May 8, 2021
Operator
Good morning, ladies and gentlemen, and welcome to Parkland Corporation’s 2021 Q1 Results Analyst Call. [Operator Instructions] This call is being recorded on Tuesday, May 4, 2021.
I’d now like to turn the conference over to Brad Monaco, Director of Capital Markets for Parkland. Please go ahead.
Brad Monaco
Thank you. With me today on the call are Bob Espey, President and CEO; Marcel Teunissen, Chief Financial Officer; and Ian White, Senior Vice President, Strategic Marketing and Innovation.
This call is webcast, and I encourage listeners to follow along with the support of slides. We will go through our prepared remarks and then open it up for questions from the investment community.
Please limit yourself to one question and a follow-up as necessary. And if you have other questions, reenter the queue.
We’d ask analysts to follow up directly with the Capital Markets team afterwards for any detailed modeling-type questions. During our call today, we may make forward-looking statements 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 measures, which should not have any standardized meanings prescribed by GAAP.
These measures are identified and defined in Parkland’s continuous disclosure documents, which are available on our website or SEDAR. Please refer to these documents as they identify factors which may cause actual results to differ materially from any forward-looking statements.
Dollar amounts discussed in today’s call are expressed in Canadian dollars unless otherwise noted. I’ll now turn the call over to Bob.
Bob Espey
Thank you, Brad, and good morning, everyone. We appreciate you taking the time to join us and trust you are staying safe and healthy.
I would also like to welcome Ian White to today’s call to provide an update on some of our ongoing organic growth initiatives, which continue to strengthen our existing business. The photo on today’s cover slide showcases one of our proprietary Pioneer branded locations with an on-the-run convenience store.
Together, these illustrate our compelling value proposition, which fulfills our purpose of powering journeys and energizing communities and plays a critical role driving continued organic growth. Many of our markets are still dealing with various levels of COVID-19 restrictions.
I’m exceptionally proud of our team’s commitment to safely and reliably providing the essential fuels and services customers need. In particularly -- in particular, I want to thank our frontline teams for their continued dedication to this effort.
We are off to a great start in 2021. Our strong business performance through the first 3 months has reinforced our confidence in the continued strength of our business model.
Our geographic and product diversity continues to provide a layer of insulation from economic volatility. Despite ongoing COVID-19 impacts, the resilience of our business continues to be remarkable.
This was a fantastic quarter, and we’re on track for our full year guidance. For those of you who follow us closely, know how much we focus on maintaining a strong balance sheet.
Through the quarter, we enhanced our financial flexibility through the completion of over $3 billion of refinancing. This will deliver approximately $20 million of annual interest savings.
Means we have no senior note maturities until 2027 and are well-positioned to fund our growth. Built on a foundation of great brands, great assets, great service and a great team, we are seeing tremendous underlying strength across the business.
In addition, the investments we are making in our marketing capabilities further support our growth. Ian will talk to this shortly.
So far this year, we have completed or announced 5 acquisitions across our U.S. and international segments.
This includes another small international acquisition in April, where we will expand our regional aviation portfolio through operations at 2 international airports in Puerto Rico. As you know, we set a high bar for any acquisition.
Each must advance our strategy, provide integration and organic growth opportunities and strengthen our supply advantage. Looking forward, each of our geographies offers a rich pipeline of consolidation targets to support our growth ambitions, including our international business, which we are seeing increased opportunity.
Moving on to Slide 4. I’d like to talk briefly about our sustainability journey, which is integral to our culture and strategy.
We included updates on this important strategic area in our news release. However, I would like to highlight a few key areas of focus for us.
Firstly, we are making solid progress building our enterprise sustainability strategy. We’re working towards our second annual sustainability report, which will include commitments around our emissions.
We look forward to sharing the report in the fourth quarter and discussing details at our November Investor Day. More broadly, we see big opportunity to play an ongoing and expanded leadership role through the energy transition.
This extends well beyond our existing manufacturing of renewable fuels at the Burnaby refinery, which is -- which in 2021 will have the equivalent environmental effect of removing 80,000 passenger vehicles from the road. We expect continued growth in this area of our business, and we’ll also harness our existing retail network to support our customers’ mobility needs, including electric vehicle charging options.
We have been pragmatic and disciplined in accessing this opportunity, and we’ll focus in markets which already have encouraging electric vehicle penetration. We expect to share more on our energy transition strategy as we move throughout 2021.
I’ll now pass over to Marcel to go through the corporate financial results.
Marcel Teunissen
Thank you, Bob, and good morning, everyone. Turning to Slide 5 and a summary of our financial results.
We delivered Q1 adjusted EBITDA of $314 million, which is up more than 60% from 2020. And while COVID continues to impact the broader economy, each area of our business delivered underlying growth compared to last year.
And this is an excellent result, which reflects the quality and the resilience of our business through challenging market conditions. As you can see on the chart on the left, our supply segment had a great quarter.
Adjusted EBITDA was up materially from last year, driven by strong utilization at our Burnaby refinery and while prior year’s quarter had the impact of the scheduled turnaround we spoke about before. Our marketing business also delivered growth with lower cost and robust margins, offsetting softer volumes.
As you know, we have natural variability in our cost base. However, the teams continue to do a great job exercising financial discipline and proactive cost control.
We’re off to a great start to the year and are firmly on track for our full year guidance of $1.2 billion for adjusted EBITDA, plus or minus 5% as guided previously. Moving to the segment overview on Slide 6.
I’ll start with Canada, where we delivered $116 million of adjusted EBITDA in quarter one, which was $14 million higher than the prior year. Although many Canadian markets are experienced a COVID third wave and have implemented tough restrictions, these are having far less material impact than we saw during the early phases of the pandemic, and it is clear that our customers have adapted.
As an example, while Canada retail volumes are still behind the pre-COVID levels, since mid-March, they were over 40% higher than the same period in 2020, which were the first 2 weeks of COVID. Through the combination of strong fuel margins, lower cost and 21 consecutive quarters of same-store sales growth, we delivered higher EBITDA on lower volumes.
Our International segment delivered $67 million of adjusted EBITDA, which is consistent with prior year. Importantly, our underlying business improved from 2020 on a U.S.
dollar basis, but the headline results were reduced by $4 million due to foreign exchange translation rate impacts. International continued to benefit from cost control initiatives, enhanced logistics and shipping optimization.
Even though we did not benefit from what would normally be our busy tourist season, we delivered strong performance from our wholesale channel and had pockets of strength in aviation. This was slightly offset by isolated COVID restrictions.
Overall, we’re extremely pleased with the international business to be in line with last year despite COVID and FX impacts is a remarkable outcome. And we remain optimistic for continued economic recovery through the second half of the year and have an even stronger base business from which to grow.
Our U.S. segment delivered $20 million of adjusted EBITDA in quarter one.
This is up 25% from 2020, driven by prior year acquisition -- acquisitions, our growth supply advantage and national accounts growth. This growth was dampened by continued slowdown in the oil and gas and cruise ship industries in the northern and southeast regional operating centers.
During the quarter, we reached a significant organic growth milestone by surpassing 350 million liters of annualized national account fuel volume, partnering with local regional operating centers to service large, complex commercial customers. And we are pleased that our sales reach is extending into areas beyond our existing regional operating centers as well.
This incremental volume highlights our growing supply advantage, enhanced overall margins. Our Supply business delivered excellent results in the first quarter with $136 million of adjusted EBITDA.
This is up $94 million from 2020. We continue to operate safely and reliably at our Burnaby refinery with a composite utilization of 91%.
This includes crude processing and 1,700 barrels per day or 25 million liters of bio-feedstock co-processing, which was a new record for the Burnaby refinery. In addition to putting us firmly back on track with our 100 million liter full year target for 2021, co-processing helped us meet our carbon compliance requirements in British Columbia and lowered our high-cost HDRD blending requirements.
Our integrated logistics business also performed well under challenging market conditions, which improved supply cost, offsetting lower volumes. Turning to Slide 7.
As Bob already mentioned, we have a track record of financial discipline. And for those who follow us closely will know that maintaining a strong balance sheet and financial flexibility to fund growth is a strategic imperative.
We took several steps through the quarter in this regard, including over $3 billion of refinancing transactions. So, what do we do?
And what does that mean? We increased the amount available under our credit facility from approximately $1.7 billion to $1.9 billion.
The agreement has a 5-year term and highlights our banking group’s confidence in our ability to do what we do best, which is grow organically and buy high-quality companies and create value. We also took the opportunity to refinance our 2024, ‘25 and ‘26 senior note maturities, which had a weighted average interest rate of nearly 6%.
And through the issuance of a CAD 600 million bond at 4.375% and USD 800 million bond at 4.5% in late March, we lowered our annual interest costs by approximately $20 million and pushed out our senior note maturities to between 2027 and 2029. Our Canadian bond was the second lowest coupon and third largest deal on record in the Canadian high-yield markets, demonstrating the high -- the market support and confidence in our strategy.
And both bonds were well oversubscribed. We fully funded our capital expenditures, acquisition and net dividends in quarter one and maintained a leverage ratio well within our comfort range.
The 3x debt-to-EBITDA ratio includes a 0.1 increase due to the acquisition activity over the last 12 months and also reflects the retirement of our intermediation facility in February. The facility was in place to fund and hedge working capital at the Burnaby refinery, which we’ve now moved in-house.
Build on a foundation of strong operational performance and a long runway of growth opportunities, we have lowered our interest cost, have no senior note maturities for the next 6 years and plenty of liquidity and we are committed to our capital allocation policy and our primary objective of growing the business. I would like to pass over to Ian now to refresh everyone on our enterprise-wide organic growth initiatives.
Ian?
Ian White
Thanks, Marcel, and thank you, Bob, for inviting me to join today’s call, and good morning, everyone. Want to take a few minutes to highlight some of our customer-centric organic growth initiatives that we began to outline at our 2019 Investor Day.
Collectively, these helped us manage and grow through COVID, have underpinned our success year-to-date and will play an integral role in our continued success. Over the past few years, through targeted and purposeful investments, we have developed a unique and compelling customer value proposition.
Underpinned by our high-quality network of regionally relevant B2C and B2B brands, our portfolio includes exclusive fuel, C-store, fresh root offerings and a variety of branded partnerships. These brands’ strong regional connections have earned the trust and confidence of our customers over many years.
By staying focused on our customers, we believe we have the right formula that leverages our enterprise capabilities and generates a superior customer value proposition. Scale matters in this business, and we have a meaningful density, particularly in Canada, where 85% of the population live within a 15-minute drive of a Parkland retail location.
As we continue to increase the penetration of these brands across our retail and commercial businesses, we improve brand awareness and efficiency. Ultramar is a great example of a brand we have extended beyond retail to our commercial business across Ontario and Eastern Canada to bolster its profile.
With convenience retailing specifically, each region is at a different stage of maturity. In many regards, Canada has been an incubator for our retail initiatives.
The skills and capabilities we have built and refined are now being scaled across our U.S. and international businesses.
This includes the unification of our convenience store brands across North America and having -- and advancing our JOURNIE Rewards loyalty program across all geographies. Moving to Slide 9.
On the Run, or OTR is our North American convenience store brand. We have continued to evolve and refine this offer over the past few years in Canada.
Based on its outperformance versus non-branded locations, we continue to have high confidence in what OTR can do for our nonfuel convenience store growth strategy. Some of the factors which underpin OTR’s success include larger footprints, a food offer, greater visibility from the forecourt and locally relevant customer offerings.
These characteristics have been important for years in our retail business, but even more so through COVID when we saw a shift in customer preferences and shopping habits. During the past 12 months, the C-store has emerged as a fill-in shopping destination, supplementing customers’ grocery trips.
In addition to great branding, products and customer service, the hallmark of a leading C-store business is having the operational agility to adapt to changing customer needs in real time. I couldn’t be prouder of our team’s quick response during COVID to make the required shifts in our product mix, adding new items and shoring up our supply chain to remain in stock, all while continuing to serve our customers safely.
When you bring this all together, On the Run sites in 2020 delivered 20% more in point-of-sale dollars versus non-branded locations. Furthermore, we are encouraged by the shift we are seeing in the product mix to higher-margin categories, such as beverage, confectionery, food and snack items, leading to improved gross margin dollar contribution across our network.
Our investment in OTR is clearly paying off. This gives us confidence to accelerate our rollout across Canada and introduce this great brand and capabilities across our U.S.
network. We will stand up 5 pilot locations of varying scopes in the first half of 2021.
Once we’ve collected learnings from these pilots, we will determine the right pace of further rollouts over the following 24 months. If you are customers of ours, you know that our promise is to help you make the most of every stop.
The combination of our leading fuel On the Run convenience store, plus exclusive food partnerships like Triple O’s do just that. They help create true convenience destinations.
Our exclusive agreement with Triple O’s harnesses the success we have experienced at our 25 high-performing locations in British Columbia and allows us to enter new high priority markets, including Alberta and Ontario. Although COVID has made the immediate expansion more challenging, we are progressing as planned with one location in Alberta and 2 recent openings in Ontario, all connected to the On the Run brand.
Each site opening has been strong out of the gate and is exceeding our expectations despite the ongoing pandemic. The runway for our partnership with Triple O’s is long, given the quality of the offer in limited penetration outside of BC.
For those dialing in from BC, Alberta or Ontario, I encourage you to stop by one of our OTR and Triple O locations to try one of their signature burgers, Shakes and fries and earn 2 times the journey points while stocking up on convenience items at On the Run. Turning to Slide 10.
While our brands and exclusive partnerships form the foundation of our customer proposition, our loyalty program strengthens the connections to our customers and enables us to deliver highly personalized, timely, relevant offers. As you can see in the chart on the left, through a challenging market environment where passenger traffic has been impacted by COVID, we have exceeded our own expectations and have grown the JOURNIE Rewards program to around 1.9 million members.
JOURNIE is now available at approximately 1,000 sites across Canada, and we plan to convert our Fas Gas locations to JOURNIE by the end of the year. This will make JOURNIE one of Canada’s top 3 convenience -- fuel and convenience store reward programs by site count.
Membership is not the only statistic we are proud of. There are many underlying trends that speak to the quality of the program in the way it drives customer engagement.
For example, approximately 70% of new members have opted in for communication. This is substantially higher than the industry average and allows us to a dialogue with our members, leading to more personalized offers.
Supported by our strong communication opt in, recent promotional campaign results demonstrate our ability to drive member engagement and improve our share of wallet. For example, a recent campaign offered members an additional benefit when purchasing higher-margin premium fuel and drove a 9% lift in premium liters sold and a 5% lift in average fill versus the pre-promotional run rate.
These improvements were experienced across all fuel brands. Similarly, offering members an additional vendor-funded benefit when purchasing specific C-store items led to 80% of members purchasing one of those products for the first time at 70%, adding an additional item to their basket.
The results of these promotional campaigns demonstrate why we’re seeing higher fuel average fills and convenience store basket sizes for JOURNIE members. So where does JOURNIE go from here?
We are focused on 3 near-term steps to evolve and expand our reward program. First is about refinement and personalization.
Having teamed up with Amazon web services, we are progressing our personalization engine at an enterprise level to become more targeted and efficient with our marketing investments. Secondly, given the success of our partnership with CIBC, we intend to look at additional partnership opportunities to raise the program’s profile and reach while enhancing choice and its value to our customers.
Finally, JOURNIE will become the branded rewards program across all of our geographies. While the program design will be adapted for local markets, the fundamentals of the program will remain the same and the benefits we are already capturing in Canada will be scaled across the enterprise.
New program launches are scheduled for select U.S. and international markets in the back half of this year.
Loyalty is just one way we are accelerating the connection to our customers, and it’s only one example of how we are embracing innovation. I look forward to speaking with you again at our November Investor Day, where I’ll provide more details on these -- on the initiatives that underpin and enable our digital and innovation strategy.
With that, I’ll turn it back to Bob.
Bob Espey
Thanks, Ian. That was a great overview, and it sets the tone for a year of continued organic growth across Parkland.
To wrap things up before we invite your questions, I’d summarize by saying that I’m delighted with our first quarter performance. Adjusted EBITDA of $314 million puts us firmly on track to hit full year 2021 guidance.
Our growth platform is stronger than ever, not only just for acquisitions but also to consistently deliver organic growth. We have a proven track record of disciplined value creation.
We are confident in our ability to hit our ambition for $2 billion of run rate adjusted EBITDA by the end of 2025, driven by the key strategic pillars that have made us successful for a long time. Building on our investment in sales and marketing, we have a strong pipeline of opportunities, which support our ability to grow organically across all regions.
The results we have seen to date give us confidence to invest further. Ian gave some great examples of this, and we will continue to innovate to improve our customer experience and become more efficient, allowing us to build on our track record of driving growth.
We have a depth of high-quality consolidation opportunities alongside a proven track record of synergy capture, which supports our ability to acquire prudently and integrate effectively. We have announced or closed 5 transactions to date this year, which demonstrates that capability, and we see opportunity in Canada, the U.S.
and our International business. Importantly, we have the financial tool kit and discipline required to execute.
We are fortifying our supply advantage by leveraging our scale and infrastructure to enhance margins, and we continue to invest in our Burnaby refinery. The strong results in co-processing record we set at Burnaby in Q1 underpin the attractiveness of that asset.
I also want to highlight that our supply advantage supports organic and acquisition growth in multiple product lines. Diesel and LPG are great examples of what differentiates our business model and where we see growth potential.
Finally, thank you to Marcel and Ian for their comments on today’s call. Their insights is representative of our One Parkland team, which has the experience, diversity, capability and high-performance mindset to deliver our goals.
These attributes are what have made us successful over the past decade, coupled with significant opportunity for Parkland to participate and lead through the energy transition. I am extremely excited for our future.
I look forward to outlining this opportunity set in detail at our November Investor Day. Thanks to the entire Parkland team for all their efforts to deliver a great first quarter and setting ourselves up for a successful year.
I would now like to turn the call back to the moderator for questions.
Operator
[Operator Instructions] Your first question comes from Neil Mehta with Goldman Sachs.
Neil Mehta
My first question is on the quarter, you guys put up $314 million of adjusted EBITDA. The guide here for the year is $1.2 billion.
So in what’s typically a seasonally weaker quarter, the first quarter, you guys are annualizing above the midpoint of the adjusted EBITDA range. So can you talk about how you’re thinking about the moving pieces that go into the 2021 earnings power?
Fuel prices obviously rising. Canada continues to have lockdowns.
Volumes seem to be performing very well in the U.S. and merchandise feels like it’s working for you guys really well.
So talk about those moving pieces and your conviction level in terms of potentially even beating the $1.2 billion.
Bob Espey
Great. Thanks, Neil, and thanks for the question.
In terms of our guidance, look, we had a great first quarter, and I’m really pleased with the results. The scorecard was green across the board, which is great to see.
As we look forward, I mean, the business environment is similar. We do see volatility in volumes across various markets because of COVID.
But we do expect that as vaccines continue to roll out in key markets, that that will stabilize and we’ll see volumes come back to 2019 levels. It’s something that we’re seeing in our U.S.
business that volume is coming back as people -- as public health measures kick in and vaccinations are delivered and people feel confident to travel again. I would say, when you look, again, given the underlying performance here at the beginning of the year, certainly a back-end recovery will bode very well for Parkland and should certainly ensure that we meet or beat that guidance number that we’ve put forward.
Neil Mehta
And the follow-up is just bridging between the $1.2 billion, the $2 billion target that you laid out here in the release for 2025, recognizing we’re going to have an Analyst Day, we’re going to provide -- put more meat on the bones, but just provide a sort of high-level frameworks about that bridge and how much of it you see coming organically versus inorganically?
Bob Espey
Sure. The $2 billion really builds on top of the Investor Day we did in 2019, where we outlined the pillars for growth across all 3 regions of our business plus our supply and wholesale business.
And what we’re doing is confirming that. And also what we’ve seen over the last couple of years is a lot of investment in our underlying capability to ensure that we can deliver that.
And Ian provided some great examples of the organic growth initiatives that we’ve put in place that we were investing in over the last couple of years. And now we see really starting to drive performance.
And we will continue to roll those out, not only in Canada, but across other jurisdictions. The other piece that we now have is our M&A opportunity, which we’ve talked about in the past, we have lots of small to medium opportunities that enable us to hit that target.
And as we look forward, the composition of that is roughly 50% M&A and 50% synergies and organic growth. So again, a target that feels very comfortable.
And given our geographic and product breadth, we have a lot of opportunities that we can pursue to fulfill that.
Operator
Your next question comes from David Newman with Desjardins.
David Newman
Congrats on the great set of results. My first question of the 2 is just on digging down in Burnaby a little bit.
I mean, it’s really impressive the outperformance that you’ve had in defying COVID, I would call it. The elements of the outperformance, what elements are sustainable between optimizing sales, channels mix, HDRD?
And do you expect that posting these kind of numbers in terms of utilization, is that sustainable? And how does it -- how do you frame this on a recovery?
I mean, it looks like you could almost run up against capacity constraints. So maybe just digging down on what elements are sustainable with the biofuel and the HDRD benefits and then longer-term on utilization?
Bob Espey
Great. Thanks for the question, Dave.
Look, our team, the Parkland team has really done a stellar job in optimizing the Burnaby asset among many facets, which has allowed us to maintain an industry-leading utilization and also the introduction of bio-feedstocks, which, again, is an industry first, has really helped us make sure that we can meet our compliance obligations in the most cost-effective manner. I’ll turn it over to Dirk, and Dirk will give some more detail on the optimization activities at the refinery.
Dirk Lever
Yes. Thanks very much, Bob, and good morning, David.
Yes. When we’re looking at the refinery, yes, we were able to hit a high utilization rate.
That will -- fundamental to that means that we’re able to clear the inventory that would be gasoline, diesel and jet, and we’re fortunate to have some good contracts at that Vancouver International Airport because jet has been the difficult item to clear for most refiners. With the expected turnaround, we’re expecting those volumes to pick back up, and that would be across the board for all types of flights.
So as we’re looking forward, we see that we can be able to maintain that utilization rate. Keep in mind that in Q4, we’ve already announced that we’ve got like a mini turnaround pit stop that will be 2 to 3 weeks.
So that’s why we have that utilization of 85% for this year. But as we look forward to the other parts of this year and into next year, we think we can get right back to the normal utilization rates, which would be taking us to that 92% to 95%.
Couple that with the benefits that we get from the biorefining, which helps us meet the stringent British Columbia low carbon fuel requirements. For us, this is a cheaper way to meet the pathways to those regulatory requirements.
So we’re feeling quite positive. Again, a lot will be driven by the crack spreads, but the cracks have been pretty good relatively speaking.
When we look at it, it’s just a little bit below the running 3- to 5-year average. We’d expect that to normalize.
So we’re feeling pretty positive what we see at the refinery. And as Bob has mentioned, the team at the refinery has done an incredible job of being able to feed in the bio-feed along with the crude and run it safely and consistently.
And as we went past through the last year’s turnaround, part of what we were looking for with the work we were doing was to increase our efficiency at the refinery and keep the refinery up and running at a higher utilization rate. So those benefits are starting to reap through to us, and we’ll be able to enjoy those in -- for the rest of this year and next year as well.
David Newman
Excellent. And then my second question is, I’m sure we all feel a little bit like caged animals with this COVID staying in, and we’re all ready to go out there in the world then again.
And if you look at it in terms of like cruise lines, airline traffic, driving, maybe an elevated level of staycations this summer, I think things are getting booked up in Canada across the board. Any KPIs that you can point out that you think that maybe there’s a possibility that we could actually overshoot coming out of this in the second half of this year?
Are you seeing any telltale signs at all in the horizon that gives you more confidence?
Bob Espey
Yes, David, a number of items that we’re seeing across the board in -- again, in the U.S., we’ve seen gasoline demand pick up quite robustly in the markets that we’re operating in. And we’d expect to see that in Canada as things start to come back.
On the international side, markets are starting to open up. And anecdotally, we are seeing activity pick up on the tourism side.
We are seeing our jet fuel start to come back in key markets. And again, expect that there is pent-up demand for travel.
And we’ll see that not only locally, but also through, hopefully, some air travel into down south, particularly as we get into the back end of the year and the weather starts to get colder. Again, on the cruise side, again, there we’re certainly hearing and what we’ve heard from our customers is that they have bookings, record bookings going into the back end of the year.
And presumably, as restrictions get lifted, we’ll see a rise in demand. So overall, presuming that vaccinations continue to roll out and people feel confident to travel, we’re feeling quite bullish around the back end of the year.
Operator
Your next question comes from Ben Isaacson with Scotiabank.
Ben Isaacson
First question is on rumors that I’m hearing about a gasoline shortage in the U.S. and Canada due to limited number of truck drivers.
I can see a path how that could be negative and a path of that could be positive for you. Can you talk about your own fleet, first of all?
And then what kind of impact do you think that could have in your business from a margin point of view and from a volume point of view?
Bob Espey
Yes. Thanks for the question, Ben.
And look, we are seeing that in the U.S. business.
I mean drivers are in short supply. I would say it’s not something that is new to us.
I mean we’ve always prided ourselves on being able to recruit and retain the best drivers in the industry. But we’re fortunate in most jurisdictions we run our own fleets.
So that gives us some flexibility to compensate for potential shortages in drivers. We can work -- we can work a bit of overtime.
And again, we do focus on retaining and making sure that we keep our drivers at Parkland. In terms of the impact, again, costs tend to run through into the market, extra costs.
And also, if we do see a shortage, it does tend to work its way through on the volume margin side of the business.
Ben Isaacson
Great. And then just a quick one on COVID.
So your volume in Canada looks like it was down around 10%, 11% year-over-year. How did you enter the quarter and how did you exit the quarter?
Are you back towards kind of sub-5% year-over-year, even though I guess Q2 was the start of COVID last year?
Bob Espey
Yes. We -- it’s interesting.
I mean, it’s been kind of flat through the quarter at that number that we published. And again, we’ve seen markets -- there’s been volatility across our markets.
The one thing that we haven’t seen that we saw last year as markets go into more severe lockdowns, we’re not seeing the level of decline in demand. So, people are still moving.
They’re still going to work. And we’re seeing demand actually hold in quite well, given -- particularly in Canada, given some of the lockdowns that are in place.
Operator
Your next question comes from Kevin Chiang with CIBC.
Kevin Chiang
Maybe I can ask about Canadian fuel margins. Just looking at my own model, this looks to be at least the second highest I have going back a few years here.
And it seems like part of this outside of just kind of the volume margin mix that you talk about is maybe the opportunity to leverage some of that big data or data mining to kind of maybe increase the efficiency of the quality of your revenue. Just wondering, what inning are you in terms of maybe harvesting that data to kind of maximize profitability?
And then when you think about leveraging that into your U.S. and International segments, how should we think about that as well as how should we think about this capability as you think about the synergy capture when it comes to your M&A pipeline?
Bob Espey
Yes. So let me talk about volumes and margins.
And again, I’ll ask Ian here to assist me. But I would say, again, across our business, what we’ve seen through the pandemic and certainly in the last quarter is the resilience of the platform.
We’ve seen volume margin and costs, and the team has been able to manage that quite effectively to make sure that we preserve our cash flows. In terms of the digital work we’ve done around our pricing and how we’re rolling that out, I’ll turn that over to Ian.
And Ian can comment on it. It is -- Ian does lead our digital group at Parkland.
Ian White
Sure. Thanks, Bob.
And Kevin, appreciate the question. As Bob said, I would suggest there’s 2 factors at play.
One is there is a market condition. And given the role we play in the market, it’s important that we know we have an impact on that.
So a big part of that is ensuring we’re making the right decisions. And I would say at a -- we are much better at pricing at a micro-market level from a fuel perspective, but also want to deploy those capabilities more around dynamic pricing into the convenience store and also across other jurisdictions, including our B2B business.
So I would say what we’re experiencing right now is a combination of what we’re seeing in the market, but also our ability to read the market, react and utilize some of the digital capabilities that we have developed and will continue to progress.
Kevin Chiang
Okay. That’s helpful color.
And then I know we’ll get more details on this on the $2 billion target that you reiterated on the press release yesterday. But I’d be interested in knowing when you initially talked about $2 billion at your Investor Day versus maybe how you see the path forward post-pandemic, just wondering if there’s any changes in the moving parts in terms of how you think you get there?
How does energy transition play a role today maybe versus what you would have contemplated I guess 2 years ago? Just be interested to know, are there things you could point to that are different now versus the Investor Day back in 2019 when you initially laid out this $2 billion target.
Bob Espey
Yes, Kevin, I’ll take that one. In terms of the $2 billion target, I would say our -- again, as we look at our business, we have a number of advantages that help us get to that target.
Again, the first is our geographic diversity and the fact that we’re in a lot of markets and markets that are still very fragmented. The second thing is our product diversity, which we are gasoline, convenience and then also in our diesel and propane businesses.
As we look forward and start to take into account potential impacts of energy transition, how has that changed? I mean, I would say, consistent with what we’ve talked about in the past, first and foremost, is a focus on good, strong non-fuel and convenience revenue and looking for good assets.
And I think the recent transaction we announced in the U.S., CMB is a great example of that because it really brought some top-tier convenience sites to us that are destinations that have a good, strong food and convenience offer. The second thing is continuing to grow our diesel and our propane businesses.
We’ve seen -- and we can do that across all of our jurisdictions, both organically and through M&A. Our diesel business, again, I’ll point to CMB, which has a strong commercial element and also some good infrastructure to enable import into the market.
And again, we see that as a good basis on which to build and grow that business in that jurisdiction. The third is in our propane business.
And we see opportunities in our international business to add propane volume. We’ve made investments there in our propane distribution capability, which have extended our supply advantage beyond gasoline and diesel into propane.
And then we recently announced the -- or closed in the quarter the acquisition of 2 LPG terminals in the Midwest, which further cements our wholesale position in those markets. So those are some of the typical assets that we’re buying that we see as long-term assets.
And certainly, we see a good pipeline of those going forward, and those will persist through the pending energy transition here.
Operator
Your next question comes from Vishal Shreedhar with National Bank.
Vishal Shreedhar
You referenced points about this throughout the call, but everyone is talking about inflation. And wondering what the impact is on your business.
We’re already seeing a little bit of pressure on working cap associated with rising commodity prices. And I know it’s not a massive part of your business, but your U.S.
fuel margins starting to fade a little bit here. I’m wondering if there’s other things I should consider, maybe wages, what you see there, pressure from store product margins or other attributes, how is management thinking about that?
Bob Espey
Look, I would say when it comes to the underlying commodity, I mean the price where it’s at, it’s been there before. So our business is well -- it’s used to.
And from a working capital perspective, we can certainly accommodate that. And again, our business is a fixed margin business or is a margin business on top of the underlying commodity price.
So we’re really not that sensitive to where the price is in terms of our ability to -- in terms of the impact on our margins. In terms of base inflation in the business, yes, we have been seeing costs escalate, which we’ve been seeing here for quite a while.
Even in certain jurisdictions, mandated increases in minimum wages have been something we’ve been dealing with over the last several years. And we tend to be able to pass that through to the customer base.
And that’s something that we’ve seen consistently over the years and wouldn’t expect that to change.
Vishal Shreedhar
Okay. Just switching gears here, and I recognize it’s early days, but management referenced electrical vehicle charging.
And wondering how, at this point, management sees that initiative? Is this an initiative that you see meeting the typical target threshold that PKI aims to achieve?
Or is this more of a test and learn initiative? And then as you learn more about the initiative, then you’ll deploy potentially in scale at your typical return targets?
Bob Espey
Yes. It’s -- I mean, look, our initial forays here are on a very small basis.
And we’ve gone into various markets and tested with charging alongside our convenience. We are evolving our thinking here.
And particularly in markets where we’re starting to see higher adoption rates in EVs, we think there’s a good opportunity to start to roll out an EV charging proposition that we can meet the needs, the energy needs of our customers independent of the type of vehicle that they’re driving. We do think that the pillar of that is a good, strong destination food and convenience offer.
We’re well-positioned, particularly in BC, where we are seeing increases in certainly the new vehicles sold on the EV side to start to play in that market. And certainly, when we look at certain European countries and that are ahead in terms of adoption, there are some encouraging statistics around dwell time and the amount that consumers are spending once they get to a site and are waiting for their cars to charge.
So stay tuned. We are doing a lot of work, and we’ll be keeping our investors updated on these initiatives as they roll out here in the back half of the year.
Vishal Shreedhar
Okay. And management earlier referenced the 2019 Analyst Day and it laid out a variety of initiatives to help achieve the ambitious goals that were set.
I was just wondering, like in terms of the progress made, there are some initiatives which may have been delayed because of COVID. I think one of the initiatives that was talked about was improving interprovincial and U.S.
to Canada commercial volumes, making it easier for your customers to cross boundaries and increase the volume that way. Is that initiative still -- is that still a key initiative for Parkland?
And has it been able to make progress since that Analyst Day?
Bob Espey
Yes. I think you’re talking to our NFN platform.
And you’re right, we did idle that last year due to COVID and reprioritizing. It is something we’ve reinvigorated this year and expect to be in market with that proposition in the back half of the year.
Operator
Your next question comes from John Royall with JP Morgan.
John Royall
So was wondering on the relative strength of the Canadian dollar, the types of levels we’re seeing now were contemplated in your guidance for the year. And what kind of sensitivity does your overall business have to movements in the currency?
Bob Espey
Thanks, John. I’ll turn that question over to Marcel, who can talk about the impacts of FX on our business.
Marcel Teunissen
Yes. No, thank you for the question there, John.
So maybe just as a basis, most of our markets, whether it’s in Canada or the U.S. or of course the international business, U.S.
dollar plays a very important part just because the base pricing is like that. And so we generally see a natural hedge when the dollar is moving all the way up to the consumer pricing of course.
A couple of effects, and we talk about it in our results. So when I talked about the international business being impacted by a $4 million kind of FX effect, that’s just a translation.
They did better in U.S. dollars, but when you then translate that back to cat with the stronger Canadian dollar, that is kind of a -- that has a $4 million impact.
So that’s a translation effect on the accounts you could say. Then on our balance sheet, if you look at our balance sheet, we talk about the OCI and the way that our balance sheet overall is positioned.
And what we’re trying to do there is match our U.S. dollar assets on the balance sheet with U.S.
dollar debt. So that’s -- those 2 kind of offset each other, and we’re looking at that.
And beyond that, from a kind of operational perspective, we clearly monitor our currencies, particularly those in the International business, we monitor that closely. We don’t have a very active hedging program.
We would only do that if we have material exposures to a currency we normally don’t deal with. But even in those markets that aren’t U.S.
dollar price, we typically see that FX movements get passed on to the end consumer relatively quickly. So I hope that answers your question, John.
John Royall
Yes. That’s really helpful.
And then second one might be sticking with Marcelo. Just on the CapEx, it came in pretty light this quarter relative to just thinking of an even allocation to your guidance.
And I see the guidance is unchanged. So just wondering if you can discuss the cadence of CapEx a little bit for the rest of the year and where some of that lumpiness may be coming from?
Marcel Teunissen
Yes.
Bob Espey
Yes.
Marcel Teunissen
No, that’s -- do you want to take that, Bob?
Bob Espey
No, no, no, Marcel, you go ahead. I was going to -- of course, your way, so.
Marcel Teunissen
Okay. Thank you.
No, the -- so John, so as Dirk already mentioned, the second half of the year of course we have the turnaround at Burnaby or there’s the shorter turnaround there. So that will take up some CapEx.
So that’s going to be a bit more backloaded. Also, as you recall, last year, we took quite -- we stopped quite a bit of activity or we paused that.
And so we’re just kind of getting up to speed with some of that activity. So while quarter one was relatively kind of relatively slow, there’s a lots of work is being done underlying.
And so we still feel that the guidance that we’ve given for CapEx will be there by the end of the year.
Operator
Your next question comes from Michael Van Aelst with TD Securities.
Michael Van Aelst
I guess, there’s questions for Ian. Regarding your Canadian same-store sales, we’ve seen some meaningful changes in the customer shopping habits.
And of course you’ve also had some pretty strong company-specific improvements with your loyalty, the On the Run and the private label. I’m wondering if you have a sense as to how much of the improvement you’ve seen over the last 4 quarters is more driven by company specifics?
And therefore, whether or not you think you can continue to show some growth as you lap these really strong comps?
Ian White
Yes, Michael. Yes, sorry, Bob.
Am I -- you okay?
Bob Espey
Yes.
Ian White
Great. Thanks.
So yes, I think we’re -- certainly we had a strong 2020, as you pointed out. And part of that was seeing that shift in consumer demand and behavior.
I would say more broadly though, the channel as a whole is playing a bigger role in consumers’ lives. And the big -- I think the important component to consider is that the investments we’ve made in upgrading our locations, but also in the brand and the capabilities like loyalty that, by the way, we did launch in the middle of a pandemic, we’re really starting to see that getting closer to the consumer is paying off.
So I’ve got a lot of confidence in the team’s ability to continue to drive strong comps. We’re lapping strong comps as well on a year-over-year basis.
But we certainly, as Bob pointed out earlier, we see a good sort of long road of organic growth ahead of us in this area.
Michael Van Aelst
What are you seeing, or what are you thinking of from either a promotional standpoint or other strategic initiatives that you’ll do to try and keep that customer from going back to old habits and shopping more grocery stores rather than kind of mixing it up with closer to home C-stores?
Ian White
Yes. I think it’s a couple of things.
One is we were fortunate enough to remain an essential service to remain open during consumers’ times of need and to do it really well. So I think the connection that our brands and our local teams made in our communities, in my view, withstand the test of time.
And that’s something I think that will resonate for many, many years. And every survey and consumer perspective I read and hear about indicates that consumers will continue to reward brands that did the right thing for them in times of need.
So I think we’ve got a very good halo there. And secondly, what you’ll start to see us do, and that’s the reason we gave some color around the early -- or sort of early impressions of the rewards program is we’ll be able to become more targeted and more personal.
So today it’s largely a mass message that reaches everybody, and there’s a bit of a lack of efficiency around that from a marketing spend perspective, which you’ll start seeing us do as membership and our programs grow and the stickiness with our consumer base grows is you’ll see more targeted personal offers and more choice for consumers. So I think the combination, as Bob alluded to earlier, of us investing in the business, both from a physical attribute perspective, meaning more sites, better locations, but also the investments we’re making in these programs, we think, again, is an important growth engine for us.
Operator
Your next question comes from Derek Dley with Canaccord Genuity.
Derek Dley
Just a question on the $2 billion ambition. I think you mentioned in your remarks that roughly 50% of that would come of the incremental accompanying acquisitions.
And if I recall back to 2019, that number was 75%. So can you just talk about what you’re seeing or where are the improvements that you’ve seen on the organic side that have kind of brought up the organic part of that equation?
Bob Espey
Just to clarify, Derek, it is about the same. It’s about 75% M&A plus synergies and 25% organic.
We’ve split it. It depends how you split it.
It can also be 50% acquired and then 50% organic plus synergies. So just to -- it’s roughly -- it’s just a different way of slicing it.
Again, look, when we do look at it, we do have a proven track record of being able to buy great assets that we can add value to our underlying and demonstrated that we can deliver anywhere between 20% and 50% synergies with each acquisition. So quite confident that we can hit those numbers on top of our continued organic growth commitments, so.
Derek Dley
That…
Bob Espey
That makes sense?
Derek Dley
Yes. That makes sense.
That helps clarify what I thought was the difference there. And then just -- can you just comment on what you’re seeing in terms of the increase here that we’ve seen in oil prices?
How has that affected the business? I’d imagine it’s led to some incremental activity in the U.S.
But what about crack spreads and the refinery as well?
Bob Espey
Yes. In terms of activity, again, in certain jurisdictions, it does help, particularly Alberta and our northern U.S.
business as exploration activity kicks back in that will help those jurisdictions. I mean on an overall corporate basis, they’re not really material, but it is always nice to have the incremental volume.
Dirk, do you want to comment on what we’re seeing in terms of the crack spreads?
Dirk Lever
Sure. And thanks very much, Bob, and good morning, Derek.
Yes. When you’re looking at the crack spread, remember, the crack spread is comparing 2 items.
One is the cost of the underlying commodity. So, in our case, crude and bio-feed.
And then the other part of it, which is the revenue side of it, is what the price that we get for gasoline and diesel and jet. And so the crack spread sometimes will vary as the commodity price moves up, sometimes it will hold steady.
What we have seen over the last little while is a small improvement on that crack spread. But just remember that the 2 are interlinked, i.e., the feed input costs and the revenue of the finished products.
And so even in a high commodity price environment, you can get periods where there’s high and/or low crack spreads, the same with -- when the prices go down. It’s really the interplay between the inputs and the outputs.
But as we have seen, we’ve had some pretty decent crack spreads even during a downturn. And as we look through the last few months, we’ve seen a steady but small increases to the crack spread.
Operator
Your final question comes from Steve Hansen with Raymond James.
Steve Hansen
I’ll be quick with a single. First of all, glad to see the Triple O’s franchise extending beyond BC as a resident, it’s a fantastic offer.
But my question is really around the JOURNIE program extension into other geographies, the U.S. in particular.
CIBC has been obviously one of the important key pillars or partnerships around your JOURNIE success thus far. How should we think about partnership opportunities as you extend the brand into the U.S.?
And what kind of partners do you feel you need to ultimately make sure it’s successful down there?
Bob Espey
Great. Thanks, Steve.
And I’ll turn that over to Ian.
Ian White
Great. Thanks, Bob.
Steve, great question. And you’re right, we’ve had a very successful partnership with CIBC.
To this point, it’s brought profiles of the program, it’s brought a tremendous share of wallet opportunity for Parkland. And as I referenced in my comments, we do believe that there are natural partnership extensions.
So I would say, certainly, financial services is an area we see being a key role, but other areas such as grocery, travel, et cetera, we think would be natural sort of partnerships that we should -- we could be pursuing. So I would look to, over time, as we progress this capability into new geographies to see a similar partnership -- pursuit of similar partnerships with some tweaks, again, subject to the local markets and to the brands and various services that those markets require.
Bob Espey
Okay, great. Well, thanks.
That concludes our Q&A period today. We’d really like to thank everybody for participating and look forward to chatting in August when we announce our Q2 results.
Operator
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Have a great day.