CALGARY — Fuel retailer Parkland Corp. has lowered its full-year profit forecast as market sluggishness continues to eat into margins at its Burnaby, British Columbia, refinery.

The Calgary-headquartered company faces challenges similar to those of refiners around the world, as the industry deals with a fuel supply glut and weak global economic conditions that have reduces demand.

During a conference call to discuss the company’s third-quarter financial results Thursday, CEO Bob Espey said adjusted profit in the company’s refining segment fell 73 percent year-over-year. The other, at $49 million, compared to $188 million during the same three-month period. last year.

He said this happened despite the Parkland refinery in Burnaby operating well, with high utilization.

Globally, refiners face low “crack spreads,” an industry term that measures the difference between wholesale prices of petroleum products and crude oil prices.

When crack spreads are strong, refineries make more money, and when they are weak, refineries make less money.

Global crack spreads are currently low due to a variety of factors, including weak economic conditions that have reduced fuel demand in China as well as the U.S. government’s sale of a million barrels of gasoline last quarter from its Northeast supply reserve, which pushed more fuel into the market. the market.

“In terms of the dynamics that are driving down crack spreads, there is a period here where we are seeing significant supply, so the market is sloppy,” Espey said.

“Typically what we see in times like this, as we have seen in the past, is that the market is working to clean itself up… We are seeing that global demand will continue to grow over time. next year, which will begin to improve some of the global oversupply situation.

Current market conditions are so difficult that some U.S. refiners have announced plans to temporarily reduce production due to weak market conditions.

Many global oil majors are also reporting lower third-quarter profits due to weakness in their refining segments. Reuters reported on Thursday that French giant TotalEnergies saw its third-quarter profits hit a three-year low this year, largely due to collapsing refining margins.

For its own third quarter, Parkland reported that its profits declined 60% year over year, from $230 million in 2023 to $91 million in the third quarter of 2024.

Espey said that while he believes the market will eventually correct, he expects difficult refinery market conditions to persist through the rest of the year.

Parkland announced after the market close Wednesday that it was lowering its full-year 2024 adjusted earnings forecast to between $1.7 billion and $1.75 billion, down from a previous forecast of between $1.7 billion and $1.75 billion. .9 and 2.0 billion dollars.

This is the second quarter in a row that the company has lowered its forecast, from $1.95 billion to $2.05 billion initially.

He attributed the lower forecast largely to lower refining margins in the third quarter, as well as the unanticipated outage at the Burnaby refinery in the first quarter of this year.

“I believe our business is resilient and these headwinds are temporary,” Espey said.

The Parkland refinery in Burnaby, acquired by the company in 2017, is one of the only remaining refineries on Canada’s west coast. It supplies a quarter of the gasoline and diesel consumed in the province of British Columbia.

The company also operates approximately 4,000 fuel and convenience stores as well as commercial locations throughout Canada, the United States and the Caribbean.

This year, Parkland has continued to face calls for it to take drastic action to improve its stock price, which is down 23 percent since the start of the year.

U.S. activist investor Engine Capital LP, along with Parkland’s largest shareholder, Simpson Oil Ltd., has asked Parkland to conduct a review of strategic alternatives, including a possible sale of the company.

Parkland said such a review was unnecessary and did not consider the best interests of the majority of its shareholders.

In August, Simpson Oil – which is based in the Cayman Islands and owns about 20 percent of Parkland’s shares – launched legal action against the fuel retailer. The lawsuit seeks to overturn a set of voting restrictions that are part of a 2019 board governance agreement between Simpson and Parkland.

This report by The Canadian Press was first published October 31, 2024.

Companies in this story: (TSX: PKI)

Amanda Stephenson, The Canadian Press