Yahoo Finance Parkland expects $75M profit hit from B.C. refinery outage, stock falls
Parkland Corp. (PKI.TO) says the unplanned outage at its Burnaby, B.C. refinery will cost about $75 million in lost profit, sending shares of the Canadian fuel retailer down more than six per cent in trading on Wednesday.
The Calgary-based company said an incident occurred while restarting the refinery on on Jan. 21, following a shut-down due to cold weather. Nine workers are reported to have sought medical attention for injuries after the release of heavy, odorous smoke.
The outage was expected to last four weeks. Now, Parkland says it estimates a roughly eight-week disruption, with normal operations resuming in early March.
“We can certainly make up a big portion of the unplanned shutdown,” CEO Bob Espey said on Wednesday. “The team is working hard to get it back online.”
Parkland operates roughly 4,000 fuel and convenience locations across Canada, the U.S., and the Caribbean, under banners including Pioneer, On the Run, Ultramar, and Esso. It also owns frozen food retailer M&M Food Market.
The company reported its fourth-quarter financial results before Wednesday's opening bell. Speaking on a conference call with analysts, Espey was asked about the financial impact of the recovery plan for the Burnaby refinery. He confirmed the lower-end of $75 million to $100 million in lost earnings before interest, taxes, depreciation, and amortization (EBITDA) as an “accurate estimate.”
However, Espey said Parkland had previously planned a minor outage during the eight-week downtime, and work scheduled for later in the year expected to improve the refinery’s operation is underway now.
Espey also predicts the spread between crude and refined products will work in Parkland’s favour when operations resume. On top of that, he expects Canadian government carbon credits for refining low-carbon fuels to help offset the expected loss.
Parkland says it remains on track to hit between $1.95 billion to $2.05 billion in adjusted EBITDA in 2024, up from $1.92 billion last year. The company increased its annualized dividend by three per cent on Wednesday to $1.40 per share.
Toronto-listed Parkland shares fell 6.74 per cent to $44.30 at $10:29 a.m. ET. The stock has climbed more than 55 per cent over the last 12 months.
Earlier this month, analysts at RBC Capital Markets and CIBC Capital Markets boosted their respective profit targets for the company. Parkland’s fourth quarter adjusted EBITDA fell short of RBC’s estimate, but topped CIBC’s.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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