Parkland Corp.'s Q1 Earnings Benefit From 2021 M&A Moves

CALGARY, Alberta — Parkland Corp. reported strong results for its first quarter of 2022 as the company continues to weave recent acquisitions into its network, while also managing challenges like inflation. 

"We continue to expand our customer base and successfully grow the contribution from our marketing businesses. Our accomplishments generated adjusted EBITDA of $387 million in the first quarter," President and CEO Bob Espey stated during the company's first-quarter earnings call, held earlier this month. 

"In addition to underscoring our confidence in achieving the high end of our 2022 adjusted EBITDA guidance, our performance puts us on track with our $2-billion run rate ambition by the end of 2025," he added.

Parkland's teams continue to advance the company's strategy, integrating recently acquired companies and managing the impacts of inflation while optimizing margins, according to the chief executive.

Notably, during the first three months of 2022, Parkland added 37 On the Run stores and grew its JOURNIE rewards membership by more than 10 percent compared to the fourth quarter of 2021.

"During the quarter, we benefitted from last year's U.S. and international acquisitions, and closed our previously announced purchases of Crevier and M&M Food Market in Canada," Espey said. "Each transaction advanced our strategy to further develop our platform, diversify our revenue streams, and strengthen our customer offer."

Parkland effectively executed two years worth of acquisitions in 2021. The company estimates that it can generate $80 million in synergies by 2024 on the $200 million of acquired EBITDA included in its guidance.

"We are now focused on integrating these high-quality companies, capturing the synergies, driving organic growth opportunities, and on reducing our leverage by slowing down acquisitions," Espey said, noting that the company decided to defer its option to acquire the remaining 25 percent of Simpson Oil Ltd. (SOL) in 2022.

Parkland acquired 75 percent of SOL, the largest independent fuel marketer in the Caribbean, in early 2019. SOL supplies and markets a total of 4.8 billion liters of fuel volume annually across 23 Caribbean countries under the Sol, Shell and Esso brands.

"We are focused on integrating and capturing the synergies from the companies acquired and on slowing down the pace of acquisitions to help strengthen our balance sheet," Espey explained. "Despite macroeconomic uncertainties and ongoing volatility that will continue to play out during the year, the strength and resilience of our business gives me confidence in our performance."

For the rest of this year, Parkland's focus will be on wrapping up the remaining deals in its pipeline. Organic growth is also on the company's agenda.

"With encouraging tailwinds in each part of our business, we have a long runway of organic growth opportunities and much to be excited about as we advance our strategic initiatives," said Espey. "Our developed pillar is about providing our customers with the essential fuels on which they depend, and integrating and capturing synergies from the great businesses we acquire. You should think of our diversify pillar as expanding our customer proposition by growing our convenience and food offers. We have tremendous opportunity here."

Q1 2022 Highlights

"With a record Q1 performance, 2022 is shaping up to be an exciting year," Espey said. 

For the first three months of the year, Parkland's results by segment were:

United States: Adjusted EBITDA was $47 million, up 147 percent from $19 million in the first quarter of 2021. Performance was underpinned by prior-year acquisitions and related synergies, strong margins, higher marine fuel demand, and new cruise ship contracts. Margin improvements helped mitigate the impact of inflation.

Canada: Adjusted EBITDA was $191 million, up 28 percent from $149 million a year ago. Performance was underpinned by strong margins, increasing fuel volumes, the closing of previously announced acquisitions (Crevier and M&M Food Market), and organic growth. Same-store sales growth, excluding cigarettes, was 1.7 percent.

International: Adjusted EBITDA was $82 million, up 22 percent from $67 million in the first quarter of 2021. Performance was underpinned by fuel volume growth primarily driven by a recovery in tourism (aviation) and wholesale, contribution from a previously announced acquisition in St. Maarten, and supply synergies from the company's Isla joint venture in the Dominican Republic. 

Refining: Adjusted EBITDA was $89 million, down 8 percent from $97 million in the first quarter of 2021. A stronger margin was offset by higher operating costs.

Providing more color on the U.S. results, Chief Financial Officer Marcel Teunissen explained that Parkland's growth in the U.S. was led by a full quarter of results from its acquisition of Urbieta Oil Co. in Florida and its acquisition of Lynch Oil Co. in the Pacific Northwest, both of which closed in the fourth quarter of 2021.

"We are actively integrating both businesses to maximize synergies. In the U.S., we have seen growing fuel volumes with the phaseout of COVID-related measures. Driven by our team’s know-how and supply infrastructure, we continue to capture incremental margin through a volatile commodity price market," Teunissen said.

Calgary-based Parkland Corp. is an independent supplier and marketer of fuel and petroleum products and a convenience store operator. Parkland currently services customers across Canada, the United States, the Caribbean region and the Americas through three channels: retail, commercial and wholesale.