Parkland Fuel Corporation Announces Record 2018 Adjusted EBITDA of $887 million & Dividend Increase
February 28, 2019
Exceptional 2018 Driven by Full Year Contributions From Acquisitions, Strong Supply Performance and Integration Synergies
CALGARY, Alberta, Feb. 28, 2019 (GLOBE NEWSWIRE) -- Parkland Fuel Corporation, ("Parkland", "We", the "Company", or "Our") (TSX:PKI) announced today the financial and operating results for the three months and year ended December 31, 2018. All financial figures are expressed in Canadian dollars unless otherwise noted.
"Parkland continues to deliver strong performance across the enterprise,” said Bob Espey, President and Chief Executive Officer. "A standout fourth quarter in the supply segment underpinned our record results, while continued synergy realization and underlying organic growth initiatives positively contributed. While Parkland benefited from higher than normal refining margins in the fourth quarter, we are focused on driving sustainable and long-term cash flow growth within the ratable portions of our business. I would like to thank the entire Parkland team for their hard work and continued focus on safety to deliver another record year.”
Parkland's annualized common share dividend will increase two cents per share, from $1.174 to $1.194, effective with the monthly dividend payable on April 15, 2019 to shareholders of record at the close of business on March 22, 2019.
Q4 & Full-Year 2018 Highlights
- Fourth quarter Adjusted EBITDA of $285 million and net earnings of $77 million ($0.58 per share, basic) was driven by strong refining crack spreads, continued efforts in executing Parkland's supply strategy and synergy realization.
- Full-year Adjusted EBITDA of $887 million and net earnings of $206 million ($1.56 per share, basic). As the acquisition of the majority of the Canadian business and assets of CST Brands, Inc. (the "Ultramar Acquisition") closed on June 28, 2017, and the acquisition of all outstanding shares of Chevron Canada R & M ULC (the "Chevron Acquisition") closed on October 1, 2017 (collectively, the "Acquisitions"), the increase in full-year Adjusted EBITDA and net earnings was driven by full year contributions from the Acquisitions in addition to the factors outlined above. See Section 3 of the Management's Discussion and Analysis for further discussion.
- Fourth quarter fuel and petroleum product volume was 4.4 billion litres, relatively flat compared to the fourth quarter of 2017 ("Q4 2017"). On a full-year basis, fuel and petroleum product volume was 17.0 billion litres, up 27% year-over year, primarily driven by incremental business from the Acquisitions.
- Fourth quarter Adjusted distributable cash flow increased by $73 million to $175 million, resulting in an Adjusted dividend payout ratio of 23%. Full-year Adjusted distributable cash flow increased by $317 million to $568 million, resulting in an Adjusted dividend payout ratio of 28%.
- Total Funded Debt to Credit Facility EBITDA ratio of 2.5 times as at December 31, 2018.
- Completed 2018 initiatives that are expected to result in run-rate annual synergies on the Acquisitions of approximately $100 million. We continue to expect that annual run-rate synergies on the Acquisitions will reach approximately $180 million by the end of 2020.
- Announced during the fourth quarter a new strategic initiative to bring Filld’s mobile fuelling service to consumers across Canada, starting in Vancouver, British Columbia. Parkland co-led a $15 million investment into Series B Preferred Shares in the capital of Filld in October 2018. As part of Parkland's investment, Parkland will be the exclusive supplier of fuel to Filld in Canada.
- Fourth quarter Adjusted EBITDA of $78 million, a decrease of $16 million relative to Q4 2017 due to very strong comparable gasoline and diesel margins in Q4 2017 and softer fourth quarter 2018 margins in some markets. Our underlying Retail business is performing well, with consistent execution in the field resulting in strong key performance indicators. Full-year Adjusted EBITDA was $316 million, an increase of $85 million relative to 2017 primarily due to the Acquisitions.
- Fourth quarter Company C-Store SSSG was 10.3%, our 12th consecutive quarter of positive Company C-Store SSSG, while full-year Company C-Store SSSG was 7.6%. Growth was attributable to the successful implementation of the new On the Run / Marché Express Flagship and Retrofit store concepts, the successful roll-out of Parkland's proprietary private label brand 59th Street Food Co., and continued backcourt convenience store optimization that resulted in higher forecourt to backcourt conversion rates.
- Fourth quarter Company Volume SSSG was 3.5%, while full-year Company Volume SSSG was 0.7%. The increases were primarily due to strategic efforts to increase same-store volume at Company sites.
- We retrofitted 78 existing On the Run / Marché Express locations and constructed twelve Flagship locations in 2018. Our development initiatives will see the brand rolled out across our Canadian network in the coming years. In 2018, we expanded our private label brand, "59th Street Food Co.", and are now offering 20 products at select Parkland locations. We are planning to launch an additional 20 private label products in 2019. In addition, we are currently testing our "Journie" loyalty program in two Canadian markets, and expect to expand the program across our network in 2019.
- Fourth quarter Adjusted EBITDA of $27 million, approximately flat compared to Q4 2017. Full-year Adjusted EBITDA was $93 million, an increase of $23 million relative to 2017 primarily due to the Acquisitions and strong first half 2018 propane organic growth and customer wins.
- Fourth quarter Fuel and petroleum product volume decreased 4% relative to Q4 2017, primarily due to softer volumes in Western Canada. This was partially offset by a 4% decrease in operating costs as Parkland continues to maintain a strong emphasis on cost management.
- Ongoing optimization of our Commercial brand portfolio in various geographies has seen certain legacy operations, particularly in Eastern Canada, successfully rebranded to Ultramar. This enables Parkland to drive future growth and sustained profitability under one aligned customer value proposition.
- Fourth quarter Adjusted EBITDA of $199 million, an increase of $105 million relative to Q4 2017. These exceptional results were primarily driven by profitable supply sourcing initiatives, improved supply economics, continued efforts in executing Parkland's supply advantage strategy and strong refining crack spreads. Due to the rapid price decrease of both crude feedstock and refined products in the fourth quarter, Parkland also realized a $49 million benefit from its working capital funding agreement at the Burnaby Refinery which flows through cost of purchases. On a full-year basis, this benefit totalled $20 million.
- Full-year Adjusted EBITDA of $561 million, an increase of $401 million relative to 2017. The increase was driven by full year contributions from the Acquisitions and the factors outlined above.
- Refinery utilization, which measures the amount of crude oil processed and converted to products in the Burnaby Refinery, was 87.8% for the fourth quarter, compared to 94.4% for Q4 2017. The Burnaby Refinery processed intermediary products and bio-fuels such as canola and tallow which are not reflected in crude throughput, and therefore not included in refinery utilization.
Parkland USA Highlights
- Completed three acquisitions in 2018, the largest of which was the acquisition of all of the issued and outstanding equity interests of Rhinehart Oil Co., LLC and its affiliates (the "Rhinehart Acquisition"). The Rhinehart Acquisition closed on August 27, 2018, and added 10 distribution facilities, 9 retail sites, and 4 cardlock facilities across Utah, Colorado, Wyoming and New Mexico.
- Fourth quarter Adjusted EBITDA of $11 million, an increase of $7 million relative to Q4 2017. Full-year Adjusted EBITDA was $28 million, an increase of $12 million relative to 2017. The increases are primarily due to the Rhinehart Acquisition and Parkland's continued focus on its strategy to drive new business, grow organically and manage costs.
- Fuel and petroleum product volume increased 92 million litres in the fourth quarter and 119 million litres on a full-year basis, relative to Q4 2017 and full-year 2017, respectively. The increase was primarily due to the Rhinehart Acquisition and organic growth initiatives.
- Subsequent to the quarter, Parkland opened a Houston office that will support its growing supply and trading business in the U.S. and Caribbean markets.
- Parkland will continue to look for acquisition opportunities in the U.S., including tuck-in opportunities in and around its existing regional operations centers and new regional operations centers in areas where we can establish a supply advantage.
Corporate Segment Highlights
- Marketing, general and administrative expenses were $32 million in the fourth quarter and $111 million on a full-year basis. As expected, these expenses increased primarily due to additional corporate costs to support the larger integrated business and execute future growth strategies. In particular, additional costs were incurred for technological innovation initiatives and employee costs to support Parkland's growth.
Consolidated Financial Overview
|($ millions, unless otherwise noted)||Three months ended December 31,||Year ended December 31,|
|Sales and operating revenue(6)||3,526||3,429||1,740||14,442||9,560||6,266|
|Adjusted gross profit(1)||587||469||197||1,995||1,094||708|
|Per share – basic||0.58||0.37||0.03||1.56||0.70||0.50|
|Per share – diluted||0.57||0.37||0.03||1.53||0.69||0.49|
|Distributable cash flow(2)||151||45||29||416||151||120|
|Adjusted distributable cash flow(2)||175||102||43||568||251||153|
|Dividends declared per share outstanding||0.2934||0.2886||0.2835||1.1704||1.1510||1.1250|
|Dividend payout ratio(2)||27||%||89||%||94||%||38||%||91||%||91||%|
|Adjusted dividend payout ratio(2)||23||%||38||%||64||%||28||%||55||%||71||%|
|Total long-term liabilities||2,750||2,469||692||2,750||2,469||692|
|Shares outstanding (millions)||134||131||96||134||131||96|
|Weighted average number of common shares (millions)||133||131||96||132||117||95|
|Fuel and petroleum product volume (million litres)(4)||4,354||4,432||2,783||16,978||13,333||10,415|
|Fuel and petroleum product adjusted gross profit(1) (cpl)(5):|
(1) Measure of segment profit. See Section 13 of the