Image source: The Motley Fool.
Date
Wednesday, Nov. 5, 2025 at 10 a.m. ET
Call participants
President and Chief Executive Officer — Joseph Kim
Chief Operating Officer — Karl R. Fails
Chief Financial Officer — Dylan Bramhall
Chief Commercial Officer — Austin B. Harkness
Chief Sales Officer — Brian Hand
Senior Vice President, Investor Relations — Scott D. Grischow
Need a quote from a Motley Fool analyst? Email [email protected]
Takeaways
Parkland acquisition -- Completed in a $9 billion transaction, resulting in Sunoco LP (SUN 1.76%) becoming the largest independent fuel distributor in The Americas with over $3 billion in trailing twelve-month pro forma adjusted EBITDA.
Synergy targets -- Management expects more than $250 million in synergies from the Parkland (TSE: PKI) transaction by 2028, resulting in greater than 10% accretion to distributable cash flow per common unit.
Fiscal Q3 2025 adjusted EBITDA (period ended Sept. 30, 2025) -- $496 million, up from $470 million the prior year, both adjusted and excluding one-time transaction expenses.
Distributable cash flow as adjusted -- $326 million in the quarter.
Fiscal Q3 2025 distribution per common unit -- $0.9202 for the quarter, or $3.68 annualized, up 1.25% from the prior quarter, marking the fourth consecutive quarterly increase; trailing twelve-month coverage ratio of 1.8 times.
Leverage -- Leverage at quarter end was approximately 3.9 times; management expects a return to the target of 4 times within twelve months post-acquisition, accelerating the previously stated timeline.
Credit facility expansion -- Credit facility increased by $1 billion to $2.5 billion following the Parkland closing, with no outstanding borrowings at the time of the call.
Fuel distribution segment: volume -- Fiscal Q3 2025 volumes of 2.3 billion gallons, up 5% sequentially and 7% year-over-year.
Fuel distribution adjusted EBITDA -- $238 million, excluding $6 million in transaction expenses; compared to $214 million in fiscal Q2 2025 and $253 million in fiscal Q3 2024.
Pipeline systems adjusted EBITDA -- $182 million for the segment, up from $177 million in fiscal Q2 and $147 million in fiscal Q3 last year; throughput of 1.3 million barrels per day, compared to 1.2 million in both fiscal Q2 and previous year.
Terminals adjusted EBITDA -- $76 million, excluding $1 million in transaction expenses, compared to $73 million in fiscal Q2 and $70 million in fiscal Q3 last year; throughput at 656,000 barrels per day, down from 692,000 in fiscal Q2 and 694,000 in fiscal Q3 2024.
Free cash flow outlook -- Management expects annual free cash flow to exceed $1 billion in the near term, over 50% higher than the standalone case prior to the Parkland deal.
Growth and maintenance capital expenditures -- $115 million on growth capital and $42 million on maintenance capital in fiscal Q3 2025, including joint venture contributions.
SunC C-Corp tracker launch -- Trading for SunC to begin November 6 on the NYSE, offering investors a corporate structure with Form 1099 issuance and minimal corporate taxes projected for at least five years.
Hurricane Melissa impact -- Direct business impacts were limited to Jamaica operations; management does not expect any material effect on fiscal Q4 2025 results or on 2026 and beyond for the Caribbean segment.
Summary
The acquisition of Parkland (TSE: PKI) closed, positioning Sunoco LP (SUN 1.76%) as a diversified, multinational distributor with significant accretive potential projected by management. The company reported record quarterly results in adjusted EBITDA and distributable cash flow alongside accelerated distribution growth commitments. Management reaffirmed intentions to issue formal 2026 financial guidance early next year, with integration and leverage targets now prioritized for the coming twelve months.
CEO Kim stated, "we expect free cash flow to be over $1 billion a year in the near future," highlighting the enhanced post-acquisition cash generation opportunity.
Management indicated both expense and commercial synergies are expected to drive results, with key integration decisions underway immediately following closing.
Leadership cited a disciplined capital deployment approach, with current investment spanning fuel distribution, pipeline, and terminal segments according to a "best project win" strategy.
Parkland (TSE: PKI)'s Canadian business is expected to be margin-accretive, with sustained higher margins than U.S. operations, and channel management initiatives planned for acquired U.S. assets.
No material near-term impact is expected from Hurricane Melissa, with the Caribbean portfolio’s overall results unaffected according to management.
Industry glossary
Transmix: A blend of various petroleum products (e.g., gasoline, diesel, jet fuel) that accumulate during pipeline shipments and must be separated and reprocessed to yield saleable products.
Channel management: The process of optimizing the mix of sales channels (e.g., wholesale, dealer, retail) to improve profit stability and maximize segment performance.
Coverage ratio: A measure of the company’s distributable cash flow divided by total distributions paid, indicating the sustainability of payouts to unitholders.
Full Conference Call Transcript
Scott D. Grischow: On the call with me this morning are Joseph Kim, Sunoco LP's President and Chief Executive Officer, Karl R. Fails, Chief Operating Officer, Austin B. Harkness, Chief Commercial Officer, Brian Hand, Chief Sales Officer, and Dylan Bramhall, Chief Financial Officer. Please refer to our earnings release and SEC filings for risk factors and reconciliations of non-GAAP financial measures, including adjusted EBITDA and distributable cash flow as adjusted. It has been another busy quarter for Sunoco LP, and I'd like to begin my remarks by providing a brief recap. Last week, we successfully completed the acquisition of Parkland Corporation, in a transaction valued at approximately $9 billion.
This transaction has created the largest independent fuel distributor in The Americas, and a leading operator of energy infrastructure. We are confident it will provide compelling financial benefits for our unitholders. As our asset portfolio has evolved over the past several years, we have significantly improved the stability of our income, while also strengthening our financial position and scale. Over the past twelve months, Sunoco LP and Parkland on a combined basis generated over $3 billion in pro forma adjusted EBITDA across our fuel distribution business and our midstream operations.
The Parkland acquisition will be immediately accretive to distributable cash flow per common unit, and we expect over $250 million in synergies by 2028, which will result in greater than 10% accretion. Additionally, our highly successful financing transactions executed in September outperformed our expectations and will deliver approximately $40 million of additional annual cash savings. This transaction, combined with our proven track record of capital allocation, will create greater financial flexibility for ongoing distribution growth, solid free cash flow, and strengthened credit profile. Finally, I'm pleased to remind investors that tomorrow, Thursday, November 6, Sunoco LP will begin trading on the New York Stock Exchange under the ticker SunC. This new C Corp tracker broadens investment options.
As a reminder, SunC is taxed as a corporation and issues a Form 1099, making it an attractive option for investors outside of the United States, domestic institutional investors, and personal retirement accounts. Now turning to our financial and operating results. The third quarter continued Sunoco LP's strong financial and operational performance throughout 2025. The partnership delivered a record third quarter with adjusted EBITDA of $496 million compared to $470 million a year ago, both excluding one-time transaction-related expenses. Distributable cash flow as adjusted came in at $326 million for the third quarter. In the third quarter, we spent approximately $115 million on growth capital and $42 million on maintenance capital.
This includes the partnership's proportionate share of capital expenditures related to our two joint ventures with Energy Transfer, $16 million for growth capital and $4 million for maintenance capital. Turning to the balance sheet. As of the end of the third quarter, a $1.5 billion revolving credit facility had no outstanding borrowings. Leverage at the end of the quarter was approximately 3.9 times. Following the closing of the Parkland transaction, our credit facility was increased by $1 billion to $2.5 billion, which will provide greater liquidity for the partnership moving forward. As of today, our credit facility is currently undrawn.
On October 20, we declared a distribution for the third quarter of 92.02¢ per common unit, or approximately $3.68 on an annualized basis. This represents an increase of 1.25% compared with the previous quarter and resulted in a trailing twelve-month coverage ratio of 1.8 times. This marks the fourth consecutive quarterly increase in Sunoco LP's distribution and is consistent with an annual distribution growth rate of at least 5%. I would like to conclude my remarks by stating that our financial position continues to be stronger than at any time in Sunoco LP's history. Our legacy business remains strong as exhibited by our record third quarter adjusted EBITDA.
Prior to closing the Parkland acquisition last week, we were on a path to achieve our 2025 adjusted EBITDA guidance and intend to provide formal 2026 guidance for the combined company early next year. With that, I will turn the call over to Karl to discuss our operational results.
Karl R. Fails: Thanks, Scott. Good morning, everyone. As Scott walked through, our teams have been very busy this quarter, and the operational and financial results highlight the strength of our business and the benefits that come from accretive growth. We delivered strong results across all three segments, so let me walk through some of those details. Starting with our fuel distribution segment, adjusted EBITDA came in at $238 million excluding $6 million of transaction-related expenses, compared to $214 million in the second quarter and $253 million in the third quarter of last year. Volumes came in at 2.3 billion gallons during the quarter, up 5% from last quarter and up 7% compared to the third quarter of last year.
This volume growth far outpaces total US volume growth for both gasoline and diesel, showcasing that our investments are yielding tangible results in both our growth capital program and fuel distribution bolt-on transactions. Reported margin for the second quarter was 10.7¢ per gallon compared to 10.5¢ per gallon in the second quarter and 12.8¢ per gallon in 2024. When we look at margins across our system, there are a few perspectives worth pointing out. First, we believe that breakeven margins continue to be supported by many of the same factors that we have discussed over the past few years, including inflation resulting in higher costs, limited overall volume growth across the industry, and higher interest rates.
Second, we have seen some tempering of market volatility which has not produced an outsized fuel profit quarter like we saw during the second and third quarters of last year. Once you normalize for the sale of our West Texas retail business in 2024, at a very attractive multiple, we expect that in 2025, we will have grown segment EBITDA for the seventh year in a row. The business continues to deliver very strong results. In our Pipeline Systems segment, adjusted EBITDA for the quarter was $182 million compared to $177 million for the second quarter and $147 million for the third quarter of last year, all excluding transaction-related expenses.
Segment throughput was 1.3 million barrels per day, compared to 1.2 million barrels per day in the second quarter and 1.2 million barrels per day in the third quarter of last year. During the quarter, we saw strong performance across all our pipeline systems on both volumes and gross profit. Turning to our Terminals segment. Delivered adjusted EBITDA of $76 million excluding $1 million of transaction-related expenses, compared to $73 million in the second quarter and $70 million in the third quarter of last year, both excluding transaction-related expenses. Segment throughput was 656,000 barrels per day, down from 692,000 barrels per day in the second quarter and 694,000 barrels per day in the third quarter of last year.
Our transmix business continues to have a strong year supported by good performance in our terminals assets across all our regions. We expect to finish the year strong in our two midstream segments, highlighting the stability of the underlying assets and the work that our teams have done to optimize the expense structure with a focus on reliability and providing flexibility to our customers. Our third quarter results highlight our strong fuel distribution growth driven by our capital deployment strategy with a good mix of signing up new customers and bolt-on M&A, which continues to deliver market share gains and stable earnings. This strategy is complemented by our midstream operations.
With the Parkland transaction now closed, our confidence in its highly accretive value has grown steadily over the past several months. It is another opportunity for us to deliver on our strengths: maintaining reliable operations, disciplined expense management, optimizing gross profit, and effectively and accretively deploying capital. I will now turn the call over to Joseph Kim to provide his overall perspective.
Joseph Kim: Thanks, Karl. Good morning, everyone. We delivered a very strong third quarter. Although 2025 is not quite over, I want to share some perspectives on this year as a whole. On the last earnings call, we stated that the back half of this year will outperform a good first half. With the third quarter results in the books, it is playing out as we stated and will deliver another record year. All three business segments are performing well. Our fuel distribution business continues to grow and provide stable earnings. Our pipeline and terminal segments also continue to perform at a high level. Last year's NuStar acquisition is proving to be outstanding.
We have reduced expenses by 25% while improving gross profit and maintaining reliability. As for the Parkland acquisition, let me start off by publicly welcoming the Parkland employees to the Sunoco LP team. With the closing complete, we posted a new investor presentation earlier this week. I want to highlight some key insights. Both Legacy Sunoco LP and Legacy Parkland are performing as expected. As I said earlier, Sunoco LP will have another record year. As for Parkland, the 2025 year-to-date results have materially outperformed 2024. When you combine the two businesses together, our diversified portfolio spans across the U.S., Canada, the Greater Caribbean, and Europe. We will deliver over 15 billion gallons of refined products.
Scale is vital in our business, and we are now the largest fuel distributor in The Americas. Specifically within our midstream and fuel distribution portfolio, the Parkland addition greatly enhanced our position in the Atlantic Basin. We have over 7 billion gallons of contracted fuel demand from Eastern Canada to the U.S. East Coast to the Caribbean to South America. Throughout this footprint, we also have a leading position of terminals and the expertise to manage waterborne and other sourcing options. Bottom line, scale plus key assets equals a leading supply cost advantage. Moving forward, our immediate top two priorities are number one, integrating Parkland and number two, getting our balance sheet back to four times leverage.
Just like we did with the NuStar acquisition, we'll quickly make key decisions to integrate the two companies to achieve synergies as soon as possible. We expect more than $250 million in synergies. We're digging deep into every part of the acquired business. We will provide more precision and timing when we complete the process. As for the balance sheet, we expect to be back to our long-term target leverage of four times within twelve months. This is faster than the timeline that we gave back in May. Let me wrap up. As Scott mentioned earlier, the Parkland transaction is highly attractive with a greater than 10% accretion.
Going forward, we expect free cash flow to be over $1 billion a year in the near future. The over 50% increase versus our standalone case puts us in a better position to execute on our capital allocation strategy, which is accretive investments, distribution growth, and a strong balance sheet. Operator, that concludes our prepared remarks. You may open the line for questions.
Operator: Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Spiro Michael Dounis with Citi. Please proceed with your question.
Spiro Michael Dounis: Thanks, operator. Good morning, team. Question, Joe, maybe just to pick up on some of those closing comments around synergies. Looking like the floor now is sort of firmly around over $250 million. I know you're a few days into this merger, but I also know you've been busy in the background getting ready for this integration. So curious to give a sense for just, you know, maybe how much above that $250 million we should have in mind. Are these more commercial or cost in nature? And maybe how are you thinking about the cadence of realizing those over the next three years?
Karl R. Fails: Hey, Spiro, this is Karl. Good morning. Yeah. Really, to build on Joe's comments in his prepared remarks, there were really two updates that we provided in the release and in the investor deck earlier. One was the floor on the synergy number, and then the second was tightening our time frame on getting back to the four times leverage to within twelve months. And really that comes because of the confidence we have based on the work we've done in the last six months. There are material synergies on both the expense and commercial sides.
I think the best way to think about the expense side of things, whenever you put two large companies together, you get to leverage the scale to find efficiencies. And we've spent the integration planning period planning that, and I'd say, you know, already a lot of those plans were started to be executed this weekend after we closed. Then you layer on that we have a very strong track record of good expense discipline. And so we feel there's a lot of opportunity there. But on the commercial side, our scale helps us as well. The teams have begun putting together plans. Most of those are on the supply side.
But there are also going to be some opportunities on how we go to market. Should yield results. As far as your question on the cadence, you should expect that when we issue guidance early next year, that we'll give more details on what that ramp looks like through year three where the $250 million plus should be able to be delivered. And as far as your question on the ultimate upside, here's how we think about it. The two primary measures on this acquisition that we're going to be focused on, and both of them are very visible to the street, are first that we meet our commitment on getting leverage back to four times within twelve months.
And second, that we're going to show a double-digit accretion on a DCF per LP unit basis. The strongest lever we have to hit those metrics. But at some point, in the future, those are going to merge with just improvements and growth in the base business that we've acquired. So bottom line is we feel very confident, and we're going to hit on those metrics as we've laid out.
Spiro Michael Dounis: Great. Thanks, Karl. Second one, maybe just going to Sunoco Corp. Dividend equivalency. Looks like the latest update points to minimal tax for at least five years. Just curious, can you put a finer point on what that means for SunC's dividend equivalency over that period? And what's within your control to maybe push that out even further?
Scott D. Grischow: Yeah. Spiro, this is Scott. Look, there was no change to our two-year dividend equivalency that we announced with the transaction in May. This is a feature that we granted as part of the Parkland transaction. Our intention is to keep the SunC distribution very similar to Sunoco LP's past time period, and having minimal corporate income taxes is the foundation for achieving that. And as we laid out in our investor materials, we expect this to be the case for at least five years. I will continue to pursue opportunities and strategies that allow us to minimize corporate taxes at SunC on an ongoing basis, namely by deploying capital on organic CapEx and acquisitions, things of that nature.
And we'll update investors when appropriate on the outlook past the five-year period.
Spiro Michael Dounis: Great. I'll leave it there. Thank you, gentlemen.
Operator: Our next question comes from Justin Scott Jenkins with Raymond James. Please proceed with your question.
Justin Scott Jenkins: Great. Thanks. I guess I'd like to start on the distribution. Obviously growing at a nice 5% clip, but obviously a much bigger business and more stable business with a lot of free cash flow with Parkland. Does that give you the potential to eventually maybe push that growth target up over time beyond the at least 5% window that you've looked at here recently?
Joseph Kim: Hey, Justin. It's Joe. Hey, obviously, I think I've said it like a broken record, you know, quarter after quarter. You know, the foundation of our capital allocation is having a stable, reliable, and growing distribution. And I think the foundation of that is we continue to grow cash flow. I think we've stated a few times that for the eighth consecutive year, we've grown DCF per common unit. And we expect that to continue for the future. Our coverage is hovering, you know, around 1.8. Our balance sheet is in a good position. So we said, I think last year, that we expect a multiyear distribution increase, we said that pre-Parkland. You add in Parkland with double-digit accretion.
So we're in a good place before Parkland. We're in a better place after Parkland. As far as an exact amount for 2026 and above, we'll provide that as part of our kind of overall guidance early next year. But I think what you can take away is that we're in a better position than we were even last year for meaningful distribution growth on a multiyear path.
Justin Scott Jenkins: Great. Appreciate that, Joe. Second question is on Hurricane Melissa impact. Certainly, you've had some presence in The Caribbean over time and Parkland is a bigger business in The Caribbean. Anything that you want to highlight here in terms of impact from the hurricane itself on the broader Caribbean portfolio for the fourth quarter and into 2026?
Austin B. Harkness: Yeah. Hey, Justin. This is Austin. You know, first, I just start with, you know, on the human side of things. Our thoughts are with the people in the region, you know, and the loss of life and property associated with the storm. This is a powerful storm. From a business standpoint, specifically, the impact to our portfolio was largely limited to the Jamaica business. And, you know, fortunately, all employees in the region have been accounted for. I think, you know, this is a credit to the team.
We've got a fantastic team down there, you know, from the work they did including their meticulous preparation in advance of the storm, making sure that the area was as prepared as possible to the swift response, I should say, bringing, you know, necessary people, supplies, resources, into the island to assist with recovery efforts. Just to put the business impact into a little bit more perspective, you know, Jamaica is one of 25 jurisdictions and markets that we serve in the Caribbean region.
And so overall, we don't expect there to be any material impact to our fourth quarter results for the segment or 2026 and beyond, but that's in no way intended to minimize obviously, the human impact and devastation to some of the folks that were impacted in the region.
Operator: Thanks, guys. Our next question comes from Theresa Chen with Barclays Bank. Please proceed with your question.
Theresa Chen: Good morning, everyone. Looking at your comprehensive asset base at this point, could you share your perspective on potential opportunities for your West Coast terminaling assets as well as any incremental profitability upside for the Burnaby Refinery in light of ongoing California refinery closures?
Karl R. Fails: Yeah, Theresa. Good morning. This is Karl. I think here's what I'd say. I'll start with the refinery. One is we're thankful, and you see the results that the refinery team has delivered this year on improved reliability. That's really been our focus and will be our focus going forward on the refinery operation. Clearly, California has had plenty of refinery shutdowns and different things in the news. Our strong asset base on the West Coast, while it's not as big as on the East Coast, is growing. And I think there's going to be opportunities. So, well, I don't know exactly how the markets are going to shape out over the next two or three or four years.
I think our track record shows that when product flows shift, that we have the scale and expertise to be able to take advantage of them. So the refinery really is the platform for our fuel distribution business in Western Canada. And we have key assets down through the Pacific Northwest and into California. So if refinery shutdowns continue and the West Coast of the U.S. and Canada become import markets, we should have the opportunity to supply from our refinery in Canada, or we should have facilities that enable imports coming in from outside the U.S. So I think we're well positioned to be able to take advantage of wherever the markets shake out.
Theresa Chen: Got it. Thank you. And what are your expectations regarding how the recently announced refined product pipeline projects could impact or create opportunities for your own Gulf Coast to Mid-Continent refined product pipeline infrastructure as well as your fuel distribution assets in PADDs 2 and 5?
Karl R. Fails: Yeah, Theresa. I think my answer is pretty similar to the California question. I think, well, we don't comment specifically on certain competitors' projects. I think those pipeline open seasons and projects that you mentioned really are an indication of some of the changes in U.S. refined product flows as a result of refinery shutdowns in California. So I think the same principles are in play. We have a fuel distribution business that we've had a track record of taking advantage of changes in product flows.
We now have an asset portfolio of terminals on the West Coast, some pipeline systems in the Mid-Con and in Texas that we can use to invest in to provide services for either our own business or our customers. Obviously, when things change, sometimes there are assets that are impacted negatively. But we'll have assets that are impacted positively. So as we look at that altogether and our ability to work with our customers, see where we can help meet their strategic objectives, we feel really good about our ability to benefit from these changes.
Operator: Thank you. As a reminder, if you'd like to ask a question, please press 1 on your telephone keypad. One moment please while we poll for questions. Our next question comes from Elias Max Jossen with JPMorgan. Please proceed with your question.
Elias Max Jossen: Hey, this is Eli on for Jeremy. Just wanted to start on the outlook. I guess what went into the decision not to update the 2025 guide today to include Parkland contributions? Would that be part of the Tankwood asset closing? And, yes, just thoughts there. And then maybe on to '26 and kind of early thoughts there. I think you said you'd release guidance earlier next year versus maybe December this year. Just are the kind of key puts and takes, base business and synergies to expect as components to the 2026 guide? Thanks.
Joseph Kim: Hey, Eli, this is Joe. Let me start with 2025. I think the obvious reason is we just closed on Parkland, and so one of the statements we made earlier is that we expect to close on Tankwood in the fourth quarter. Trying to get, you know, put too much precision on when Tankwood's going to happen gave us good reason to be sure about what we're going to provide for guidance for next year instead of just giving an update in 2025.
The other thing is that for the reason why we typically have given guidance in December of every year, if we push it to early next year, we just got all the budgets that Parkland put together for their business. We went through that with a fine-tooth comb. We won't just convict you. Today's business is going to perform like, and we'll go and that'll be a significant part of our guidance for next year. As far as early thoughts on 2026, I can give you a few things I think that might be helpful. First of all, the Parkland business is performing year to date better than 2024. So we're starting with a really good baseline with Parkland.
Secondly, for Sunoco LP, legacy business, we continue to grow. We've grown year after year, and 2026 on a standalone basis won't be any different. I think Karl talked in-depth about the synergies. You know, we increased, we put the at least $250 million in synergies. We think this is to be an outstanding acquisition for us. We're in the process of going through more precision and exact timing, and all that will come together when we give guidance. But I think the takeaway is that we feel even better about this acquisition than when we announced it in May. And we're well positioned to have another outstanding year in 2026.
Elias Max Jossen: Awesome. And then, you know, maybe just back to the base business. I think you talked about kind of just steady improvement there. Maybe in the fuel side, just thinking about the CPG margins following the integration of PKI assets. How should we think about those margins trending as we move forward? I know you are the largest fuel distributor in North America and you have a lot of economies of scale. So should we see any kind of upward pressure on those margins going forward?
Joseph Kim: Let me give you a couple of thoughts about more of the segment basis. And I'll give you the pieces, and then when we give guidance, all this will kind of tie out together. First of all, we'll start with the PKI Parkland U.S. Business, their legacy business. I think it's been well documented that they've had some struggles over the last few years. The exact reason, the detail, the insider view, we don't have the exact details yet, but we will. But here's what I think to give you clarity on the U.S. Business. We view Parkland's U.S. fuel distribution business just like a bolt-on acquisition we've done over and over again.
So, you know, we're going to channel manage it for income stability. We're going to do gross profit optimization. We're going to cut expenses. So in due time, pretty darn quickly, we expect the Parkland U.S. business that struggled to perform in line with what Sunoco LP has done year after year. So we feel very positive about that. As far as the Canadian business, the way that I would probably look at it is they've had strong third quarter results. I'm not surprised. These assets in Canada and fuel distribution have performed well year after year. The Canadian assets have some key elements that I really like. First of all, they've got scale. We've got scale.
You know, one in five fuel stations is fueled by Parkland, so incredible scale in Parkland in Canada. Secondly, the Canadian relative to the U.S. they've had a long history of sustained higher margins than the U.S. We don't think this is going to change. And finally, we have channel management. We've done that with every acquisition we've done. We've taken the assets, and we'll put it into the right channel where we think we can have the most income stability. So from a Canadian fuel distribution side, we think this is going to be additive to our overall fuel distribution portfolio. In The Caribbean, we see these are a bunch of niche markets with high margins.
And we think this is going to continue. We have history in niche markets like Hawaii and Puerto Rico. And then some of these markets also have material GDP growth in some of these areas that we think will share in the upside. So if you put it all together, I feel better about our fuel distribution portfolio. That's the reason why we thought Parkland was a great fit for us.
Elias Max Jossen: Great. I'll leave it there. Thanks.
Operator: Our next question comes from Ned Antonov Baramov with Wells Fargo. Please proceed with your question.
Ned Antonov Baramov: Hey. Good morning. Thanks for taking the questions. Want to stay on the legacy Sunoco LP U.S. fuel distribution business here. A few factors in play. On the one hand, the ongoing government shutdown and some signs of weaker fuel demand don't seem constructive for volumes, but on the other hand, as Karl pointed out, your CapEx program and roll-up transactions year to date add gallons to your system. Either way, you've already demonstrated an ability to protect the overall contribution from this segment across different environments. Just wanted to check if there is a change in how you think about the prospects of the fuel distribution business in the next six to twelve months?
Austin B. Harkness: Yeah. This is Austin. You know, I think you hit it. Overall, I think what we're seeing from a fuel volume standpoint is in the U.S. More broadly, demand for refined products is roughly flat year over year. There has been maybe some softening in recent months. But our legacy business has outperformed the broader segment, right? We're up mid to high single digits for Q3 on volumes. And a lot of that, as you pointed out, is owed to our capital allocation strategy and growth capital deployment, including growth CapEx and some of the bolt-on accretive M&A that we did in the first half of this year that's yielding benefits in Q3 and beyond.
In terms of changes to expectations, we actually see the fundamentals as strong for the segment as they've ever been. The business is healthy, and with our combined now asset base with the Parkland acquisition, we're well positioned to continue our historical trend of growing EBITDA for the segment accretively year over year going forward.
Ned Antonov Baramov: Great. And I guess a quick question on growth capital. Could you talk about the key areas of investment for Sunoco LP in the third quarter? Other than the $16 million contribution to the Gathering JV? Are you still primarily spending in support of the fuel distribution business? Or are there organic opportunities in your pipeline and terminals segments?
Karl R. Fails: Yeah, Ned. This is Karl. Our growth capital is spread across all of our segments. But really, it is in a best project win type of mentality. And, you know, obviously, we haven't done any large projects in our pipeline systems or terminal segments, but there's plenty of what we call smaller to medium-sized optimization type projects. Some of them unlock more opportunities with our fuel distribution business. Some of them unlock more ratable income from third-party customers. So, really, it's fuel distribution, pipelines, and terminals all have growth capital in addition to our parts of the JVs.
Ned Antonov Baramov: Thank you. That's all I had.
Operator: We have reached the end of the question and answer session. I'd now like to turn the call back over to Scott D. Grischow for closing comments.
Scott D. Grischow: Thanks for joining us on the call today. As we said, there are a lot of great things to look forward to in 2025 and beyond for Sunoco LP, and we look forward to updating you going forward. Please reach out if you have any questions.
Austin B. Harkness: Thanks for tuning in, and always appreciate your support.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. And we thank you for your participation.