ALIMENTATION COUCHE-TARD INC.
INVESTORS PRESENTATION September 2017
FORWARD-LOOKING INFORMATION AND CAUTIONARY LANGUAGE This presentation and the accompanying oral presentation contain forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “projected”, “estimate”, “may”, “anticipate”, “believe”, “expect”, “plan”, “intend” or similar words suggesting future outcomes or statements regarding an outlook. All statements other than statements of historical fact contained in these slides are forward-looking statements. Forward-looking statements involve numerous assumptions, risks and uncertainties. A variety of factors, many of which are beyond Alimentation Couche-Tard Inc.’s (“Couche-Tard”) control, may cause actual results to differ materially from the expectations expressed in its forward-looking statements. These factors include, but are not limited to, the effects of the integration of acquired businesses and the ability to achieve projected synergies, fluctuations in margins on motor fuel sales, competition in the convenience store and retail motor fuel industries, foreign exchange rate fluctuations, and such other risks as described in detail from time to time in documents filed by Couche-Tard with securities regulatory authorities in Canada, including those risks described in Couche-Tard’s management’s discussion and analysis (MD&A) for the year ended April 30, 2017. Couche-Tard’s MD&A and other publicly filed documents are available on SEDAR at www.sedar.com. Unless otherwise required by law, Couche-Tard does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by it or on its behalf. No financial information presented in this presentation as of a date more recent than April 30, 2017 has been audited. While the information contained in this presentation is believed to be accurate, Couche-Tard expressly disclaims any and all liability for any losses, claims or damages of whatsoever kind based upon the information contained in, or omissions from, this presentation or any oral communication transmitted in connection therewith. In addition, none of the statements contained in this presentation are intended to be, nor shall be deemed to be, representations or warranties of Couche-Tard and its affiliates. Where the information is from third-party sources, the information is from sources believed to be reliable, but Couche-Tard has not independently verified any of such information contained herein. This presentation is not, and under no circumstances is to be construed as, a prospectus, an offering memorandum, an advertisement or a public offering of securities. Under no circumstances should the information contained herein be considered an offer to sell or a solicitation of an offer to buy any securities.
2
COMPANY REPRESENTATIVES
Claude Tessier Chief Financial Officer Mathieu Descheneaux Vice President Finance
3
AGENDA
1. Company Highlights 2. Ambitions & Strategy 3. Network Development 4. Value Creation & Financial Review 5. CST Case Study
4
KEY DATA •
Listed on the Toronto Stock Exchange
ATD.B
•
Market Cap1
Approx. CA$34B
•
Revenue
US$37.9B Fiscal Year 20172 US$9.8B Q1 2018 YTD2 (+16.9%)
•
Gross Profit
US$6.5B Fiscal Year 20172 US$1.7B Q1 2018 YTD2 (+14.4%)
•
EBITDA
US$2.4B Fiscal Year 20172 US$0.7B Q1 2018 YTD2 (+12.2%)
•
Number of stores3
•
9,471
Europe
2,754
International
1,749
FY2017
US$2.7B / 1.09x
Q1 2018
US$6.4B / 2.31x
S&P
BBB (Stable outlook)
Moody’s
Baa2 (Stable outlook)
Ratings
5
North America
Net Debt / Leverage4
•
13,974
1. Close as at September 8, 2017. 2. Fiscal Year ended 30/04/2017 and Q1 2018 YTD being 12 weeks to 23/07/2017. 3. Includes Couche-Tard’s Company-Owned/Dealer-Operated and Dealer-Owned-Dealer-Operated sites as at July 23, 2017. 4. Long term interest-bearing debt, net of cash and cash equivalents and temporary investments divided by EBITDA adjusted for non-recurring items. Refer to the Corporation’s MD&As for more details.
ALIMENTATION COUCHE-TARD INC.
COMPANY HIGHLIGHTS
WHO WE ARE Couche-Tard is a Canada based group and a world leader in the convenience store and road transportation fuel retail sector • In North America, Couche-Tard is the largest independent convenience store operator in terms of number of company-operated stores. • In Europe, Couche-Tard is a leader in convenience store and road transportation fuel retail in Scandinavia, Ireland and the Baltic countries, with a significant presence in Poland.
North America
• 9,471 convenience stores throughout North America, including 8,129 stores offering road transportation fuel in all 10 Canadian provinces and 42 U.S. States, and employing about 95,000 people. • More than 1,200 locations in the U.S. supplied with road transportation fuel through CrossAmerica Partners LP.
Europe
• 2,754 stores, comprising a broad retail network across Scandinavia (Norway, Sweden and Denmark), Ireland, the Baltics (Estonia, Latvia and Lithuania), Poland and Russia. Including employees at its branded franchise stations, about 25,000 people work in its retail network, terminals and service offices across Europe.
International
• More than 1,700 stores operated by independent operators under the Circle K banner in 13 other countries or regions worldwide which brings the number of sites in Couche-Tard’s network to over 15,000.
Store count as at July 23, 2017.
7
COMPANY HISTORY • • •
1980
Start of operations with the opening of a first convenience store located in Laval, Québec.
80’s-90’s
Consolidation of the Canadian market.
2001
First breakthrough of Couche-Tard in the United States : acquisition of the assets of Johnson Oil Company, Inc., owner of 225 Bigfoot stores, all located in the U.S. Midwest.
•
2003
Acquisition of The Circle K Corporation from ConocoPhillips Company that operates 1,663 Circle K corporate stores located in 16 States and has a franchising or licensing relationship with 627 additional stores in the U.S. and worldwide.
•
2004
Couche-Tard becomes an active player in the US market consolidation.
•
2012
Acquisition of Statoil Fuel & Retail, a leading Scandinavian road transport fuel retailer. Statoil Fuel & Retail operates a broad retail network across Scandinavia (Norway, Sweden, Denmark), Poland, the Baltics (Estonia, Latvia, Lithuania) and Russia with approximately 2,300 stores, the majority of which offer fuel and convenience products while the others are automated (fuel only) stations.
•
2015
Acquisition of The Pantry Inc., a leading convenience store operator in the southeastern United States and one of the largest independently operated convenience store chains in the United States. The Pantry operates approximately 1,500 stores in 13 States under select banners, including Kangaroo Express®, its primary operating banner.
• • •
2015
Couche-Tard launches its global Circle K brand, the world’s preferred destination for convenience and fuel.
2016
Acquisition of Topaz, the leading convenience and fuel retailer in Ireland, made up of 444 stores.
2016
Couche-Tard signs an agreement with Imperial Oil to acquire 278 Esso-branded Canadian fuel and convenience sites located in the provinces of Ontario and Québec.
•
2017
Couche-Tard enters into a merger agreement to acquire 100% of the outstanding shares of CST Brands, Inc. (NYSE:CST) which stands as the 4th largest chain in North America with 1,146 locations in the US due to a strong presence in Texas and 873 locations in Canada.
•
2018
Couche-Tard enters into a merger agreement to acquire 100% of the outstanding shares of Holiday Stationstores, Inc. an important convenience store player in the U.S. Midwest region, with 522 stores, a food commissary and a fuel terminal in Newport, Minnesota, which supplies one third of the stations.
8
A DISCIPLINED CONVENIENCE STORE OPERATOR AND INTEGRATOR Broad Geographic Footprint with Leading Market Positions
Superior Product Offerings Track Record of Highly Disciplined Growth and Debt Reduction
• Increasing focus on private label, fresh food products and famous for concepts • Industry leading merchandise gross margin • Proven integrator • Well positioned to lead further consolidation in fragmented industry • Committed to investment grade post acquisition
Attractive Sector Dynamics
•Steady industry performance throughout downturns with strong projected growth •C-store sector well positioned to gain share from traditional food retail •Industry-leading returns in recessions
Powerful Financial Results
•Strong and consistent financial performance throughout all economic cycles •Prolific history of positive same-store comps and 22.5% Return on equity1 •Significant FCF generation (2012-2017) CAGR of 17%
Attractive Synergy Potential
Disciplined Management Culture
(1) As of April 30, 2017.
9
• Combines world class retailer and leading C-store operator with geographically diverse footprint • Strong banners, with our new global convenience brand “Circle KTM” and our fuel banner “Ingo” at unmanned stations in Scandinavia
•Proven ability to extract significant synergies from acquisitions •Transferring best practices across entire platform •Management team with strong track record and founders have 22% equity ownership as of April 30, 2017 •Management and Board need to hold a multiple of their salary in Shares •Decentralized operating model
EXPERIENCED MANAGEMENT TEAM Alain Bouchard Founder and Executive Chairman of the Board On September 24, 2014, Mr. Bouchard stepped down as President and Chief Executive Officer and took on a new role as Founder and Executive Chairman of the Board of Directors.
10
Brian P. Hannasch President and Chief Executive Officer President and Chief Executive Officer since 2014. Previously Chief Operating Officer since 2010 and Senior Vice-President, U.S. Operations from 2008 to 2010.
Claude Tessier Chief Financial Officer Claude Tessier, CPA, CA, is Couche-Tard’s Chief Financial Officer since January 2016. Beforehand, Mr. Tessier was President of the IGA Operations Business Unit part of Sobeys since 2012.
Jean Bernier Group President Global Fuels and North-East Operations Appointed Group President Global Fuels and North-East Operations on July 30, 2012. He has over 25 years of experience in the convenience store, fuel and grocery store sectors of the retail industry.
Geoffrey C. Haxel Senior Vice-President, Operations Appointed Senior VicePresident, Operations in January 2011. He was formerly Vice-President, Operations, U.S. Arizona Region since December 2003.
Dennis Tewell Senior Vice-President, Operations Appointed Senior VicePresident, Operations in June 2013. Prior to his current appointment, He held the position of VicePresident, Worldwide Franchise as he joined Couche-Tard in January 2011.
Darrell Davis Senior Vice-President, Operations Appointed Senior VicePresident, Operations in May 2012. Previously, he had been Vice-President Operations, Florida since March 2011.
Alex Miller Senior Vice President, Global Fuels Appointed Senior VicePresident Global Fuels on February 16, 2016. Previously, he had been Vice-President North American Fuels since October 2012. He joined Couche-Tard in January 2012 as Director of Operations Midwest.
Jacob Schram Group President, European Operations Appointed Group President, European Operations in June, 2012. He was formerly Chief Executive Officer for Statoil Fuel & Retail from October 1st, 2010. He joined Statoil in 1996.
Jørn Madsen Executive Vice-President, Central & Eastern Europe Appointed Executive VicePresident, Central & Eastern Europe on October 1, 2010. He was formerly Vice President for country operations in Statoil Energy & Retail since 2007. He joined Statoil in 1990.
Hans-Olav Høidahl Executive Vice-President, Scandinavia Appointed Executive VicePresident, Scandinavia on October 1, 2010. He was formerly Vice President for Energy Europe in the Statoil Group since 2006.
NORTH AMERICAN NETWORK
Largest independent convenience store operator in the US in terms of number of company operated stores
• In the US, the convenience sector is fragmented and in a consolidation phase
• Couche-Tard acquired The Pantry in March 2015, one of the largest independently operated convenience stores in the US
• On June 28, 2017, Couche-Tard acquired 100% of the outstanding shares of CST Brands, the 4th largest chain in North America. Leader in the Canadian convenience store industry
• In Canada, the convenience store sector is dominated by a few major players including Couche-Tard and integrated oil companies. Some of the latter are selling, or expected to sell their retail assets.
• On September 7, 2016, Couche-Tard received the approval from the Canadian Competition Bureau to acquire from Imperial Oil Limited 279 sites in Ontario and Quebec and finalized the integration of these sites during the third quarter of fiscal 2017.
Canada
US
Couche-Tard Circle K Mac’s, Esso & CST (will be rebranded to Circle K)
Circle K Kangaroo Express & CST (will be rebranded to Circle K)
Total network of 9,471 stores in North America As at July 23, 2017.
11
EUROPEAN NETWORK
Leader in convenience store and road transportation fuel retail in the Scandinavian and Baltic countries and Ireland
• The European convenience store sector is often dominated by a few major players, including integrated oil companies. Some of these are in the process of selling, or are expected to sell their retail assets
• Key brands: Circle K
Being rebranded from Statoil
Ingo
Unmanned Scandinavian stations
Topaz
Will be rebranded to Circle K
2,754 stores in 9 countries or regions in Europe As at July 23, 2017.
12
INTERNATIONAL PRESENCE Central / South America Mexico 461
Asia China
United Arab Emirates
86
31
Guam Honduras
•
Convenience stores operated by independent operators under the Circle K brand
•
License agreement to use the brandname Circle K
13
25
Hong Kong Egypt Costa Rica 5
332
9
Philippines Macau
Vietnam
30
246
16
Malaysia 6
Indonesia 489
More than 1,700 licensed Circle K stores in Asia, Costa Rica, Egypt, Honduras, Mexico and U.A.E As at July 23, 2017.
13
CONSOLIDATED NETWORK RECAP
Canada
U.S.
Europe
International presence
Total
COCO(1)
1,602
5,759
1,968
-
9,329
CODO(2)
251
131
360
-
742
DODO(3)
1
623
426
-
1,050
377
727
-
-
1,104
-
-
-
1,749
1,749
2,231
7,240
2,754
1,749
13,974
-
-
981
-
981
# With fuel
1,194
6,935
2,752
-
10,881
% With fuel
54%
96%
99.9%
-
78%
Franchise/Affiliated(4) Licensed(5) Total Of which: Automats
(1) Sites for which the real estate is controlled by Couche-Tard (through ownership or lease agreements) and for which the stores (and/or the service stations) are operated by Couche-Tard or one of its commission agents. (2) Sites for which the real estate is controlled by Couche-Tard (through ownership or lease agreements) and for which the stores (and/or the service stations) are operated by an independent operator in exchange for rent and to which Couche-Tard sometimes provides road transportation fuel through supply contracts. Some of these sites are subject to a franchise agreement, licensing or other similar agreement under one of our main or secondary banners. (3) Sites controlled and operated by independent operators to which Couche-Tard supplies road transportation fuel through supply contracts. Some of these sites are subject to a franchise agreement, licensing or other similar agreement under one of our main or secondary banners. (4) Stores operated by an independent operator through a franchising, licensing or another similar agreement under one of our main or secondary banners. (5) Stores operated by independent operators under the Circle K banner in other countries or regions worldwide. As at July 23, 2017. Excludes CrossAmerica Parners LP
14
COUCHE-TARD IS A WORLD LEADER Couche-Tard is a leading global convenience store operator with EBITDA of $2.5 billion • Well diversified across geographies • Focus on growing high margin categories REVENUES Merchandises and services
Motor Fuel
Other
Total
$10,971M
$27,213M
$1,147M
$39,331M
Europe 12%
Revenues By Products LTM Q1 2018
US 1%
Europe 25%
Other 3%
Canada 2%
Merchandise and services 28%
Canada 17%
US 71%
US 62%
Canada 13%
Europe 97%
Motor fuel 69%
GROSS PROFITS Merchandises and services
Motor Fuel
Other
Total
$3,780M
$2,700M
$221M
$6,701M
Europe 14%
Gross Profit By Products LTM Q1 2018
Canada 9%
Other 3% Motor fuel 40%
Canada 17%
Financial data presented for the LTM as of Q1 2018.
15
US 7%
Europe 35%
US 69%
US 54% Canada 11%
Europe 84%
Merchandise and services 57%
COUCHE-TARD IS A WORLD LEADER REVENUES U.S.
Canada
Europe
Total
$24,792M
$5,444M
$9,095M
$39,331M
Other 0.1%
Revenues By Geography LTM Q1 2018
Other 0.4% Merchandise and services 32%
Other 12%
Merchandise and services 34%
Merchandise and services 14%
Canada 14%
Motor fuel 65%
Motor fuel 68%
Europe 23%
US 63%
Motor fuel 74%
GROSS PROFIT U.S.
Canada
Europe
Total
$4,066M
$966M
$1,669M
$6,701M
Other 0.4%
Gross Profit By Geography LTM Q1 2018
Other 2% Motor fuel 32%
Motor fuel 36%
Merchandise and services 64%
Financial data presented for the LTM as of Q1 2018.
16
Other 11%
Merchandise and services 66%
Merchandise and services 32%
Europe 25%
Canada 14% Motor fuel 57%
US 61%
REVENUE & GROSS PROFIT Gross Profit is the more accurate reflection of our business operations Revenue (in millions of US dollars)
11% CAG 35,543 2,676 22,980 6
25,271
37,905
37,962 2,800
34,530 1,972
27,209
24,282
34,145
1,126
39,331 1,147
767
23,306
26,054
8,276
10,072
7,596
7,953
2012
2013
2014 2015 2016 Merchandise Motor Fuel
10,724 2017 Other
Revenue includes road transportation fuel revenues which is the dollar amount of sales
•
Revenue can therefore change with movements in the average selling price of road transportation fuel
•
In fiscal 2017, road transportation fuel revenue represented about :
27,213
16,375
6,599
•
10,971
63% of total revenue in Canada
LTM Q1 2018
68% of total revenue in the US, and
Gross profit (in millions of US dollars) 6,482
17% CAG 4,988 4,610 347 2,975 6
1,664
5,268 334
401 1,888
6,082 211 2,440
221
213 2,587
2,129
2012
2,599
2,699
2,806
2013
2014
2015
Merchandise
3,431
2016 Motor Fuel
3,682
3,780
2017
LTM Q1 2018
Other
CAG: Five-year compounded annual growth - fiscal 2017 over fiscal 2012
74% of total revenue in Europe
•
Yet, road transportation fuel gross margins represented only about 40% of Couche-Tard’s overall gross profit
•
Gross profit represents our income after cost of sales
2,700
787
2,182
17
6,701
A HISTORY OF STRONG FINANCIAL PERFORMANCE Gross Profit
Same Store Sales Growth
17% CAG
2012
2013
2014
2015
2016
2017
2.7%
1.0%
3.8%
3.9%
4.6%
2.0%
1.6%
2.0%
2.8%
3.5%
Merchandise sales
(in millions of US Dollars)
US
6,082 4,610
4,988
6,482
5,268
Europe Canada
2.8%
2.0%
1.9%
3.4%
2.9%
0.1%
0.1%
0.6%
1.7%
3.4%
6.6%
2.6%
2.5%
2.4%
2.6%
1.0%
1.3%
-0.1%
0.9%
-0.3%
Motor Fuel Volume
2,975
US Europe 2012
2013
2014
2015
2016
2017
-0.9%
Canada
Free Cash Flow (1)
EBITDA 23% CAG
17% CAG (in millions of US Dollars)
(in millions of US Dollars)
2,331 1,376
1,640
2,396
865
1,876
18
1,065 890
404 2013
2014
2015
2016
2017
2012
2013
2014
Proven track record of consistent growth (1)
979
614
841 2012
0.0%
Free Cash Flow defined as: EBITDA minus total CAPEX (excluding price paid for acquisitions), net dividends paid, net interests paid and net income taxes paid plus proceeds from disposal.
2015
2016
2017
STOCK PERFORMANCE – COMPARED TO PUBLIC COMPETITORS AND RETAIL INDUSTRY
800%
800%
700%
700%
600%
600%
500%
500%
400%
400%
300% 300% 200% 200% 100% 100%
0%
0%
Couche-Tard
C-Stores
Grocery
Home Improv.
Drugstores
Mass Merch.
Dollar Stores
Source: Yahoo Finance. As of September 1, 2017. (1) On June 28, 2017, ACT acquired CST Brands.
19
Couche-Tard Delek Murphy
Casey's Marathon CST Brands(1)
ALIMENTATION COUCHE-TARD INC.
AMBITIONS & STRATEGY
OUR VISION
TO BECOME THE WORLD’S PREFERRED DESTINATION FOR CONVENIENCE AND FUEL
21
OUR GLOBAL BRAND
22
GET HIGH DEF
GLOBAL CIRCLE K BRAND • On September 22, 2015, Couche-Tard announced the creation of a new, global convenience brand, “Circle KTM” • The existing Circle K is already Couche-Tard’s largest and most international brand. It can be seen today serving the needs of customers in 22 countries around the world • The new Circle K brand will replace the existing brands: Circle K®, Statoil®, Mac’s® , Kangaroo Express®, Topaz® • Couche-Tard has chosen to retain the company’s founding Couche-Tard retail brand in the province of Québec, Canada • The new Circle K brand will also appear on licensed stores worldwide • The Company’s goal in the coming years is to have a single convenience retail brand across our worldwide network Before
23
After
Before
After
REBRANDING STATUS
Project well under way: More than 1,800 stores(1) in North America and 1,300 stores(1) in Europe are now proudly displaying our new global convenience brand Circle K • Scandinavia market already completed – Outstanding success • Baltics, Poland and Canada underway • United States ongoing
(1) As of July 23, 2017
24
NEW GLOBAL BRAND – SAME APPROACH TO SERVING OUR CUSTOMERS
SUPER GLOBAL SUPER LOCAL
25
THE PROMISE BEHIND THE BRAND
26
MAKING IT EASY BRAND PILLARS SUPPORTING OUR PROMISE
27
BRAND PILLARS – FAST & FRIENDLY SERVICE
Recruitment & Hiring
28
Employee engagement
Employee turnover
Service standards
Training
Physical appearance
BRAND PILLARS – EASY VISTS
Predictable in-store and forecourt experience
Clean #2 reason impacting shoppers’ decision of which c-store to visit (after location)
Source
29
Convenience store news
In-stock Out-of-stock is #1 reason for missed sale in c-stores
Fast transaction 88% of US adults want their store checkout experience to be faster
BRAND PILLARS – PRODUCTS FOR PEOPLE ON THE GO
Food
30
Hot Dispensed Beverages
Cold Dispensed Beverages
Car Wash
Private Label
Fuel
CONVENIENCE KEY CATEGORIES
31
PRIVATE LABEL
Better value proposition to customers
Increased Circle K brand awareness
Higher penny profit
32
FUEL
Consumer experience
Payment & Loyalty
Pillars Product Differentiation 33
Pricing
ALIMENTATION COUCHE-TARD INC.
NETWORK DEVELOPMENT
NEW FORMAT DEVELOPMENT
Larger fuel offering Food service expansion High traffic locations Focus on site layouts & critical dimensions Circle K Branded store & customized fuel branding Standardization of building, interior layout & image
35
NEW SITES
36
We completed the construction, relocation or reconstruction of 91 stores during fiscal 2017 and 23 since the beginning of fiscal 2018.
ALIMENTATION COUCHE-TARD INC.
VALUE CREATION AND FINANCIAL REVIEW
OUR FOUR PILLARS OF VALUE CREATION – THE EQUATION
Value Drivers
Organic Growth
38
Acquisitions
Protect Value & Enable Growth
Cost Discipline
Capital Structure & Financial Discipline
Value Creation
ORGANIC GROWTH
Focus on customers’ needs and respond to market trends
Construction, relocation or reconstruction of stores
Organic Growth
Branding
Private label
Innovation and technology
Execution
Continuous improvement
39
Emphasize on key categories – Food, coffee, cold beverages, fuel and car wash
ORGANIC – FISCAL 2017 TOP-LINE GROWTH
Europe SSS +3.5% Canada SSV (-0.3)%
Europe SSV +1.0%
Organic Growth Canada SSS +0.1%
SSS: Same-store merchandise sales SSV: Same-store volume
40
US SSS +2.0% US SSV +2.6%
ORGANIC – SUSTAINABLE TOP-LINE GROWTH Road Transportation Fuel Volume (millions of gallons)
Merchandise & Service Sales (millions of US dollars)
21% CAG
10% CAG 10,072 6,599
2012
7,596
7,953
10,724
10,502
8,276
6,945
8,135
2014
2015
4,613
2013
2014
2015
2016
2017
2012
Same-store Merchandise Revenue Growth 5%
2013
2016
2017
Road Transportation Fuel Same-Store Volume Growth 5%
2012 2013 2014 2015 2016 2017
-5%
2012 2013 2014 2015 2016 2017
-5% US US
Europe
Canada
CAG: Five-year compounded annual growth - fiscal 2017 over fiscal 2012
41
7,626
11,793
Europe
Canada
ORGANIC GROWTH – LEADING TO STRONG MARGINS IN ALL GEOGRAPHIES
Europe 42.4%
Organic Growth
Canada 33.8%
United States 33.2%
FISCAL 2017 MERCHANDISE & SERVICE MARGIN
42
NO CLEAR CORRELATION BETWEEN FUEL PRICES & MARGINS 3.54
U.S Market(1)
3.51
3.41
21.74
20.15
18.56
2.89 2.20
18.77
16.99
• No clear correlation between fuel selling price and
18.59
margins
2.19
2.18
• Our margins are not directly impacted by lower fuel
18.11
selling prices
• Lower fuel prices leave customers more money in their pockets for their in-store shopping 2015
2016
2018 Q1 LTM
Motor fuel margin (US cents per gallon)
U.S Fuel Margins (CPG) (1)
Canadian Fuel Margins (CPL) (1)
Norwegian Fuel Margins (NOK PL)(2)
US margins (CPG)
Trend
CA margins (CPL)
Danish Fuel Margins (DKK PL) (2) 0.6
0.6
0.4
0.4
0.2
0.2
(1) For company-operated stores only (2) For total network
Trend
DKK margins per litre
Trend
Q1 2018
Q4 2017
Q3 2017
Q2 2017
Q1 2017
Q4 2016
Q3 2016
Q2 2016
Q1 2016
Q4 2015
Q3 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Q4 2013
Q3 2013
Q2 2013
Q1 2018
Q4 2017
Q3 2017
Q2 2017
Q1 2017
Q4 2016
Q3 2016
Q2 2016
Q1 2016
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Q4 2013
Q3 2013
Q2 2013
Q1 2013
SEK margins per litre
Q1 2013
0
0
Trend
Q1 2018
Q4 2017
Q3 2017
Q2 2017
Q1 2017
Q4 2016
Q3 2016
Q2 2016
Q1 2016
NOK margins per litre
0.8
0.8
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Q4 2014
Q1 2013
Q1 2018
Q3 2017
Trend
Swedish Fuel Margins (SEK PL)(2)
43
Q1 2017
Q3 2016
Q1 2016
Q3 2015
Q1 2015
Q3 2014
Q1 2014
Q3 2013
Q1 2013
Q3 2012
Q1 2012
Q3 2011
Q1 2011
Q3 2010
Q1 2010
Q3 2009
Q1 2009
Q3 2008
Q3 2007
Q1 2008
-
Q1 2018
Q3 2017
Q1 2017
Q3 2016
Q1 2016
Q3 2015
Q1 2015
Q3 2014
Q1 2014
Q3 2013
Q1 2013
Q3 2012
Q1 2012
Q3 2011
Q1 2011
Q3 2010
Q1 2010
Q3 2009
Q1 2009
Q3 2008
Q1 2008
Q3 2007
2.00
Q3 2014
4.00
Q2 2014
6.00
Q1 2014
8.00
Q4 2013
1.4 1.2 1 0.8 0.6 0.4 0.2 0
10.00
30.00 25.00 20.00 15.00 10.00 5.00 -
Q3 2013
Motor fuel price (US dollars per gallon)
2017
Q2 2013
2014
Q2 2015
2013
Q1 2015
2012
US FUEL MARGINS TRENDS
Year-over-year volatility – Long term trend is up ACT Historical US Fuel Margins (CPG)
US Industry Historical Fuel Margins (CPG)
24.00 22.00 20.00
+1.9 CAG
18.00 16.00 14.00 12.00 10.00
24.00 22.00 20.00 18.00 16.00 14.00 12.00 10.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
•
Large integrated oil companies out of retail. Market dominated by pure play retailers who need to maintain and grow margins in order to maintain profitability
•
Large integrated oil companies out of retail. Market dominated by pure play retailers who need to maintain and grow margins in order to maintain profitability
•
Higher premium fuel penetration
•
Higher premium fuel penetration
•
Improved, more sophisticated pricing strategies
•
Improved, more sophisticated execution
•
Improved supply conditions
ACT: Fiscal Year / Industry: Calendar Year Sources: ACT reporting documents and NACS SOI Annual Report. 44
ACQUISITIONS
Smart, disciplined acquisition strategy – Spotting the right opportunities and striking the right deals at the right price
Identify the right opportunities
Deleveraging
Acquisitions
Realization of available synergies
Strike the right deal at the right price
Swift and efficient integration
45
PROVEN TRACK RECORD OF SUCCESSFUL ACQUISITIONS
Garvin oil
Revenue ($)
Compac Food Stores
Winners Sterling Stores Pump N Shop
2004 Net Debt/ Adjusted EBITDA (1)
Stores Acquired
2005
2006
2.2
0.8
0.4
1,706
45
75
2007
2008
2009
2010
2011
2012
1.5
1.3
1.0
0.8
0.3
0.4
421
46
107
70
47
326
2013 2.0 (2) 2,506
2014 1.3 166
2015 1.2 (3) 1,660
Agreement signed for additional stores acquisition in fiscal 2018
46
(1) This ratio represents the following calculation: long term interest-bearing debt, net of cash and cash equivalents and temporary investments divided by EBITDA (Earnings before Interest, Tax, Depreciation, Amortization and Impairment) adjusted for specific items. Refer to the Corporation’s MD&As for more details. (2) Including full-year results for SFR. (3) Pro forma The Pantry for 2015, Topaz for 2016, ESSO for 2017 and CST for 2018.
2016
2017
2018
1.0 (3)
1.1 (3)
2.3 (3)
515
442
1,362
522
EXCEPTIONAL DELEVERAGING TRACK RECORD
• ACT is committed to maintaining a strong balance sheet and sustaining its investment grade credit rating
Circle K Acquisition
No Transformational Acquisition
Adj. Net Debt / Adj. EBITDAR(4)
2,453 Stores Acquired
Leverage post SFR $3.6B Acquisition acquisition lower than Circle K
Strong credit metrics for several years
4.2 3.0
F2004
F2005
3.2
3.2
2.5
F2006
F2007
F2008
3.6 2.9
F2009
2.7
F2010
2,269 Stores Acquired
2,299 Stores Acquired
1,017 Stores Acquired
Rapid deleveraging $804M after Acquisition transformational acquisition
The Pantry, Topaz and IOL stores Acquisitions
SFR Acquisition
2.1
2.1
F2011
F2012
Pro Forma
3.1
F2013
$1.7B $1.7B $0.3B Acquisition Acquisition Acquisition
2.4
F2014
2.2
2.0
2.0
F2015 (1)
F2016 (2)
F2017 (3)
Demonstrated track record of rapid deleveraging after acquisitions
47
(1) (2) (3) (4)
Pro forma The Pantry Pro forma Topaz Pro forma Esso This ratio represents the following calculation: long-term interest-bearing debt, net of cash and cash equivalents and temporary investments divided by EBITDA (Earnings Before Interest, Tax, Depreciation, Amortization and Impairment) adjusted for specific items.
DELIVERING ON SYNERGIES THROUGH OUR ACQUISITIONS
Synergies Statoil Fuel and Retail • Target: $150M - $200M • Realized: >$200M
Synergies CST Brands, Inc • Initial target for the first 36 months: $150M –$200M
Synergies The Pantry • Target for the first 24 months: $125M • Realized: >$125M
48
COST CONTROL – PART OF OUR DNA
Year-over-year expense growth 1.9%
Disciplined Culture
2.3%
1.5% 0.8%
Scalable Organization, Systems & Processes
0.2% -0.9%
Cost Control
2012 2013 2014 2015 2016 2017 Economies of Scale
5-year Average : +1.0% Cost Efficient Systems 49
CAPITAL STRUCTURE & FINANCIAL DISCIPLINE Competitive cost of debt Rapid deleveraging after acquisitions
Well spread maturities
Cost Discipline Disposal of non-core assets
Dividend growth
50
Careful allocation of capital
Access to liquidities – Cash and credit facilities
STRONG EBITDA TO FCF CONVERSION
Strong FCF Growth (millions of US dollars)
17% CAG
Capital Investment primarily consists of the investment in property and equipment net of disposals and the ongoing improvement of our network:
• •
Construction of new stores
• • •
Replacement of equipment
Relocation and construction of existing stores Information technology Rebranding
2016 CAPEX increased significantly because of the integration of more than 1,500 Pantry stores. In addition, 2017 CAPEX increased due to the integration of the acquired stores from Esso and Dansk Fuel.
Couche-Tard generates strong cash flows, which allows rapid deleveraging to support a strong credit profile. CAG: Five-year compounded annual growth - fiscal 2017 over fiscal 2012. (1) 2015 Free cash flow includes the proceeds from the disposal of the aviation fuel business. (2) 2016 Free cash flow includes the proceeds from the disposal of the lubricants business.
51
Capex spend has averaged about 30% of EBITDA since 2012
STRONG CAPITAL STRUCTURE & FINANCIAL DISCIPLINE Adjusted Leverage Ratio (2) 3.07:1
Free Cash Flow (in million dollars US)
Average Cost of Debt 2.7 %
Investment Grade Credit Profile
FCF +17 % CAG1
865
979
1,065 890
975
Free Cash Flow ~$1.0 Billion
614 404 2012
2013
2014
2015
2016
2017
Capital Structure & Financial Discipline
2018 Q1 LTM
~$1.5 Billion available under credit facilities Standard&Poors: BBB (Stable)
(1) (2)
52
(3)
Moody’s: Baa2 (Stable)
CAG: Five-year compounded annual growth - fiscal 2017 over fiscal 2012. Long term interest-bearing debt plus the product of eight times rent expense, net of cash and cash equivalents and temporary investments divided by EBITDAR (Earnings before Interest, Tax, Depreciation, Amortization, Impairment and Rent expense) adjusted for specific items. Refer to the Corporation’s MD&As for more details. Issuance of the notes occurring subsequent to the end of the first quarter.
~$1.0 Billion in Cash
$2.5 Billion and CA $700M of senior unsecured notes (3)
RESULT OF THE VALUE CREATION EQUATION : ADJUSTED DILUTED NET EARNINGS PER SHARE AND RETURN ON EQUITY GROWTH
Adjusted Diluted Net Earnings per Share (USD)
Value Creation
Return on Equity
5-year compounded annual growth
+22 % 2.08
2.21
1.79
22.0% 21.5% 22.6%
24.9%
27.0% 22.5%
1.35 1.11 0.81
2012 2013 2014 2015 2016 2017
53
2012 2013 2014 2015 2016 2017
RESULT OF THE VALUE CREATION EQUATION : DIVIDEND GROWTH Dividends Paid – US Millions Value Creation
5-year compounded annual growth1 +24 % 145
145
104 87 50
56
2012
2013
65
2014
Dividend vs Free cash flow 2015
2016
2017
2018 Q1 LTM
Quarterly dividend increased twice during fiscal 2016, from CA 5.50¢ per share to CA 7.75¢ per share, an increase of 41%. In the second quarter of fiscal 2017, the quarterly dividend increased to CA 9.00¢ per share (remained at CA 9.00¢ for the third and fourth quarters of fiscal 2017 as well as for the first quarter of fiscal 2018). (1) CAG: Five-year compounded annual growth - fiscal 2017 over fiscal 2012.
54
FCF +17 %
CAG1
979
1,065 890
865
975
614 404 50
56
2012
2013
65
2014
87
104
2015
2016
Free cash flow
145
145
2017
2018 Q1 LTM
Dividend
RESULT OF THE VALUE CREATION EQUATION : STOCK VALUE GROWTH
5-Year Stock Performance Value Creation
450.0%
350.0%
250.0%
150.0%
50.0%
-50.0% 2012-08-30
2013-08-30
2014-08-30
Variance ACT stock price (%)
Source: Bloomberg. As of August 30, 2017.
55
2015-08-30
2016-08-30
Variance TSX index (%)
2017-08-30
SNAPSHOT – CONTINUED GROWTH
Q1-2018
12-week period ended July 23, 2017
Merchandise same-store revenues United States
+1.4%
Europe
+1.4%
Canada
(0.2%)
Road transportation fuel same-store volume United States
+0.4%
Europe
(0.3%)
Canada
(0.2%)
Adjusted EBITDA Adjusted Diluted Net Earnings per Share Declared dividend per share
56
$715.3M / +16.2% $0.67 / +17.5% 9.0 ¢ CA / +16.1%
ALIMENTATION COUCHE-TARD INC.
ACQUISITIONS COMPLETED DURING FY18 Value Creation
CST TRANSACTION SUMMARY & OVERVIEW Transaction Summary • Alimentation Couche-Tard Inc. (“ACT”) acquired 100% of the outstanding shares of CST Brands Inc. (“CST”), representing a total enterprise value of US $4.4 billion or approximately US $4.2 billion excluding the value of CST’s equity participation in CrossAmerica Partners LP (“CAPL”). In order to obtain approval from the regulatory authorities, ACT sold to Parkland Fuel Corporation certain Canadian assets of CST, retaining 157 company-operated stores. In the United States, ACT has agreed to sell 70 sites to Empire Petroleum Partners, LLC., a transaction which should close at the end of August or in early September 2017. • CST shareholders received cash consideration of US$48.53 per share • Implied CST EBITDA multiple of 11.4x pre-synergies (1) Strategic & Financial Impact • Transaction is expected to generate between US$150M and US$200M in annual cost synergies to be realized over the next 3 years • Provides ACT control over CAPL’s General Partner, ownership of associated Incentive Distribution Rights and equity stake of 20.5% in CAPL (CAPL is a distributor of branded and unbranded petroleum for motor vehicles in the U.S.) Financing • Couche-Tard financed the purchase of CST, including the refinancing of a portion of CST’s existing indebtedness through: • Capacity under existing revolving credit facilities • New acquisition debt financing consisting of term loans of which a portion will be termed-out over time • Available cash (1) (2)
58
As of March 31, 2017. Excludes CrossAmerica Partners LP. LTM for the period ended March 31, 2017. Excludes CrossAmerica Partners LP.
Gross Profits (2)
5%
30%
41% 54%
Merch. & Serv. Fuel
70%
US
Canada
HIGHLIGHTS OF THE TRANSACTION
Strategic Importance
Acquisition Rationale
• Unique opportunity to acquire one of few remaining potential North American public targets exceeding 1,000 stores
• Operating model alignment
• Top-line upside
• Strong geographic
• Sharing of business awareness and best practices
• ACT to approach 9,500 North American stores
• Void fill in US Southeast
• Increased scale and leverage to create brand awareness and take advantage of merchandise and fuel procurement opportunities
• Entry in Texas • Strenghtening of existing network • Talent acquisition and crosslearning potential • Valuable real estate portfolio • MLP structure
59
Significant Synergies Potential
• Cost optimization • Optimization of supply conditions • Optimization of distribution strategy • Elimination of redundant costs
CST’S RETAINED RETAIL NETWORK
US Network
1,106(1) company operated sites
Canadian Network
157(1) company operated sites
(1)
60
Net of the Canadian divested sites to Parkland and the U.S. divested sites to Empire Petroleum
PRO FORMA NORTH AMERICA FOOTPRINT
•
COUCHE-TARD (1) US: 6,074 Canada: 2,087 • CST (2) (3) US: 1,106 Canada: 157 • Total US: 7,180 Canada: 2,244 North America: 9,424
U.S. store count by State(4)
61
AL
161
FL
942
KY
113
MS
113
NC
426
TN
160
AZ
615
GA
388
LA
307
MO
124
OH
313
TX
882
AR
41
HI
5
ME
111
NV
34
OK
62
VT
7
CA
741
IL
256
MD
10
NH
60
OR
57
VA
56
CO
209
IN
237
MA
32
NJ
27
PA
29
WA
47
CT
3
IA
5
MI
29
NM
91
RI
1
WV
17
DE
1
KS
35
MN
17
NY
36
SC
309
WI
1
(1) (2) (3) (4)
Couche-Tard’s store count as at June 30, 2017. As at June 28, 2017. Excludes CrossAmerica Parners LP Net of the Canadian divested sites to Parkland and the U.S. divested sites to Empire Petroleum Pro forma store count by state. Includes Couche-Tard’s Company-Owned/Dealer-Operated and DealerOwned/Dealer-Operated sites and excludes its RDK network operated under a joint venture.
CST acquisition has allowed ACT to further diversify its operations and cash flow with a stronger presence in Texas, a fast growing and business friendly state.
PRO FORMA PROFILE FOR CST - FINANCIAL
(1)
(2)
(billions of US Dollars)
Revenues % of total GP % of total EBITDA(3) Store network
At Closing Pro Forma
37.9
8.2
46.1
82%
18%
100%
6.5
1.2
7.6
85%
15%
100%
2.4
0.7
3.1
12,664
1,263
13,927
Debt
7.6
DEBT/EBITDA
2.4
Pre-synergies EBITDA Contribution
22% 78%
Couche-Tard has strengthened its leadership position as a global convenience store operator with pro forma EBITDA of $3.1B
(1) (2) (3)
62
Couche-Tard Fiscal 2017 results After reflecting sale to Parkland and the sales agreement with Empire Petroleum, CST LTM financial results as at March 31, 2017. EBITDA includes a gain of $347 million from disposal of assets. Includes Couche-Tard’s Company-Owned/Dealer-Operated and Dealer-Owned/Dealer-Operated sites as well as its International licensees as at June 30, 2017. Excludes CrossAmerica Parners LP
CROSSAMERICA PARTNERS LP ACT brings CrossAmerica: • Continuity with a general partner whose management culture is aligned with CrossAmerica –Disciplined operator with best practices in acquisitions and integration –Strong and consistent financial performance throughout all economic cycles –Heightened focus on growing Free Cash Flow, with particular expertise in cost management –Well capitalized with solid balance sheet; CST longterm debt is non-recourse to ACT –Well positioned to lead further consolidation in fragmented industry
•
Scale and global reach provides additional operational benefits –Further strengthens relationship with many of our key suppliers –Many turnkey branding and franchise programs that can complement dealer offerings –Supports dealer health, which impacts fuel volume growth and additional rental income potential
•
Wholesale operations with complementary geographic reach (1) CrossAmerica’s network as of March 31, 2017
63
CrossAmerica U.S. Footprint(1)
EXCEPTIONAL SYNERGIES POTENTIAL
TOP-LINE SYNERGIES
COST SYNERGIES
Merchandise Supply Costs Increased brand penetration and awareness
Value drivers, e.g. loyalty, digital marketing, etc
64
Leveraging key consumer
Leveraging best practices and crosslearning opportunities
$150M$200M in pre-tax cost synergies Operating Expenses and Overhead
Fuel Sourcing & Distribution Costs
INTEGRATION STRATEGY
Evaluate talent pool and secure key employees
Sale of CST Canadian assets
Integrate operations & eliminate redundant costs
Integrate support functions, technology and systems & eliminate redundant costs
Roll-out key programs– Polar Pop, Simply Great Coffee, ATMs, etc.
Rebrand to Circle K/ CoucheTard
Transfer CST to existing ACT nonfuel agreements to unlock procurement synergies
Renegotiate ACT existing agreements to leverage increased scale
Build optimal strategy for CrossAmerica Partners LP
Well planned and efficient integration strategy – Similar to The Pantry
65
Review distribution strategy
STRONG FINANCING PLAN Transaction financing needs of ~$4.8 billion (including acquisition costs), funded through Capacity under ACT’s existing credit facilities New acquisition financing consisting of term loans – three tranches with 1, 2 and 3 years terms
ACT expects to repay for the term loans through Proceeds from the sale of Canadian assets Proceeds from sale of other non-core assets Term out to the bonds market Free cash flow
Financing strategy will allow Access to capital at competitive conditions Flexibility to repay debt rapidly Capacity to modulate debt maturities
Competitive, well balanced and flexible financing structure
66
ALIMENTATION COUCHE-TARD INC.
SIGNIFICANT ACQUISITION AGREEMENT SUBSEQUENT TO FY17
HOLIDAY SNAPSHOT
• On July 10, 2017, Alimentation Couche-Tard Inc. announced that it had signed an agreement with Holiday Companies to acquire all of the issued and outstanding shares of Holiday Stationstores, Inc. and certain affiliated companies (“Holiday”), an important convenience store player in the Upper Midwest United-States, with 522 stores, a food commissary and a fuel terminal in Newport, Minnesota, which supplies one third of the stations. 374 stores are operated by Holiday and 148 by franchisees • Holiday has a strong car wash business with 221 locations • Allows Couche-Tard to expand it’s geographic footprint into the Upper Midwest U.S. and to gain a strong position in the Greater Twin Cities metropolitan area. The acquired sites are located in the following states: Minnesota, Wisconsin, Washington, Idaho, Montana, Wyoming, North Dakota, South Dakota, Michigan and Alaska. • The transaction is anticipated to close in the fourth quarter of Couche-Tard’s fiscal year 2018 and is subject to customary regulatory approvals and closing conditions. The Corporation expects to finance the transaction by using its available cash and existing credit facilities.
68
CONCLUSION Broad Geographic Footprint with Leading Market Positions Superior Product Offerings Track Record of Highly Disciplined Growth and Debt Reduction Attractive Sector Dynamics Powerful Financial Results Attractive Synergy Potential Disciplined Management Culture
Poised for growth
69
