Earnings call: Parkland reports mixed Q3 results amid refining challenges

In the recent quarterly earnings call, Parkland (ticker: PKI) CEO Bob Espey and CFO Marcel Teunissen detailed the company's third-quarter performance, which did not meet expectations primarily due to lower refinery margins impacting results by roughly $140 million.

The adjusted EBITDA for the quarter stood at $431 million, with the Canadian operations contributing $200 million, slightly down from the previous year.

Despite economic headwinds, Parkland saw growth in its Retail and Commercial businesses and increased its market share in the Canadian fuel and convenience sector, now ranking as the second-largest retailer.



Key Takeaways



Parkland's Q3 adjusted EBITDA reached $431 million, with Canadian operations contributing $200 million.The company experienced a shortfall in financial performance due to lower refinery margins, which affected results by approximately $140 million.Retail and Commercial businesses grew by 2%, with market share gains in Canada.The international segment's adjusted EBITDA was $152 million, a decrease of 11% year-over-year.U.S. operations reported a 4% increase in adjusted EBITDA to $54 million.Parkland plans to adjust its 2024 EBITDA guidance down by about $250 million.



Company Outlook



Parkland aims to lower its leverage ratio to the lower end of the 2 to 3 times target by the end of 2025.The company is focusing on organic growth strategies and prioritizing high-return capital allocation opportunities.Executives discussed progress toward a $2 billion run rate, with a conservative outlook due to market dynamics.



Bearish Highlights



Refining segment's adjusted EBITDA declined to $49 million from $88 million the previous year.Available cash flow over the trailing 12 months was down 16% from 2023, at $627 million or $3.58 per share.



Bullish Highlights



The marketing and supply segment showed a 2% growth year-over-year.Parkland is optimistic about achieving 2028 targets despite stock price pressures.The company is gaining market share in both Canada and the U.S. and expects improvements in the carbon credit market.



Misses



The company missed the anticipated financial targets due to lower refinery margins.Adjusted EBITDA guidance for 2024 has been lowered by approximately $250 million.



Q&A Highlights



Management addressed questions on leverage ratios and share buybacks, indicating that decisions will be based on market conditions.Factors affecting capture rates, including carbon credit sales and renewable diesel imports, were discussed.Varied consumer behavior across regions was noted, with strong demand in international markets and softness in the U.S. northern regions.





Parkland's strategy moving forward includes a balanced approach to capital allocation, with dividends, organic growth, and leverage reduction being key areas of focus. The company is also considering opportunistic share buybacks. Despite regional challenges and global market trends of declining margins, Parkland is strategically navigating market entries and exits to optimize its operations. The company's resilience in Canada, attributed to supply chain efficiencies, and the optimistic projection of achieving a $60 million run rate in the U.S. by Q4, underscores its strategic agility in a fluctuating market landscape.



Full transcript - None (PKIUF) Q3 2024:





Operator: Good morning. My name is Elvis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Parkland Q3 Analyst Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Adam McKnight, Director, Investor Relations for Parkland. Please go ahead.

Adam McKnight: Thank you, and good morning. With me today on the call are Bob Espey, President and CEO; and Marcel Teunissen, Chief Financial Officer. This call is webcast, so we encourage those listening on the phones to follow along with the supporting slides. Start with some prepared remarks, and then open it up for questions from the investment community. Please limit yourself to one question, and a follow-up question if necessary. And if you have additional questions, please re-enter the queue. The Investor Relations team will be available after the call for any detailed modeling questions that you might have. During today’s call, we may refer to forward-looking information related to expected future performance. These statements are based on current views and assumptions, and are subject to uncertainties which are difficult to predict. These uncertainties include, but are not limited to, expected operating results and industry conditions, among other factors. Risk factors applicable to our business are set out in our Annual Information Form and Management’s Discussion and Analysis. We will also be discussing non-GAAP and other financial measures, which do not have any standardized meetings prescribed by the IFRS accounting standards. These measures are identified and defined in Parkland’s continuous disclosure documents, which are available on our website or on SEDAR+. Please refer to these documents as they identify factors which may cause actual results to differ materially from many forward-looking statements. Dollar amounts discussed in today’s call are expressed in Canadian dollars unless otherwise noted. I will now turn the call over to Bob.

Bob Espey: Thank you, Adam, and good morning, everyone. We appreciate you joining us today to discuss our third quarter results. I’d like to start by thanking the Parkland team for their dedication to servicing our customers, while operating safely in a weak economic environment. Despite robust operational performance, our third quarter financial results came in below expectations due to lower refinery margins which were felt across the industry. Adjusting for this impact of approximately $140 million, our third quarter results would have been in line with our plan. We continue to see strength and growth across our underlying business. Adjusted EBITDA from our Retail and Commercial businesses have grown 2% over the last 12 months, despite soft economic conditions. We have also improved our market share during this time in Canada, and we are now the second largest fuel and convenience retailer. This is an impressive achievement and testament to the strength of our asset base. The execution of our organic initiatives and the dedication of the Parkland team. I am confident in the resilience of our diversified business, and the team continues to execute our organic growth strategy. With that, I’ll turn it over to Marcel to review our Q3 results in more detail.

Marcel Teunissen: Thank you, Bob, and good morning, everyone. In the third quarter, Parkland delivered adjusted EBITDA of $431 million. In Canada, adjusted EBITDA was $200 million, which is slightly below Q3 2023. Adjusting for one-time benefit in the prior year, we saw a 4% increase year-over-year in our underlying business. Fuel margins remain strong, driven by continued price and supply optimization. We also saw same-store volumes growth of 1.4%. This demonstrates the strength of our company-owned network and the positive impacts of our JOURNIE loyalty program and On the Run conversions. Our business is built to adapt to changing economic conditions. This allows us to evolve our value proposition to meet customers’ needs as the economic pressure shifts. Private label business was up 12% compared to prior year, and we continue to leverage a JOURNIE to attract customers into our sites with targeted fuel incentives, in-store convenience offers, and cross-promotions between the forecourt and convenience stores. During the quarter, we launched alcohol sales at 80 sites in Ontario. We accomplished this efficiently and with minimal capital investment. We plan to offer alcohol in 120 sites by year end. It is still early days, but initial results are promising driving increased traffic to these stores. Our international segment delivered adjusted EBITDA of $152 million. This is 11% below last year primarily due to lower wholesale volumes. Consistent with the prior quarter we did not see the required returns to participate in the high volume, but low margin sector. While the third quarter is traditionally the low season, we see continued growth in our base retail, commercial and aviation businesses. And we are continuing to progress our organic growth initiatives by rebranding and building new retail sites, which, for instance, is driving double-digit same-store sales volume growth in Guyana. We remain bullish on the region’s growth potential, with one example being the recent investment announcement in offshore oil by TotalEnergies (EPA:TTEF ) in Suriname, where we are positioned to win. In the U.S., we delivered $54 million in adjusted EBITDA, up 4% from the prior year. We are seeing the positive effects of renegotiated supply contracts in Florida, as well as tactical improvements aimed at increasing margins, reducing costs and boosting in-source sales. Company same-store volumes were negative 4.4% during the quarter, which was better than industry in the markets where we operate. This is due to the team’s ability to recover market share in Florida, and we expect to achieve an adjusted EBITDA quarterly run rate of $60 million as we exit 2024. Our refining segments reported adjusted EBITDA of $49 million, which was down from $88 million last year. The decrease was driven entirely by lower refining margins, which were well below our mid-cycle planning assumptions. This overshadowed the strong operational performance of the team, who delivered composite utilization of 102%. On a trailing 12-month basis, Parkland generated available cash flow of $627 million, or $3.58 per share. This is down 16% from 2023, primarily due to the weaker refining segment results. We continue to follow our disciplined approach to capital allocation and use these funds to return cash to shareholders through our dividends, reduce debt, invest in organic growth initiatives, and repurchase approximately 3 million shares. Our leverage ratio increased to 3.4 times, as debt repayment was more than offset by lower adjusted EBITDA over the last 12 months. This increase is temporary. And we will continue to prioritize balance sheet strength as the business generates robust cash flow. I see a clear path to reducing our leverage ratio to the lower end of our 2 to 3 times target by the end of 2025. Looking forward to the end of the year, we are lowering our 2024 adjusted EBITDA guidance by approximately $250 million to $1.7 billion to $1.75 billion. This is due to the weak refining margin outlook for the rest of the year and our performance year-to-date, which had some pluses and minuses. And with that, I will turn it back over to Bob.

Bob Espey: Thanks, Marcel. The Parkland team has delivered excellent operational results during the quarter, which I have no doubt will continue going forward. Looking ahead, I am encouraged by the resilience of our business, which is supported by our customer and supply advantage. To strengthen our customer advantage, we continue to evolve our customer value proposition. I am impressed with the growth of our JOURNIE loyalty program in Canada over the last 5 years. JOURNIE drives traffic across our network and has expanded through strategic partnerships, including CIBC and Aeroplan. Earlier this month, we officially launched the integration of the M&M Food Market loyalty program. It’s still early days, but initial results are highly encouraging, and I recommend everyone link their accounts to start maximizing their rewards. We continue to strengthen our supply advantage. We recently consolidate our supply and trading teams across the regions, uncovered structural product cost savings, which will lower our costs to serve. I am confident we can compete going forward and we will be positioned to win in the long-term. In a slow economic environment, I define success by outperforming industry, and I see that in every part of the organization. Over the past 12 months, the team has grown adjusted EBITDA from our retail business by 6%, grown our non-fuel gross profit by 5%, lowered our indirect costs, which is more than offsetting inflation, and grown market share. We are progressing non-core asset divestments and are on track to close the sale of our Canadian commercial propane business in the fourth quarter. We also announced the intended sale of our Florida business, which reflects our commitment to disciplined capital allocation and redirecting capital towards the highest return opportunities. In closing, I am grateful for the Parkland team’s commitment to servicing our customers and delivering strong operating results in a tough environment. I believe our business is resilient and these headwinds are temporary. We will continue to focus on executing our long-term strategy, and I remain confident in our ability to drive organic growth across the portfolio to deliver our 2028 targets. With that, I will turn it over to the operator for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Kevin Chiang from CIBC, please go ahead.

Kevin Chiang: Hi. Good morning, everybody. Maybe just on the refining segment, obviously, a tough year this year. I guess, confidence in the ability for that segment EBITDA to kind of return to what you view as normal. Do you think there’s anything structural that might be impacting or any concerns that might be impacting how you think that recovery might take place? I guess, there’s been some concerns that the expansion of the TMX might be a contributing factor. There’s obviously excess supply in the overall North American market. Just any thoughts there as you think about the recovery in that refining segment?

Bob Espey: Hey, Kevin, it’s Bob Espey. Thanks for the question. Let me just start off. I’ll answer the question in two parts. Let me just put into context the results for the quarter. Last year at $585 million, Q3 was a very tough comp. That was our record quarter. And if you look at the delta between last year and this year, it’s $154 million, $140 million that is the refinery and difference in the crack spread. So the refinery ran well in the quarter. And the biggest impact, if you were to normalize it to mid-cycle, a refining margin would put us at $540 million. So it would have been a very good year and it shows that the business is well on track to hitting the $2 billion run rate. So just to put that into context, in terms of the dynamics that are causing the crack spreads to come down, you’ve hit certainly one of them, which is there is a period here where we’re seeing lots of supplies, so the market’s sloppy. And, generally, what we see in times like that, which we’ve seen in the past, is the market does work to clean itself up. So we’ve seen people starting to cut runs, so reduce their throughput in their refineries. We’ve had some announced closures. And then, also, we do see global demand continuing to grow next year, which will start to remove some of the oversupply globally. So, again, the fundamentals will push the crack spread higher. That being said, we are being conservative in the way that we project to the balance of the year, and we’ll also be conservative projecting into next year on crack spread. I would like to highlight, though, the marketing and supply business, which has done very well in a tough environment. So if you compare to others in the marketplace, we continue to show that we’re gaining market share in key segments and markets. As well, if you look at a TTM basis, our marketing and supply business grew by 2%, a little lower than we would have liked, but ultimately it’s showing that it is growing and that a lot of the initiatives that we’re having are offsetting some of the headwinds we’re seeing in the broader economy.

Kevin Chiang: That’s helpful. And maybe just my second question. You laid out, obviously, a very credible plan about this time last year at your Investor Day. Obviously, stocks have been under pressure this year. Does that cause you to rethink some of your capital allocation priorities, just given where the share price is, especially as you get closer to the leverage ratio that you’re targeting, which seems to still be on track here? Just any thoughts that would be helpful.

Bob Espey: Yeah. All right. Let me pass it over to Marcel.

Marcel Teunissen: Hey. Good morning, Kevin. Marcel here. In terms of capital allocation, I think it’s still in line broadly with how we’ve laid it out for the period for now to 2028, and that means we keep prioritizing kind of getting the balance sheet, getting that leveraged down to the low-end, and as we have visibility debts. We’ve also indicated, of course, that we would opportunistically continue to buy back shares, we have done quite a bit of that this year. And if we see that opportunity rise again, we will do that. We think buying back to stock is still one of the best ways we can allocate capital.

Bob Espey: Now, look, and as to the 2028 ambitions that we have, we’re still on track to achieve those. We see this as a transitory issue, and it really is, if you look at the base performance of the business, it’s meeting the targets that we’ve set, and ultimately, we’ll see the crack spreads recover here.

Operator: Thank you. Your next question is from Michael Van Aelst, TD Cowen. Please go ahead.

Michael Van Aelst: Yes, good morning. Thank you. Can I just follow-up first on your leverage comments. Given the near-term earnings outlook, can you talk more about how you – I know you see your leverage ratios coming down to that lower end of range by the end of 2025. Yeah, when I model it out, I can only see that happening if you’re not buying back stock between now and then. Can you talk about how active you think you can be on the NCIB? I know you stopped it during the quarter, but do you expect to be able to be active over the next year?

Marcel Teunissen: Yeah, it’s hard to say. I think there, Mike, I think we look into next year and, I think, the macro environment, particularly the refinery margin, that’s the big unknown and I think if that takes up a bit as Bob already indicated that creates a more room, and I think our divestments are part of the equation in terms of kind of putting money back to the balance sheet. And, I think, as soon as we kind of get the right trajectory there and the right light path, and there will be space for those buybacks. But I think we started this year probably with cracks that are much better, we had of course our operational issues in Q1, and then Q2 refinery cracks can kind of to mid-cycle and in Q3 they will drop below so we just need to see where the direction there is and kind of in relation to bring leverage down and what we do with the NCIB.

Michael Van Aelst: Okay. Right. Thank you. And then, on the crack spreads or on the refinery, the crack spreads they weren’t surprising given we can track that, but what seemed a little more surprising to me was your capture rates being as low as they were and, I believe that some of that has to do with the lack of carbon credit sales. Can you explain the drivers behind the increase in the renewable diesel coming into Canada? And how do you see that evolving over the next few quarters?

Bob Espey: Yeah, Mike, that’s correct. Our capture rate was lower. Capture rate on a quarter by quarter basis will fluctuate and, I think you look at on a TTM trailing 12 compared to the previous TTM, you’ll find it’s roughly the same. However, some of the short-term headwinds on capture rate, one was carbon credits, which I’ll talk about, but the other is we had the price accrued falling through over the quarter and there’s a trailing effect there in terms of how that comes through into the economics. We get a bit of a temporary squeeze on the way down. The other side is the carbon credit market. Look, there is an oversupply currently and it’s driven by renewable diesel from the U.S., which is being imported. The U.S. swung into oversupply. We expect that that will start to rectify itself. And part of that is the legislation in the U.S. is expected to switch from a producer tax credit in the new – to a producer tax credit in the new year. And with the hope that that keeps that product local into the local market as opposed to having it flow out to Canada. The second thing is, both the Canadian and the U.S. governments are incentive to make sure that investment continues in carbon abatement. And we expect that hanging on to those credits is the right thing, and they’ll be more valuable either late this year or early next year.

Operator: Thank you. Your next question comes from Ben Isaacson, Scotiabank. Please go ahead.

Ben Isaacson: Thank you very much, and good morning, everyone. Just a non-operational high-level question. Bob, the stock price has disconnected from any reasonable valuation of $8.50 a share in free cash flow by 2028. I’m sure you’ll agree. When you consider that in the context of several guidance cuts and balance sheet not going the way you want, at least over the last quarter or so, what gives you the confidence that $2.5 billion in 2028 is achievable that the market doesn’t seem to have right now? What is the market missing, if anything? Thank you.

Bob Espey: Hi. Good morning, Ben, and thanks for the question. Look, I would say the key thing is if you look at the performance of the business, particularly the market – I’ll first start with the refinery. We ran the refinery really well in the quarter. We achieved a composite utilization of over 100%, which shows that the team there is focused on reliable and safe operations and maximizing throughput. When you look at our marketing businesses, the three initiatives that we’ve highlighted in the past, first is common supply organization, looking at opportunities across. We’ve seen some good wins in our supply business that translate through into a higher integrated margin, and we certainly seen that in the business. The second thing is, our efforts to standardize our systems and processes, which is our ERP implementation which we’re making good progress and expect to be live with a pilot in our international business this year. And, again, we’ve talked about significant savings from that and we’re continuing to make process savings, which we have seen in terms of our cost structure has come down in an inflationary environment. And then the third thing is organic growth and our organic growth initiatives and, again, we can see in the business across the business examples of that, in Canada, we continue to gain market share and as we talked about last quarter, this year we went from third to second, and we continue to hold that position and build on that in terms of both fuel and convenience. In our commercial business, we’re in Canada, we’ve had some good wins and we continue to hold in a market that’s been at some headwinds. In our U.S. business, our retail business, we’ve seen a really good recovery in the Florida business and in fact are gaining market share and across our U.S. business. In retail, we’re seeing – we’re on track on fuel side with markets and we’re above industry on our same-store sales. And then, in international other than our wholesale business, we’ve seen gains in our retail commercial and aviation business. So I would say the business is meeting the targets that we’ve set out. And as I commented earlier, we’re lapping a tough comp. Last year in Q3, we did $585 million. This year $154 million short of that, $140 million of that is the refinery. If we factored in a mid-cycle crack, we would have been in the $530 million, $540 million, which would have been a strong quarter and tracked above the $2 billion run rates that we’d indicated we’d achieved this year.

Ben Isaacson: That’s great. And maybe just a quick follow-up. So based on that, is the right way to think about the business in 2025, I know you haven’t given guidance yet, but to start with the base of $2 billion in 2024, and then you need, I think, roughly a 6% growth rate each year to get to that $2.5 billion. Is that the right way to think about it?

Bob Espey: Yeah, I think, I mean that’s if you look at the marketing business, we’re being – we’ll be a bit more conservative in our projection on cracks.

Ben Isaacson: Got it. Okay. Thank you.

Operator: Your next question comes from Adam Wijaya from Goldman Sachs. Please go ahead.

Adam Wijaya: Hey, good morning, team, and thank you for taking my questions. I wanted to start on consumer behavior across various regions and last quarter you guys gave some great color on the state of the consumer. Can you point to any regions where you see some near-term softness, maybe some near-term strength and how you see that evolving as we head into year-end and then into 2025?

Bob Espey: Yeah. Again, if we look across our markets, each market has a little different dynamics. Now, starting our international business, we’ve seen the demands hold up well and we’ve seen some good year-over-year growth in our retail, commercial and our aviation businesses, particularly in economies that are tourist linked, right? So we continue to see robust demand in those markets for leisure travel and that coupled with the markets that have natural resource growth, we’re seeing tremendous growth in those and the consumer is benefiting from that and we’re seeing some good same-store sales growth. So some good tailwinds in that market, I’d say across the market. In our U.S. business, if we look at our northern business, I would say it’s been a bit slower and mainly again on the natural resource side and some of the infrastructure investments, we’ve seen some hesitancy. I think that’s driven by the election which is translated through into some weaker consumer demand in those markets. And then, Canada, it’s held in, I would say what we’re feeling there is more of the effects of inflationary pressure. While we haven’t seen occasions or number of visits come down, what we’ve seen is transaction size, particularly in-store, has been a bit softer than it would have traditionally been. But, overall, look, our business is hanging quite nicely. When you look at what the team has been able to do to offset some of these headwinds, we’re still seeing positive growth over a trailing 12-month period.

Adam Wijaya: Great. Thank you for that, Bob. My follow-up is just on the shareholder returns framework. So on the buyback, we saw $14 million reported this quarter. And we understand the priorities around capital allocation are really on leverage reduction, the balance sheet, and also shareholder returns opportunistically. But can you just remind us as you think about the returns framework as we head into year-end 2025 and beyond, anything we should be mindful of there? And then, is there anything that we should also be mindful of as it relates to a target cash balance going forward? Thank you.

Marcel Teunissen: Yeah. Thanks, Adam. I think, as I said earlier, our capital allocation framework remains in line with what we shared last year over that 5-year period, right? And we said we have roughly a quarter of the cash that we have available for allocation goes to our dividends, which continues to kind of be a healthy dividend. So it goes to that. A quarter of that capital goes to organic growth. And then the remaining half of what we have available, we initially prioritize kind of getting the balance sheet and getting that leverage down to getting the balance sheet kind of showed up. And then with the remaining cash, we have the choice to kind of either invest in our business or to buy back our stock. And we continue to kind of do that, and we run there through, what’s the best allocation of capital for the best returns for our shareholders in deciding that. So that’s how we look at this. I don’t see a change overall in that. I know the cash this quarter is a bit soft, but as the market recovers that will come in and we will stay in line with it. And as I mentioned a bit earlier, some of the divestment proceeds that we expect over the next 18 months or so, we’ll fit that in that overall capital allocation framework.

Operator: Thank you. Your next question comes from Luke Hannan, Canaccord Genuity. Please go ahead.

Luke Hannan: Thanks. Good morning, everyone. Marcel, I wanted to follow-up on an earlier line of questioning on the deleveraging, just a clarifying question. So to get to the low ends of that 2 to 3 times target leverage range to get to the low end by the end of next year, does that assume that you will divest, for example, the Florida assets, or are you going to be able to get there without that?

Marcel Teunissen: We will be able to get far along on that, because I think if you look at just the leverage piece, right, it’s the EBITDA at the moment more so than actually the debt reduction. We did produce that during the quarter. It’s just the EBITDA. And when you look on the trailing 12 months, obviously next year, we have a couple of weaker quarters, which will come, which will help quite a bit. And we do expect that we complete the Florida divestment before the end of next year. And so, yeah, that’s part of how we think to get into that low end of the range.

Luke Hannan: Okay. Thanks. And then, Bob, I wanted to follow-up on the international business. You had mentioned that there’s that higher volume, but lower margin wholesale business that, I guess, has impacted volume growth year-on-year. But can you share a little bit more about what’s going on there? Have there been other players that have come in to capture those volumes? Do you see yourself returning into that channel in the near-term, and maybe what other levers for organic growth in volumes specifically? I know you talked about retail and aviation. What other levers can you pull in those two businesses?

Bob Espey: Yeah, look, I always think you need to look at the international business in the context of the growth we’ve achieved over the last 5 years, and it’s been remarkable. As part of that, we grew in the wholesale market, but look, wholesale across our business is a pickle business, right? And there are times where we can push product in, and times, particularly when we see a lot of length in the global markets, which is what we’re seeing now, where margins will start to come down, and we’ll choose to step back from that market, just simply, we can’t get the right economics to work. And ultimately the returns based on the inventory that we have to maintain to service that. So, ultimately, we move in and out of that market across our various jurisdictions, depending on the length in the markets and how we want to position ourselves to make sure we’re getting the best returns. But, again, if you look back – if you take a step back and look at growth in that market, it’s been remarkable. We’re winning in the businesses that matter, which are the more asset intense businesses, our retail, our commercial business, and then our aviation business, where we’re all continue to gain within the market and see good contribution from those businesses. And you can see that the margin is growing, part of it’s mixed, but the other part is our supply group does an amazing job at making sure that our integrated margin continues to grow.

Operator: Thank you. Your next question comes from Steven Hansen from Raymond James. Please go ahead.

Steven Hansen: Yes, good morning, guys. Thanks for the time. I wanted to ask a little bit more on the U.S. progress and the confidence you have in hitting the $60 million run rate exiting Q4. It sounds like at least based on your comments that most of the renegotiations and/or other actions you’ve planned are largely complete or at least very well advanced at this point.

Bob Espey: Yeah. So we did benefit from that in Q3, and you’ll start to see that manifest itself in Q4 for a full quarter that coupled with taken out a lot of the cost that we’d anticipated. So we should start to see a good run rate in that business in Q4 built on top of some good supply fundamentals. So, we’re getting cautiously optimistic here that we’ll see that business track, where it needs to be going into next year.

Steven Hansen: Okay. That’s helpful. Thanks. And just circling back to Canada, you described the market chain gains already. Just curious about the margin profile, despite volume is being a little bit lackluster. I think the margin resilience has been the surprise story there. I mean, how do you feel about the margin profile in Canada looking for here? Or are we into a new structural level of support here? It’s been quite strong. How do you feel about that margin profile?

Bob Espey: Yeah. Look, again, I would say on the market side or on the consumer side, it’s always a competitive market, ensure that we’re competitive and winning on the market share side. Where we’re seeing the gains are on the supply side. And, again, just leveraging our scale and our asset base and being able to squeeze out that fraction of a penny on the broader system. And, look, we do expect that, certainly the supply side is structural. You know what? The consumer side bounces around, but over time tends to go up.

Operator: There are no further questions at this time. I’d now like to turn the call over to Bob Espey for final comments.

Bob Espey: Great. Thanks for listening in. Have a happy Halloween, and we’ll speak to you next quarter.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines. Thank you.

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Source: Investing.com