Parkland Income Fund (TSX:PKI.UN) has reported a sharp drop in its first-quarter earnings.
The Red Deer-based fuel retailer and wholesaler said in a news release on Monday that its net earnings for the January-to-March period were $5.4 million, or nine cents per diluted unit, down from $19.8 million and 40 cents respectively in the same quarter of 2009. It attributed part of the decline to reduced refinery margins, which Parkland shares in.
“In Q1 2010, this participation yielded earnings approximately $16.7 million lower than the comparative period in 2009,” it said in the release.
Also affecting the bottom line were higher operating costs and expenses and mild winter conditions.
Revenue was $680.3 million, up from $455.1 million, and Parkland boasted record first-quarter fuel sale volumes of 816 million litres, as compared with 673 million litres a year earlier.
The 2010 numbers included Bluewave Energy’s operations, which Parkland acquired effective Jan. 31. Bluewave had 2009 fuel sales volumes of 645 million litres.
“Overall, our commercial business is starting to experience some recovery from 2009, with improved volumes and prospects for a better 2010 agricultural inputs season,” said Parkland president and CEO Mike Chorlton. “Refiners’ margins for gasoline and diesel continued to run at the low end of seasonal norms and are far off the seasonal records set in Q1 2009.”
Parkland’s release said its commercial and industrial fuel sales are showing signs of recovery due to increased activity in forestry, trucking, and energy sectors.
Earlier this month, Parkland received approval from its unitholders to convert into a corporation. The conversion, expected to occur no later than next January, will involve an exchange of trust units for corporate shares.
Parkland expects to pay corporate dividends worth 75 to 110 per cent of the fund’s current annual distribution of $1.26 per unit. A final decision on 2011 dividends won’t be made until later this year.
“Our 2011 dividend outlook is supported by our expectation that Bluewave Energy earnings will be sufficient to cover additional financing cost and maintenance capital expenditures related to the Bluewave purchase plus 100 per cent of Parkland’s income tax as a corporation — leaving Parkland with the continued ability to maintain strong annual dividends,” said Chorlton.
Parkland operates retail and wholesale fuels and convenience store businesses under its Fas Gas Plus, Fas Gas, Race TracFuels and Short Stop Food Stores brands, and through independent branded dealers. It also transports fuel and other products, supplies propane, bulk fuel, heating oil, industrial fluids, agricultural inputs and other products, and operates the Bowden refinery as a storage and contract-processing site.
In trading Monday on the Toronto Stock Exchange, Parkland units closed at $11.05, down 35 cents.