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Free AccessAlimentation Couche-Tard (ATDBCN: Baa1/BBB+) 1Q (to 21st July) Earnings Call
Reminder numbers were ~in-line which reflects a continued small slowing in fuel volumes and consumer spend. Our focus on earnings call was on M&A strategy - all comments on BS are as expected and point to its credit positive governance. Tobacco read-through is mixed; cigarette positive but seems to be bucking market, ex. cigarette market growth in tobacco is strong and points to importance of seeking out non-combustible exposed tobacco co's.
- BS comfort leverage is 2.25x times (unch), have firepower of $10b (unch) meaning it can go up to 3.75x with no impact on credit ratings. BUT it won't prevent it from considering higher leverage if needed. On last point notes it can deleverage quickly - as shown historically.
- Sees consumer as "stretched" given "less visits, lower baskets". Similar issue with fuel where higher traffic but average fill is down.
- Sees no sign of improvement or deterioration in August and confirms that = still trending slight negatives yoy. Sees gross margin rebound up ahead though.
- It says data it looks at has it taking market share at a "fairly pronounced and quiet strong level" so above weak trends not being muddled by market share losses.
- On cigarettes says stabilisation in US but is attributing that to "outperforming our competitive peer group" - analysts broached this many times again in Q&A to confirm it was bucking industry declines and it said yes.
- Ex. cigarettes it says other nicotine products showing strong growth across the network and flags nicotine pouches in Europe in particular - highlights why exposure to net-gen/non-combustibles is so important.
- Netherlands banning tobacco sales in supermarkets from 1st of July has given Couche tard a +40-50% uplift in volumes.
Highlights focus for M&A is return on capital invested and notes hurdle rate of 15% ROCE by year 3. Noted GetGo multiple paid (most recent acquisition) was a single-digit on EBITDA. Reminder GetGo runs 270 convenience retail and fuelling locations across 5 states in the US.
This was the last earnings call from 10yr in CEO, Brian H. The current COO will take the reins (was announced in June) and is a 13y veteran of Couche-Tard. 75yr old Alain Bouchard remains as the Chairman of the board - he founded Couche in 1980 opening a single shop in Quebec, Canada. No ESG concerns from us on the rotation. Numbers from before here.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.