Parkland Responds to Headwinds in Commercial Fuels
Q1 2013 vs. Q1 2012
For the three months ended March 31, 2013, Parkland Commercial Fuels' volumes decreased 6% to 433 million litres compared with 462 million litres in 2012 principally as a result of lower year over year industrial activity in key sectors including oil and gas and the discontinuation of low margin marketer agreements in Northern Alberta.
Strong sales activities with a focus on diversifying Parkland's customer mix helped to offset the impact of the foregoing challenges in the quarter.
For the three months ended March 31, 2013, the Canadian Association of Oilwell Drilling Contractors (CAODC) reported an average monthly drilling rig count of 496 per month, an 8 percent decrease compared with 540 per month for the same period in 2012. This drop continues to be attributed to the impact of decreased commodity pricing in the Western Canadian Sedimentary Basin.
Average net fuel adjusted gross profit on a cents per litre basis for the first quarter of 2013 was 11.69 cpl, an increase of 4% or 0.46 cpl compared with 11.23 cpl in the first quarter of 2012 due to the discontinuation of low margin marketer agreements in Northern Alberta.
Given lower activity within the oil and gas sector, Parkland has made appropriate adjustments to its variable cost structure to reflect current economic conditions. Initial evidence indicates that Parkland Commercial Fuels' on going sales efforts and strategy to diversify into other markets has helped to offset diminished consumption and has consolidated market share in the commercial fuels marketplace.
Oil and gas activity will be contingent on the approval of pipelines to increase access to international markets.
Management expects that the operational changes made in the Commercial Division in 2012 to simplify and standardize the business will drive savings, better customer service, and better performance going forward. These changes include the consolidation of branches, changes in branded distribution agreements, the roll out of Parkland's multi-product commercial offering at additional branches and the simplification and standardization of procedures and process.
Retail Gross Profit Decreases by 2% on Lower Volumes Due to Cango Site Rationalizations
Q1 2013 vs. Q1 2012
For the three months ended March 31, 2013, Parkland Retail Fuels' volumes decreased 4% to 400 million litres compared with 415 million litres for the same period in 2012. The decrease was primarily the result of a 9 million litre reduction in volume contribution from the Cango network due to site rationalization, temporary closures for the purpose of upgrades, competitive pressures in certain markets partially offset by network growth in Parkland's company owned and dealer network.
The first quarter of 2013 financial results for Parkland Retail Fuels continued to benefit from lower costs that helped offset the contraction in volumes described above. Disciplined management of repair, maintenance, travel, advertising and other costs, reductions in staffing, and a refined approach to commission and dealer agreements continued to drive significant savings in operating and marketing, general and administrative costs in the quarter.
Average adjusted gross profit on a cents per litre basis increased by 2% to 4.53 cpl in the first quarter of 2013 compared with 4.46 cpl in the first quarter of 2012 due to strong company store margins partially offset by an increase in the proportion of dealer operated sites versus company owned.
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