Couche Tard's profit misses as oil recovery weighs on margins

Tue Mar 14, 2017 12:31pm EDT
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By Ahmed Farhatha

(Reuters) - Convenience store operator Alimentation Couche Tard Inc (ATDb.TO: Quote) reported a smaller-than-expected quarterly profit on Tuesday, as a jump in crude oil prices gutted margins at the company's motor fuel retail business.

Couche Tard, one of Canada's most acquisitive companies, has been expanding through deals in Europe, Canada and the United States, but higher crude prices this year have weighed on profit margins.

After a more than two-year rout, crude has more than doubled this year from a multi-year low of $27.10 per barrel it hit in January 2016.

The recovery has limited Couche Tard's ability to sell its motor fuel products at a higher margin, squeezing profits.

In the company's U.S. retail business, fuel gross margin fell 7.9 percent to 18.33 cents per gallon in the third quarter ended Jan. 29. Fuel gross margin at its Europe business declined 13.6 percent.

Revenue from the fuel retail business however jumped 27 percent to $7.97 billion, making up nearly 70 percent of total revenue.

The owner of the Circle K chain of convenience stores said total revenue rose 22.3 percent to $11.42 billion in the quarter, boosted mainly by acquisitions.

The company bought 278 fuel retail stations from Imperial Oil (IMO.TO: Quote) last year for $1.29 billion.   Continued...

Pedestrians walk past a Couche-Tard convenience store in Montreal, April 18, 2012.    REUTERS/Christinne Muschi