Parkland Income Fund (TSX:PKI.UN) today announced its business performance for the third quarter of 2008 and the nine months ended September 30, 2008. Volume and revenue achieved record levels for the quarter, while earnings before interest, taxes, depreciation and amortization (EBITDA) was lower for Q3 2008 compared to the same period a year earlier.
Third Quarter 2008 Performance Highlights:
- Record fuel sales volume of 608 million litres, up 11% from 549 million litres the prior year.
- Record Q3 2008 sales of $734 million, up 52% from $483 million the prior year.
- EBITDA of $19.9 million, down 23% from $25.8 million in 2007 but up from $19 million in Q2.
- Distribution payout ratio 78% for the quarter and 91% year to date.
- Board authorization to initiate Normal Course Issuer Bid.
- Third major growth step in 2008 - acquisition of new Esso retail branded distributorship accounts in Alberta and Ontario.
Parkland also announced that its Board of Directors has authorized an application for a Normal Course Issuer Bid (NCIB) to buy back units of the Fund for cancellation. The NCIB will be established in accordance with rules of the TSX and is subject to approval by the TSX. The Fund expects to provide further detail on the NCIB in November.
President and CEO Mike Chorlton said, "Margins in the third quarter improved relative to the first half of 2008 due to prevailing North American and local supply and demand conditions pushing up refiners' margins. Despite record sales volume and strong margins, EBITDA declined in the third quarter of 2008 compared with a year earlier primarily due to losses in FIFO inventory value rising from declining petroleum product prices. During this period of extreme volatility in the capital markets, Parkland is focused on reducing discretionary expenditures and driving operational efficiency to conserve cash and maximize our flexibility."
Distributable cash exceeded cash distributions in the third quarter and for the nine month period ended September 30, 2008. Accordingly, we have maintained our monthly distribution rate of $0.105 per unit.
Outlook
Four weeks into the fourth quarter of 2008, retail fuel sales volumes remain similar to the prior year and retail margins remain strong compared to the prior year in spite of entering the cold weather season when demand for gasoline is typically weaker.
Diesel demand is strong and refinery production problems have caused shortages of supply, which in turn have kept margins higher than previous years.
Refiners' margins for gasoline have declined from September levels but remain stronger than they were in the first half of 2008.
Subsequent to the end of the third quarter we entered into agreements to increase the number of accounts in our Esso retail branded distributorship business. We are adding 40 dealers in Ontario and Alberta with an anticipated annual volume of 200 million litres of gasoline and diesel.
Fuel Volumes
Gasoline, diesel and propane volumes were strong with total sales of 608 million litres in the quarter ended September 30, 2008, an increase of 11% from 549 million litres for the same period in 2007. The increase resulted from the acquisitions completed over the past year. At the retail level, same-store fuel sales volumes increased approximately three percent over the prior year in our company operated and controlled sites but decreased approximately three percent in the independent dealer network.
Margins
In addition to the retail margins for gasoline and diesel, we participate in the refiners' margins for a significant portion of our supply volumes. In the third quarter this participation yielded earnings slightly below the comparative period in 2007 but greater than the first half of 2008.
Under the FIFO cost method of valuing inventories, we recorded a reduction in fuel margins of $6.3 million ($0.8 million in 2007) in the third quarter compared to the LIFO method used prior to 2007. For the nine months to September 30, 2008 we have recorded a gain of $3.1 million ($3.8 million in 2007).
Our operating and direct costs were $21.4 million in the third quarter compared to $17.6 million for the same period in 2007. The increase reflects the full year effect of our acquired businesses as well as higher store operating costs such as labor, credit card costs and loyalty program costs. Competitive promotional activity has caused us to respond with higher expenditures in this area as well.
Our marketing, general and administrative expenses were $10.3 million in the third quarter compared to $10.9 million for the same period in 2007. Higher labor costs were offset by reclassification of some expense categories into operating and direct costs. -- www.cnxmarketlink.com
Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.
