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Highlights
- Q3 2024 EBITDA Decline: Adjusted EBITDA down 26% due to lower refining margins.
- Decreased Earnings: Net income dropped 60%, mainly impacted by refinery performance.
- Revised 2024 Guidance: EBITDA outlook lowered due to market conditions and a refinery shutdown.
Parkland Corporation (TSX:PKI) released its Q3 2024 financials, revealing substantial adjustments as lower refinery margins impacted the quarter's results. For Q3, adjusted EBITDA decreased by 26% year-over-year, reaching $431 million. The company attributed this decline to weak refinery margins, despite strong operational performance. Net earnings were similarly impacted, decreasing by 60% to $91 million, or $0.52 per share. The adjusted earnings per share came in at $0.61, down 54% compared to the same period last year.
One of the main contributors to the results was the unplanned first-quarter shutdown of Parkland’s Burnaby Refinery, compounded by lower refining margins that persisted throughout Q3. These challenges led to a trailing-twelve-month (TTM) available cash flow of $627 million ($3.58 per share), down 16% year-over-year, and cash flow from operating activities of $1.49 billion. The cash flow was also impacted by Parkland’s debt repayment efforts, which increased the company's liquidity to $2 billion by Q3 2024, reflecting efforts to manage capital allocation prudently. However, Parkland’s leverage ratio has risen to 3.4x, partially due to a dip in TTM adjusted EBITDA.
While the retail and commercial business divisions showed resilience, contributing $1.568 billion in TTM adjusted EBITDA (up 2% year-over-year), the overall return on invested capital (ROIC) dropped from 9.5% in Q3 2023 to 7.8% in Q3 2024. Parkland’s capital management strategy included purchasing and canceling 382,000 common shares for $14 million, demonstrating its commitment to disciplined capital allocation amid shifting priorities. As part of this approach, Parkland has announced its intention to divest its retail and commercial businesses in Florida, allowing for capital redirection toward higher-return opportunities.
In light of persistent challenges, Parkland has revised its 2024 financial guidance. The company now expects adjusted EBITDA in the range of $1.7 billion to $1.75 billion, down from its earlier guidance of $1.9 billion to $2 billion. Parkland also adjusted its 2024 available cash flow per share outlook to approximately $3.75, down from the previous estimate of $5.00. Meanwhile, ROIC guidance has been revised to about 8%, down from the initial forecast of over 11%.
Looking forward, Parkland acknowledges that market challenges, particularly in refining, are likely to continue through the year. However, the company remains focused on leveraging operational efficiencies and capitalizing on core growth areas within its business segments, balancing its strategic goals against a challenging economic backdrop.
