarily due to a bottleneck in transportation infrastructure, preventing mid-continent and Canadian crude from reaching international markets. Future pipeline and rail capacity may increase access to international markets for mid-continent crude, thereby reducing the price differential to Brent, and subsequently may narrow mid-continent refiners' margins. However, the timing of the approval and subsequent construction of pipelines remains a matter of speculation. For now, the cash flow from current refiners' margins is being used by Parkland to pay down debt, and prepare the balance sheet for future acquisitions. Operating Costs Improve in Absence of One-time Items Q3 2012 vs. Q3 2011 Operating and direct costs decreased by 17% to $33.2 million (3.0 cpl) for the three months ended September 30, 2012, compared with $39.9 million (3.6 cpl) for the three months ended September 30, 2011. The three months ended September 30, 2011 included a $5.0 million charge for aging receivables and other provisions. In addition, operating and direct costs decreased due to Retail Fuels cost controls and the sale of the long-haul trucking assets, as Parkland no longer incurs the costs of maintaining a long-haul fleet. YTD 2012 vs.2011 Operating and direct costs decreased by 12% to $113.1 million (3.6 cpl) in the nine months ended September 30, 2012, compared with $128.1 million (4.2 cpl) for the same period in 2011. Operating and direct expenses decreased primarily for the same reasons described above. Steady Progress in Reducing Marketing, General and Administrative Costs Q3 2012 vs. Q3 2011 Marketing, general and administrative expenses decreased 10% to $18.5 million (1.7 cpl) in the third quarter of 2012 compared with $20.6 million (1.9 cpl) in the third quarter of 2011. Marketing, general and administrative costs decreased throughout the Corporation principally as a result of enhanced cost control. YTD 2012 vs. 2011 Marketing, general and administrative expenses decreased 10% to $57.8 million (1.8 cpl) in the nine months ended September 30, 2012, compared with $64.5 million (2.1 cpl) for the nine months ended September 30, 2011. The decrease in marketing, general and administrative expense is due in part to one-time expenses in 2011 of $3.3 million related to management changes and Cango acquisition costs. Auditing and consulting costs were also lower year-to-date in 2012 compared with 2011 due to activities related to IFRS conversion in 2011. EBITDA Rises by 41 Percent Q3 2012 vs. Q3 2011 EBITDA for the third quarter of 2012 increased by 41% to $60.5 million compared with $42.9 million in the third quarter of 2011. The increase in EBITDA is the result of higher refiner's margins and cost reductions in the third quarter of 2012, compared with the third quarter of 2011. YTD 2012 vs. 2011 EBITDA for the nine month period ended September 30, 2012 was $157.8 million, an increase of 37% compared with $114.9 million for the nine month period ended September 30, 2011 mainly due to higher fuel volumes, improved refiners' margins, and cost reductions. Net earnings Increase to $31.8 million Establishing New Record Q3 2012 vs. Q3 2011 Parkland's net earnings in the third quarter of 2012 were $31.8 million, an increase of $7.3 million compared with net earnings of $24.5 million in the third quarter of 2011. The increase in net earnings in the third quarter of 2012 compared with the prior year was due to a $17.6 million increase in EBITDA, a $2.1 million decrease in depreciation and amortization and a $4.3 million decrease in finance costs, partially offset by a $2.8 million increase in income taxes and a $13.7 million decrease in gains from the sale of assets which relates to the proceeds from the disposal of Parkland's long-haul trucking assets in the third quarter of 2011. YTD 2012 vs. 2011 Net earnings for the nine months ended September 30, 2012 were $75.3 million, an increase of $38.8 million compared with $36.5 million in 2011. The increase in net earnings was primarily due to $42.9 million in increased EBITDA, $10.2 million in decreased finance costs, $13.0 million in lower depreciation and amortization, partially offset by a $12.4 million increase in income taxes and a $14.9 million decrease in gains from the sale of assets. MD&A and Financial Statements Management's Discussion and Analysis, the unaudited Consolidated Financial Statements, and the Notes to the Consolidated Financial Statements for the three and nine months ended September 30, 2012 are available online at www.parkland.ca. Conference Call Information Parkland Fuel Corporation will host a webcast and conference call on Friday November 9, 2012 at 1:00 p.m. MST (3:00 p.m. EST) to discuss the results. President and CEO Bob Espey and Senior Vice President and CFO Mike Lambert will discuss Parkland's financial results for the quarter and then take questions from securities analysts, brokers and investors. Please log into the webcast slide presentation 10 minutes before the start time at: http://www.snwebcastcenter.com/custom_events/parkland-20121109/site/index.php To access the conference call by telephone from within Canada dial toll free 1-888-241-0394. International callers or callers from the Toronto area should use (647) 427-3413. Please connect approximately 10 minutes prior to the beginning of the call and quote the conference ID: 5145 7351. The webcast will be available for replay two hours after the conference call ends. It will remain available at the link above for 90 days. Forward Looking Information Certain information included herein is forward-looking. Forward-looking statements include, without limitation, statements regarding Parkland's future financial position, business and growth strategies, including the manner in which such strategies will be implemented, budgets, projected costs, sources of growth, capital expenditures, financial results, taxes, future acquisitions and the efficiencies to be derived therefrom, effectiveness of internal controls, sources of funding for growth capital expenditures, anticipated dividends and the amount thereof, if any, to be declared by Parkland Fuel Corporation, and plans and objectives of or involving Parkland. Many of these statements can be identified by looking for words such as "believe", "expects", "expected", "will", "intends", "projects", "projected", "anticipates", "estimates", "continues", or similar words and include, but are not limited to, statements regarding the accretive effects of acquisitions and the anticipated benefits of acquisitions. Parkland believes the expectations reflected in such forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties some of which are described in Parkland's annual report, annual information form and other continuous disclosure documents. Such forward-looking statements necessarily involve known and unknown risks and uncertainties and other factors, which may cause Parkland's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general economic, market and business conditions; industry capacity; competitive action by other companies; refining and marketing margins; the ability of suppliers to meet commitments; actions by governmental authorities including increases in taxes; changes in environmental and other regulations; and other factors, many of which are beyond the control of Parkland. Any forward-looking statements are made as of the date hereof and Parkland does not undertake any obligation, except as required under applicable law, to publicly update or revise such statements to reflect new information, subsequent or otherwise. About Parkland Fuel Corporation Parkland Fuel Corporation is Canada's largest independent marketer and distributor of petroleum products, managing a nationwide network of sales channels. We are Canada's local fuel company, delivering gasoline, diesel fuel, lubricants, heating oil and other products to businesses, consumers and wholesale customers through community based operators who care. For investor and media inquiries please contact Tom McMillan, Director of Corporate Communications firstname.lastname@example.org or 1-800-662-7177 ext 2533. To sign up for Parkland's investor information services, please go tohttp://bit.ly/PKI-Info or visitwww.parkland.ca. SOURCE: Parkland Fuel Corporation To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/November2012/08/c6395.html CO: Parkland Fuel Corporation ST: Alberta NI: RET ERN CONF -0- Nov/08/2012 22:00 GMT
Parkland Fuel Corporation Posts Another Record in Third Quarter
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