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Parkland expects Bluewave unit to perform well during winter

Parkland Income Fund, Canada’s largest independent fuel distributor, said it expects to see strong results this winter from its Bluewave Energy unit, which it acquired less than a year ago.

Parkland Income Fund, Canada’s largest independent fuel distributor, said it expects to see strong results this winter from its Bluewave Energy unit, which it acquired less than a year ago.

Executives with the Red Deer-based fund made their remarks Monday on a conference call to discuss Parkland’s third-quarter, in which profits virtually disappeared.

“Despite low earnings this quarter, we’ve built a solid platform for growth,” chief executive officer Mike Chorlton told analysts on the call.

“We have a robust portfolio of growth opportunities and are looking forward to improved returns from the Bluewave acquisition in the last quarter of 2010.”

On Friday, Parkland (TSX:PKI.UN) said its net income plummeted 96 per cent to $400,000, or a penny per unit, from $10 million, or 20 cents per unit, a year earlier.

It attributed the profit decline partly to higher costs — including $9.4 million directly related to the Bluewave deal.

Revenue increased 47 per cent from a year earlier to $796.5 million from $543.1 million.

In trading Monday, Parkland units were down eight per cent to $11.23 on the Toronto Stock Exchange.

Parkland had been primarily focused on rural markets in Western Canada prior to the $214-million acquisition of Bluewave last December.

The purchase of the Dartmouth, N.S.-based heating oil, diesel and gasoline distributor gave Parkland a national presence.

“Bluewave integration remains on target, and is projected to exceed our plans related to cost synergies, which we initially expected to be around $2 million in 2010, and $5 million in 2011 and beyond,” Chorlton said.

Half of Bluewave’s earnings before interest, taxes, depreciation and amortization are booked in the winter months, since it is a big provider of furnace oil. So Parkland said its fourth-quarter earnings should show an improvement.

Parkland runs retail and wholesale fuel outlets and convenience stores across Canada under the names Fas Gas Plus, Fas Gas, Race Trac Fuels and Short Stop Food Stores.

It also operates the Bowden refinery as a storage and contract-processing site.

The income fund maintained distributions to unitholders, despite a 41 per cent decline in distributable cash flow. The distribution payout ratio soared to 150 per cent from 86 per cent, meaning Parkland paid out more than it brought in.