2011 - Parkland Fuel Corporation

INVESTOR AND ANALYST DAY – APRIL 2013
Bob Espey, President & CEO and Mike Lambert, Sr. VP and CFO
Investor Relations | [email protected] | 800-662-7177 ext. 6722
Forward Looking Statements
Certain information included herein is forward-looking. Forward-looking statements include, without
limitation, statements regarding the future financial position, business strategy, budgets, projected
costs, capital expenditures, financial results, taxes and plans and objectives of or involving Parkland
Fuel Corporation (“Parkland” or the “Corporation”). Many of these statements can be identified by
looking for words such as “believe”, “expects”, “expected”, “will”, “intends”, “projects”, “anticipates”,
“estimates”, “continues”, or similar words. 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. Forwardlooking statements are not guarantees of future performance and involve a number of risks and
uncertainties some of which are described in the Corporation’s interim reports, 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 the Corporation’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.
2
Canada’s largest independent fuel distributor and marketer
Offering investors yield and growth
A defensive investment with a sustainable dividend
3
Parkland’s Fuel Marketing Value Chain
Refiners’
Margins
Terminals and
Storage
Transportation
Wholesale
Margins
Commercial
Margins
Retail
Margins
Marketing
Channel
Commercial
Fuels
Retail
Fuels
Wholesale,
Supply and
Distribution
Multiple
Supply
Contracts
PARKLAND
40
1,240*
100
119†
718
Bulk plants &
Bowden terminal
Railcars and third
party trucking
Wholesale
customers
Commercial
Locations
Retail
Stations
CUSTOMERS
THIRD PARTIES
* includes 1200 cars from ERM
† includes 6 Lube Distribution Centres
Total Sales:
Fuel Volume
(TTM)
1.5
billion litres
1.8
billion litres
0.9
billion litres
4.2
billion litres
4
Investor Event Overview
» Review Parkland Penny Plan
» Penny Plan Update:
1. Grow
2. Supply
•
•
•
New Acquisitions
Review of organic growth
Innovation
•
•
•
Progress on the three levers
Acquired capabilities
Strategic infrastructure
3. Operate
•
•
•
Business simplification
Safety
Give me five!
» 2014 – 2016 forecast
5
Parkland Penny Plan
6
5 Year Growth Strategy
1.Grow
⅓ of 1 cent through
economies of scale
2.Supply
⅓ of 1 cent through
supply advantage
3.Operate
⅓ of 1 cent through
efficient operations
The Penny Plan was introduced in May 2012 at Parkland’s Analyst Day
7
Target: Double EBITDA
EBITDA
millions of dollars
$300
$200
$151M
2011 Actual
$100
$0
2011 Actual
2011 Normalized
2016
» From a normalized EBITDA base of $125 million
» EBITDA normalized for 2014 conditions by removing the impacts of one-time costs, and
removing contribution of unusual refiners’ margins
8
Target: Double EBITDA
EBITDA
millions of dollars
$300
$200
2011 Normalized
$151M
$125M
$100
2011 Actual
$0
2011 Actual
2011 Normalized
2016
» From a normalized EBITDA base of $125 million
» EBITDA normalized for 2014 conditions by removing the impacts of one-time costs, and
removing contribution of unusual refiners’ margins
9
Target: Double EBITDA
EBITDA
millions of dollars
$300
$250M
$55
Acquisitions
$70
Penny Plan
$200
$151M
$125M
2011 Normalized
$100
2011 Actual
$0
2011 Actual
2011 Normalized
2016
» From a normalized EBITDA base of $125 million
» EBITDA normalized for 2014 conditions by removing the impacts of one-time costs, and
removing contribution of unusual refiners’ margins
10
Parkland Penny Plan Scorecard
Grow
Commitment
Since
Launch
2011
Score
2,500 ML
620 ML
425 ML

$55 M
$27 M
$4 M

500 ML
(29.7 ML)
224 ML
x
100% of
Normalized
profit plus
1/3 cent
On track
-

140 ML
5 ML

Acquisitions
Organic
Supply
2016
Target
Supply Margins
Operate
Strategic Product Storage
Operating Costs
3.60 cpl
3.61 cpl
3.93 cpl*

Administration Costs
1.59 cpl
1.87 cpl
1.92 cpl*
x
<2
2.33
2.70

Total Recordable Injury Frequency
* Normalized for Cango and one-time costs
11
Parkland Penny Plan
Grow
12
Acquire 2.5 Billion Litres by 2016
Organic
Acquisitions
Independents
Volume
Target
Progress
100 ML / year
(30 ML)
Target
Major Oil Assets
Volume
EBITDA
500 ML / year
$11 M / year
620 ML
$27 M
Progress
More than
7 billion litres
in play over the next five years
13
Acquisitions
Date
EBITDA
($ millions)
Contribution
Area
Feb. 15
20
Supply
Sparling’s Propane
Apr. 2
5.5
Grow
TransMontaigne
May 2*
1.5
Grow/
Supply
Acquisition:
Elbow River Marketing
Total
27
* Expected close
14
Sparling’s Propane
%
7
Annual growth rate of propane consumption in Ontario
15
Sparling’s Propane
120 Million Litres
Employees:
131
Commercial Locations:
6
Opportunity to scale propane business
across a national growth platform
151 Million Litres
EBITDA: $5.5 million
Employees:
1,177
Commercial Locations:
113
16
Heating Fuel Opportunities
A tale of two regions
Maritimes
Ontario
Product
CAGR
Product
CAGR
Propane
(1%)
Propane
7%
Heating Oil
2%
Heating Oil
(7%)
3,000
3,000
2,500
2,500
2,000
2,000
1,500
1,500
1,000
1,000
500
500
-
2005
2006
2007
Propane - Maritimes
2008
2009
2010
2011
Heating Oil - Maritimes
Source: Statistics Canada - CANSIM table 128-0012 and CANSIM table 134-0004
2005
2006
2007
Propane - Ontario
2008
2009
2010
2011
Heating Oil - Ontario
17
Financial Capacity For Growth
Net Debt : EBITDA
Debt* : Equity
Pay-out Ratio
(Refer to Non-GAAP Measures in MD&A)
(* Includes convertible debentures)
(Refer to Non-GAAP Measures in MD&A)
2012
1.39
2012
0.82
2012
52%
2011
2.26
2011
1.27
2011
48%
Parkland will not overpay for assets
18
Fas Gas Plus Store Refresh Program
Before:
After:
Refresh program
drives growth
in same store sales
19
Liquid Natural Gas (“LNG”)
Opportunity
(Threat)
Response
» Possible substitute for diesel in commercial applications
» LNG offers both economic and environmental benefits
» Agreement with Shell to distribute LNG for stationary
applications to commercial and industrial customers in
Alberta & Northeast British Columbia beginning in 2014
20
In-Fleet Refueling
» Direct delivery to equipment
» Technology to allow:
» Online access to fuel reports
» Billing information to individual pieces of equipment
21
Parkland Penny Plan
Supply
22
Suncor Contract
» Source of refiners’ margins
» History of volatility
» Expires December 31, 2013
Gasoline Margins
Diesel Margins
cents per litre
35
45
cents per litre
40
30
35
25
30
20
25
15
20
15
10
10
5
5
0
0
J
F
2011
M
A
2012
M
J
2013
J
A
S
5 yr max
O
N
D
5 yr min
J
F
2011
M
A
M
2012
J
2013
J
A
S
5 yr max
O
N
D
5 yr min
Volume exists in Western Canada to
replace the contract
23
Improving Supply Costs
Driving Sustainable Profits for 2014
Supply Cost Improvements for 2014*
millions of dollars
40
35
35
30
27
25
20
15
13
14
2011
2012
10
6
5
0
Reference
Year
2009
*Improvements in supply costs impact EBITDA in multiple business units
2010
2013E
2014E
24
Elbow River Marketing
Years
30
Commodity by rail experience
Rail and logistics capability
25
Elbow River Marketing
Elbow River’s skills and assets
compliment Parkland’s capabilities
TTM Q3 2012 EBITDA
$20 M
Employees:
34
Railcars
1,200
Terminal Storage (ML)
60
2012 EBITDA
$199 M
Employees:
1,179
Railcars
40
Terminal Storage (ML)
35
Propane / Butane Storage
»
»
»
»
1,200 rail car fleet and logistics expertise
Leveraging storage positions
Ethanol, Biofuel & propane
Canada - US export capacity
26
Elbow River Business Model
Product Mix by Percent of Sales
Diversification
»
»
»
»
Portfolio of commodities
Counterparty mix
Rail fleet flexibility
Rail car lease “ladder”
Marketing and logistics model
is risk managed:
» Conservative risk
management practices
» Conservative approach to fleet
expansion
Crude Oil
32%
4%
7%
Butane
30%
Natural
Gasoline
6% 5% 16%
Butane
Natural Gasoline
Refined Products
Fuel Oil
Asphalt
Crude Oil
Propane
Marketing Model
Buy
Sell
Secure
supply from
producer
Secure sale
contract with
customer
Risk Mitigation
Margin risk managed
27
TransMontaigne
Wholesale Volumes Added in Quebec and Ontario
Wholesale Volumes: >500 ML
EBITDA:
$1.5 MM
Access to storage in
Quebec City & Montreal
28
TransMontaigne
Wholesale Volumes Added in Quebec and Ontario
>500 Million Litres
New supply agreement provides
growth platform for Quebec
930 Million Litres
•
•
Access to Eastern Canada terminal assets
Expected to close May 2, 2013
29
Strategic Supply Infrastructure
Time line:
2011
Description
2012 Q3
2013 Q1
Transportation &
Storage Infrastructure
2013 Q2
Storage
Capacity
(millions of litres)
Parkland’s initial
supply infrastructure
including:
Fuel Products Storage
Propane / Butane Storage
140 ML
» Bulk plants in
Whitehorse, Fort
Nelson, and Grande
Prairie
» Limited rail
infrastructure
30
Strategic Supply Infrastructure
Time line:
2011
Description
2012 Q3
2013 Q1
Transportation &
Storage Infrastructure
2013 Q2
Storage
Capacity
(millions of litres)
Bowden becomes
operational:
Fuel Products Storage
Propane / Butane Storage
140 ML
» First major terminal
» 30 ML of static
storage capacity
» 300 ML annual
throughput capacity
31
Strategic Supply Infrastructure
Time line:
2011
Description
2012 Q3
2013 Q1
Transportation &
Storage Infrastructure
2013 Q2
Storage
Capacity
(millions of litres)
Elbow River
Acquisition:
Fuel Products Storage
Propane / Butane Storage
140 ML
» Rail & Logistics for
North America
» 60 ML of storage
capacity
32
Strategic Supply Infrastructure
Time line:
2011
Description
2012 Q3
2013 Q1
Transportation &
Storage Infrastructure
2013 Q2
Storage
Capacity
(millions of litres)
Acquisition of
TransMontaigne:
Fuel Products Storage
Propane / Butane Storage
140 ML
» Storage capacity in
Montreal and
Quebec City
33
Supply/Demand Views
Drive Supply Strategy
Western Canada
Ontario and Quebec
Gasoline becoming long as FCL production comes fully on-line
Gasoline short ~ 60 KB/D in the foreseeable future
325
500
Domestic Demand Outlook
Domestic Supply
Domestic Demand Outlook
Domestic Supply
480
300
460
275
440
420
250
400
225
Actual
Forecast
2010
380
2015
2020
Actual
2010
2015
Diesel balanced to slightly long through 2015
320
2020
Diesel essentially balanced
330
Domestic Demand Outlook
Domestic Supply
300
Forecast
Domestic Demand Outlook
Domestic Supply
310
280
290
260
270
240
250
220
200
Actual
2010
Forecast
230
2015
2020
Source: Statistics Canada 2010 - 2011, (2012 prorated as of October), kbpd
Actual
2010
Forecast
2015
2020
34
Parkland Penny Plan
Operate
35
Simplifying the Business
Commercial
Retail
»
»
»
»
» E-loyalty launched
13 branches consolidated
Non-core assets divested
Extension of ERP
Full truck technology launch
» Drives efficiency & service
» 85,000 swipes in first week
» Retailer model continues to show
benefit
36
Focus on Safety
Total Recordable Injury Frequency:
2011
Lost Time Injury Frequency:
(per 100 full time equivalent employees per year)
2012
(per 100 full time equivalent employees per year)
2012
2011
(“TRIF”)
2.33
2.70
(“LTIF”)
0.50
1.80
4.00
TRIF
LTIF
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Q1
Q2
Q3
2012
Q4
Q1
37
Give me five!
5%
» 5% cost reduction ($10 M)
targeted
» $11 million budgeted
Phase
Objective
Complete
1
Opportunity ID
Q1 2012
2
E-procurement
Q2 2012
3
Full Savings
Budgeted for 2013
Q4 2012
38
Grow – Supply – Operate
When it all comes together
Acquisitions:
Brand
Parkland
Propane
Volume
Elbow River
Sparling’s
Transportation &
Propane Storage Infrastructure
151 ML
Total Volume:
151 ML
39
Grow – Supply – Operate
When it all comes together
Acquisitions:
Brand
Parkland
Propane
Volume
Elbow River
Sparling’s
Transportation &
Propane Storage Infrastructure
Propane / Butane
151 ML
200 ML
Total Volume:
351 ML
40
Grow – Supply – Operate
When it all comes together
Acquisitions:
Brand
Parkland
Propane
Volume
Elbow River
Sparling’s
Transportation &
Propane Storage Infrastructure
Propane / Butane
151 ML
200 ML
117 ML
Total Volume:
468 ML
41
The Forecast
42
EBITDA Progress
What we have accomplished in one year
EBITDA Growth Forecast
millions of dollars
$300
$200
$125
$100
Goal
Base
$125
$125
2011
2016
$0
43
EBITDA Progress
What we have accomplished in one year
EBITDA Growth Forecast
millions of dollars
$300
$80
$200
Goal
Since last year
$45
$100
Achieved
Base
$125
$125
2011
2016
$0
44
EBITDA Progress
Acquisitions:
» Elbow River Marketing
$20 MM
» TransMontaigne
$1.5MM
» Sparling’s Propane
$5.5MM
$27 MM
Synergies:
» Elbow River Marketing
$3 MM
» TransMontaigne
$2 MM
» Sparling’s Propane
$2 MM
$7 MM Identified
Efficiencies
» Give me five!
$11 MM
$11 MM
45
Our progress so far
260
240
220
200 Base Business Today
200
Acquisitions: $27M
189
180
175
160
140
2014
2015
2016
46
2014 – 2016 Low Case
260
240
Low Case
220
218
Stress:
($20M) EBITDA
Acquisitions: Slow down
200
200
180
175
160
140
2014
2015
2016
47
2014 – 2016 Forecast
260
242
240
Expected
Stress:
($10M) EBITDA
Acquisitions: $12M/yr
220
216
218
200
200
190
180
175
160
140
2014
2015
2016
48
2014 – 2016 High Case
High Case
260
259
240
242
Stress:
None
Acquisitions: $15M/yr
229
220
216
200
218
199
190
200
180
175
160
140
2014
2015
2016
49
Key Model Assumptions
2014
2015
2016
Growth Cap Ex*
$35
$35
$35
Maintenance Cap Ex
$27
$30
$34
Total Cap Ex
$62
$65
$69
Net Total Debt as % of
Capital Employed
38%
40%
41%
Organic Growth Rate
2 – 4 % including small tuck-ins
Financing
Primarily debt
Dividends
Modest increases over period
Mix
*Does not include acquisitions
Remains the same as current base business
50
Key Model Output Metrics
2014
2015
2016
EBITDA per share
2.42
2.69
2.96
Distributable cash flow
per share
1.57
1.69
1.85
Dividend to distributable
cash flow payout ratio
69%
66%
63%
ROCE
15%
15.75%
16.5%
Net Debt:EBITDA
1.65
1.62
1.60
51
5 Year Growth Strategy
1.Grow
⅓ of 1 cent through
economies of scale
2.Supply
⅓ of 1 cent through
supply advantage
3.Operate
⅓ of 1 cent through
efficient operations
The Penny Plan was introduced in May 2012 at Parkland’s Analyst Day
52
Great progress on the Parkland Penny Plan to date
Secure future with stable dividends
Strong prospects in the pipe
53
Investor Information Services
Parkland provides a number of services for investors including:
» e-mail news alerts
» Monthly Business Driver newsletter
(A monthly publication that aggregates publicly available data about what drives our results.)
To subscribe to investor services:
Investor dashboard:
http://bit.ly/PKI-Info
http://bit.ly/PKI-IR
For investor inquiries please contact Tom McMillan, Director of Corporate
Communications at [email protected] or 1-800-662-7177 ext. 2533.
54