Parkland Income Fund (TSX:PKI.UN) has reported a sharp drop in income for its third quarter.
The Red Deer-based fuel retailer and distributor had net earnings of $400,000 for the three months ended Sept. 30, down 96 per cent from $10.1 million for the same period a year ago. On a per unit basis, net earnings were one cent, compared with 20 cents for the same quarter in 2009.
Despite the drop in earnings, Parkland maintained the size of its distributions to unitholders.
A news release from the company attributed the lower profit to higher costs, including $9.4 million related to Bluewave Energy, which Parkland acquired last December.
“Earnings this quarter and on a cumulative basis reflect low refiners’ margins, the impact of carrying the increased marketing, general and administration expenses and finance costs associated with Bluewave, without the benefit of Bluewave’s strongest earnings cycle being included,” said Parkland president and CEO Mike Chorlton.
Year-over-year fuel sales volumes for the quarter were up 27 per cent, to 901 million litres — with this figure boosted by the Bluewave purchase. Fuel marketing gross profits, which include Parkland’s share of refiners’ margins, were up, as were gross profits from sales of agricultural, lubricant and other products that don’t fall into the fuel category, and gross profits from other sources like lottery revenue, externally charged freight revenue, retail commissions and vendor rebates.
Gross profits from supply and wholesale declined, and were also lower in the case of convenience store merchandise sales. The latter drop was attributed to corporate-operated sites being converted to commission-based sites, which are dealer operated.
Parkland also reported an agreement with Shell, effective Sept. 30, to become a primary distributor of Shell, Pennzoil and Quaker State lubricants. This is expected to increase Parkland’s annual direct sales of lubricants by 92 per cent.
“The alliance with Shell is another example of how oil and gas refiners are looking for a trusted partner to simplify and manage portions of their downstream marketing business,” said Chorlton.
Parkland’s release said the outlook for commercial fuel sales volumes continues to improve as activity in the forestry, trucking, and oil and gas drilling industries increases.