Q1 2021 Superior Plus Corp Earnings Call
Ladies and gentlemen, this is the operator, you're coming from.
To begin momentarily and to that time your line.
And be placed on music hold thank you for your patience.
[music].
Good day, and thank you for standing by welcome to the superior plus 2021 first quarter results conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question during the session.
Star one on your telephone.
Any further assistance, please press star zero and I will now.
I would like to hand, the conference over to your speaker today, Mr. Robbed Orient VP IR and treasurer.
Please go ahead Sir.
Thank you Kara and good morning, everyone and welcome to Superior plus this conference call and webcast to review, our 2020, one and first quarter results. Our speakers on the call today, we will be live days yard and president and CEO and Beth Summers executive VP and CFO today's call is being webcast and we encourage.
Listeners to follow along with the supporting presentation, which is also available on our website.
For this morning's call Luc and Beth will begin with their prepared remarks, and then we will open up the call for questions before I turn the call and look I'd like to remind you that some of the comments made today may be forward looking and nature and are based on superior <unk> current expectations estimates judgments projections and risks further some of them.
The information provided refers to non-GAAP measures.
Please refer to superior first quarter MD&A posted on SEDAR and superior website yesterday for further details on forward looking information and non-GAAP measures I would encourage listeners to review the MD&A as it includes more detail on the financial information for the first quarter as we won't be going over each financial.
And metrics on today's call and this will allow us to move more quickly into the question and answer period I will now turn the call over to Luke.
Yeah.
Okay.
So thank you Rob and good morning, everyone.
Thank you for joining us on the call, we hope everybody is safe and healthy.
We are dealing with various level of COVID-19 restriction and their own breathing region and kind of do on new U S.
And I'm proud of our team's commitment to safety and reliability.
And I did the essential fuel and service to our customer.
And we'd like to start with somebody and light from their first quarter in recent weeks following the end of the quarter.
On April nine we successfully complete our transition to a per play and they're just distribution company with.
And the sale of our specialty chemical and we have already announced or completed four acquisitions in 2020 one from there.
Total accounts the range and of 258 million.
Where are we focused on growing their business and they've set a goal to double the U S propane EBITDA and the next five years, well achieved a growth through acquisition and.
Organic growth.
Yeah.
Yeah.
Yeah.
Continuous improvement initiatives and Canada, and we're also looking at acquisition, but the majority of their growth and that business will come and demand recovery. Following COVID-19, and that's for Canada.
And the growth and continuous improvement initiative also part of our play will be rolling out our new five year strategic plan. The superior way forward on may 20th fish.
And although virtual Investor day, I invite you all to attend this presentation as we will be laying the framework for the next five years and our financial and operational goals.
And late January and early February we announced three propane acquisition for a total consideration of 45 million, adding 40 million leader and.
10000 customer and the northeast U S and then Canada.
On April 20th Secondly, we announced we have entered into an agreement to acquire Freeman guys for U S.
Company of 470 million and the Salt East USA.
We also published our inaugural sustainability report.
And I think the importance and of.
Sustainability, and ESG principal and the operation and business strategy. This report is just the start and we look forward to sharing more detail on what superior is doing in relation to ESG as building, a sustainable company and key to our future success and working with our stakeholders.
Yeah.
Propane is expect to play an important role and the energy transition and reducing greenhouse gas emissions by displacing other fuels, such as diesel and gasoline and heating oil.
And preparing vehicles and remote power generation application.
We also delivered strong financial and operating resolve from the first quarter and what their strategic growth and operational initiatives on track with our plan for.
And their distribution businesses continued to them on street resiliency as we achieved record EBITDA from operations of $216 4 billion and.
And the first quarter U S propane resolved and increased significantly compared to the prior year quarter due to the higher sales volume and the need to acquisition and colder weather, partially offset by higher operating expense.
U S propane EBITDA from operations 2020, one is anticipated to be higher than 2020 crumbly due to the impact of acquisition complete and 2020 and 2021.
Consistent with the five year average benefits from the superior weight and seasonal workforce optimization initiative and realized synergies from acquisition.
Ken and Canadian propane resolved for the first quarter were lower than the prior year quarter due to the decrease in average margin related to wholesale propane market fundamentals and a decrease and commercial volume related to COVID-19.
A decline and the oilfield and commercial business overall Canadian propane EBITDA from operation and 2021 is anticipated to be lower than 2020, probably due to the decrease in sales volume and average unit margin as well as a reduction and to see a double U S benefits from the goodbye on them in person.
And they have said by lower operating expense sales volume and I expect to decrease due to impact of COVID-19, and reduce activity oil and gas on the other segment and western Canada related to that.
In March and April we enhance our financial flexibility to day insurance of two unsecured note and the extension of our credit facility.
These risks.
And the refinancing initiative will deliver approximately 15 million of annual interest saving and extend our debt maturity out to 2020 six and on.
We're optimistic some restriction will be live and the second half of 2020, one, allowing our commercial customer to a period of higher capacity.
However, we have resilient business and we expect to generate strong free cash flow even in this challenging environment.
I'll now turn the call over to Beth to discuss the financial resort results and more details.
Thank you Liz and good morning, everyone.
And she first quarter adjusted EBITDA of 211, 6 million and $26 2 million or 14% increase over the prior year quarter, primarily due to higher EBITDA from operations from U S propane and realized gains on foreign exchange hedging contracts.
And the realized loss and the prior year quarter and this is partially offset by lower EBITDA from operating income.
And propane distribution and higher corporate costs.
Arkansas.
And from continuing operations and 75.
And <unk>.
And the first quarter increased $74 3 million over the first quarter 2020.
The primary drivers and trends from the U S propane distribution segment.
And described earlier and the gains on derivatives and foreign currency translation and four.
Partially offset by higher finance expense and income tax expense and the current quarter.
Consolidated adjusted operating cash flow before transaction and other costs for the first quarter.
And with $185 3 million.
At $28 9 million or 18% increase compared to the prior year quarter. This is primarily due to higher adjusted EBITDA and lower interest expense, partially offset by higher cash tax expenses.
Turning now to the individual business results.
U S propane EBITDA from operations was $140 1 million and increase of $36 7 million or 35% from the prior year quarter, primarily due.
Contribution from acquisitions completed in the last 12 months and colder weather.
Sales volumes were 33% higher compared to the prior year quarter, primarily due to acquisitions and colder weather.
Average weather and magnify degree day across the markets, where U S propane operate with 7% colder than the prior year quarter, and 4% worse and the five year average commercial sales volumes were 27% higher compared to the prior year quarter, primarily due to acquisitions and colder weather partially offset.
And by a decrease and low margin commercial distillate volume and the impact of COVID-19.
Average margins were consistent with the prior year quarter, and the impact from customer mix and sales and marketing initiatives are on.
And by the impact from the stronger Canadian dollar denominated growth profit.
Operating costs increased by 20% compared to the prior year quarter due to acquisition, partially offset by workforce optimization initiatives and realized synergies.
Canadian propane EBITDA from operations of $76 3 million decreased $10 3 million or 12% from the prior year quarter, primarily due to lower average margin related to a weaker wholesale propane and fundamental and lower sales volumes related to the impact from COVID-19.
A decline and oilfield activity in Western Canada, and warmer weather residential sales volume were 12% higher than the prior year quarter. This was primarily due to increased demand from COVID-19 related restrictions keeping more people at home and to a lesser extent the impact of acquisitions completed during.
The current quarter.
The increase was partially offset by the warmer average weather compared to the prior year quarter.
Average weather across Canada for the first quarter as measured by degree day with 3% warmer than the prior year and 4% warmer than the five year average.
Commercial sales volume were 9% lower than the prior year quarter, primarily due to the impact of COVID-19 on demand across the country continue to weaker economic conditions in western Canada and to a lesser extent the warmer weather wholesale.
And propane volumes were 2% higher compared to the prior year quarter due to sales and marketing efforts to increase third party spot price wholesale propane sales.
Average margins were 8% lower than the prior year quarter due to the weaker wholesale propane market fundamentals.
Operating costs decreased by 6% compared to the prior year quarter due to the impact on the CW and benefit and cost saving initiatives.
Lastly, the corporate results and the adjusted EBITDA and leverage guidance.
Corporate operating costs were $10 3 million and increase of $9 7 million compared to the point 6 million and the prior year Corp.
Primarily due to higher long term incentive plan costs related to the share price depreciation and the current quarter.
Interest costs decreased 14% compared to the prior year quarter due to the lower average debt levels and lower interest rates.
Superior total net debt to adjusted EBITDA leverage ratio for the trailing 12 months ended March 31, 2020, one, including the specialty chemicals EBITDA from operations was three six times.
Pro forma net debt to adjusted EBITDA leverage ratio adjusted for the cash proceeds received from the sales of specialty chemicals business and excluding the specialty chemicals EBITDA from operations was two nine times, which is below the low end of superior long term target of three to three and a half time.
And of course, we redeem and you add 350 million, 7% senior unsecured notes due July 15, 2020, net with proceeds from our private placement of USD 600 million four 5% senior unsecured notes issued at par and due March 15.
And 2029.
Following the quarter and we amended the syndicated credit facility and extended the maturity to May eight 2026.
There were no changes to the total commitments available under the credit facility, the accordion capacity or the financial covenant.
In addition, we announced a Canadian and 500 million private placement of senior unsecured notes issued at four 5%.
The proceeds from the notes along with borrowing under the credit facility and cash on hand will be used to redeem our Canadian and 400 million 525 per cent senior unsecured note and the Canadian $370 million 5.1, and two 5% senior unsecured notes.
We further strengthened our balance sheet and debt maturity profile, and we're well positioned from a financing and liquidity perspective.
Superior don't love for 'twenty, and 'twenty, one remains unchanged with expected adjusted EBITDA guidance and the previously disclosed guidance range of $370 million to 410 million.
Average weather for the remainder of 2021 is anticipated to be consistent with the five year average for the U S and Canada, we may reevaluate the 2020, one adjusted EBIT guidance when the acquisition of freedom and gas quoted with that I'll turn the call over to Q&A.
And as a reminder to ask a question you will need to press star one on your telephone.
Question question.
Please standby, while we compile the Q&A roster.
Your first question comes from the line of David and Matt.
Good morning.
Well I think David.
Congratulations on some great moves here between the sale of specialty chemicals from the deals are doing and the balance sheet moves so.
You seem to be very very well set up.
On the financial outlook, and you kind of alluded to it as well you called out the rising Canadian dollar is a headwind, but you are substantially hedged for the year.
Got Freeman and the fold now hopefully hopefully close it I'm sure it'll be fine other deal synergies cost savings and et cetera. So if I look at it seems like.
Youre going to well exceed your your guidance on line, while our key but definitely exceed the top and your current guidance I assume you're keeping your powder dry from may 25th.
[laughter].
Yeah.
Beth do I take that.
Yeah.
And the response to that question.
You know you missed a few things and there Nathan but what I will say is on the FX side, you're correct. We are hedged and so when you look at the U S. EBIT from operations impacted by the fluctuations in FX, but you see from our corporate or the hedge hedge gain but that's the offset to that impact.
And because we're hedged for this year on our commentary right.
Part of it at about 33, right that's correct yes.
So from that perspective, absolutely, we see minimal minimal impact on the change of the FX rate throughout the year, having an impact on our overall result.
With respect to your comment on screen and we.
And we'll reassess as I mentioned, our guidance at the time without COVID-19 historically from a guidance perspective, we havent built the forecast with respect to the acquisitions until they actually close right. So at that point and time will react and adjust accordingly at that time should we assume half half if it closes.
Same happen and <unk> half of the 2009.
And with respect to bring in on what you have to recall for the for when we're likely clothing Freeman.
And we'll have the bulk of Q2, and Q3 and the real and they would be obviously the quarters that have.
Very small amount and eat it out and actually some negative drag and you love throughout that period and consistent with residential type businesses.
So Q4.
It won't be half it would be less and less than half running around a little bit last two 1 billion biggest Florida, right Q1, and before yeah, no for sure yet and they're now looking switching gears, obviously, the governor of Michigan and.
And we're now past and our May 12.
Deadline here and I think she and her hedge will prevail and the feds have stepped in and but do you have a view on line five and contingencies that you might have to deploy if that comes to pass.
Yeah, I'll kick off that answer as well and.
So with respect to line five we have been proactive and have been taking steps and advance.
We have ensured that we have secured supply and east.
So in particular, Ontario, Quebec, and Atlanta would be impacted.
Through the summer months.
And so that even if a song and supply and disrupted and we're comfortable that we manage that we've done that's true increasing storage true.
Through procuring secure supply and so forth measure as well as moving railcar supply and the strategic location.
So on balance yes.
Comfortable.
And from a security perspective.
On past this summer and we'll continue to evaluate and we are.
Obviously want to balance supply and security with the Cogs, so beyond that and well keep monitoring and if necessary, we'll secure further supplies and the fall and the winter to manage that.
Alright, I'll add to that Oh, David and bad debt.
When it comes to difficult time, when you think of the vortex years and years ago your team of their railcar blockage.
Because of her.
A big group and wholesale and storage everywhere.
We can move liquid north South east West we have to understand that line side and five it is not good but we do have a very big competitive advantage in times of crisis, because or Oh, they're competitors when you take the obese and Ontario, Quebec and maritime from a wholesale.
Its toll roads opportunity, bringing it from the so with her and her sits.
And in the southeast we do have an edge on moving liquid and sicker and more liquid.
That's where on free we're not line five is a problem for everybody, but we're certainly.
Listen I'm on up to Mr. This wants to have and not necessarily in the cards and.
And I wanted to take advantage of that to gain more customers and people don't have if they lived through those twice and small and midsized company competitor.
Our buying them. If you don't want to say all of them because they're tired of makes it difficult for them. They don't have our wholesale platform.
Okay, and just one more just as part of that and then I'll hand it over.
If I recall, German rail blockades and and other situations you've actually.
And being able to improve margins.
Does the logistics, but it will just kind of supply chain logistics will carry extra cost.
And through the summer that you can offset through margin.
And from a margin impact I mean, there are some costs to be procuring and secure supply and other items and intact. That's all factored into our guidance and our forecasts going forward.
So it's it can be managed within the current guidance excellent. Thanks, Luke Thank you Beth thank.
Thank you.
Yes.
Your next question comes from the line of Ben.
And.
Thank you very much and good morning.
Luke can you talk us through organic growth.
Initially that you have right now what kind of organic growth should we expect.
And in 'twenty, and 'twenty, one 2020, two and where does that come from.
Yeah.
And and.
What you'll see at the May 25th.
And Investor presentation, there's a lot of the detail, which I kind of pardon me, saying, we're going to give a special approach to computer when because everybody can read their investor day, but we will be very specific on the mechanics that we've put in place and marketing and sales by segmentation.
By HUD and some value to do the French segment of our customer base by all the assets, we have for communications for giving and formation or be able to deliver it on time and the right time and maximize our delivery system. So we do have a special.
Very more I would say upscale that'd be mother and their approach to customers and we're gaining customers and I think this past year and retail are from new newer location and it was over 3%.
So what we intend to do May 25th give detailed specificity, how we go about that.
A little too long to explain on a call like that but may 25th we will do that you'll have people and senior leadership, explaining all the mechanic all the details on every week by segmentation and how we go to market.
And the net net of all that we are very country, then we've always book and the growth 2% more than the industry, we've achieved that and more and we will continue to do that.
And Big picture it comes from and the opportunity to not be and they're very highly sophisticated and industry and bringing best practices from <unk>.
Best industry, how they go to market and and how do you reduce the accretion and which we cut and a half and how you gain market and customers. So.
Big picture and it's good we expect to come to do to have internal growth and May 25th I gave me to you you'll love all the specific details and probably a question that third tour specific leaders that makes that happened and marketing so and.
On the operations as well.
Great just two more quick ones first just can you do now that your leverage has improved.
Following the sale of the chemicals business can you talk about your appetite from large acquisitions and the U S. One centers and to move the needle.
Not just your appetite, but maybe also be opportunity set and are there good opportunities out there and what are the multiples look.
Like et cetera.
Yeah, well, there's certainly more opportunity this year than we've seen in the past.
Deep potential tax change reform and this stage is making people that thought they would sell their business. The next two to three years to think true hardly wind up now and we've got more and call and opportunity than we've had ever in the past and.
And some are small and somebody medium Friedman and I would call it the medium size.
And we're busy looking at different deals right now and there's many and the pipeline from Big Big deals. We always study, they're big deals opportunity and you know we're very prudent on our rates of return and are buying around nine time, let's say and deleveraging two times. So we have.
And the synergies or are about 25 for Sunday and they redo those 25% with a plus a big deal as well, but the big deal are you know he was talking about the big three players there's nothing and the cards. The there are for sale or something could happen, but we certainly are.
To that and we continue to on the lives those filed in case something of a big size comes true to the market or becomes available.
So nothing that we could really feel strong about and the big size, but small and medium absolutely yes.
Thank you and then my last question.
For either you or Beth could you just give us an update on.
Your self help.
Measures include and cost cutting.
Where are you on right now and where should we expect you to be by the end of day here.
Okay.
And what we've done that a lot of cost cutting glass here and where you're seeing some benefit of that this year.
During your Investor presentation will prepare our operating costs and Cathy you west as we.
Digitalized, let's say, we have a project many project and works to simplify digitalize and have less touch point people and paper work to do the work and that is those kind of projects are simplifying our work and then as you multiply acquisition.
The Friedman and others, we did and Canada.
Sure Ed up with and overlap of route. So if you have.
Us and their competitor true.
And that pass each other to deliver within the hunger and MAU, we cut that and two when we acquired them to know you're going to deliver more than 50 miles. So all of those will we will show the operating costs and the friction and the next five years continuously to improve and we intend to present.
Real specific numbers at the Investor day, how much operating cost reduction we expect on the next five years with Oliver mechanic and the continuous improvement.
And that regard.
Great. Thank you very much.
Your next question comes from the line.
Okay and good morning, guys.
Good morning.
Question on Friedman excuse me.
Just around the additional reach.
And you ended the stout.
I think back several years now you describe the strategy to grow down the east coast and this certainly helps bolster some density and reached out and that area is there still additional density to be gathered in that eastern region or should we think about other markets or geographies or target focus.
And I'm here going forward.
And all its good question listen the Ara market share are still well you know the same size of treatment and the south east with doubling up and there'll be all the synergy we've always accomplished 25 per cent of ASO and improvement and.
And there's a ton more.
And buying from and was a good play because.
And gentlemen, treatment and there's a very well known and the industry's best of class and the association has led many different.
Project and the association and it's a big brand name and our good name for the industry and say Wow, the freedom and sold to superior.
The the many many other players around that region, there's a lot more to come.
And we expect we could.
The next five years, we could more than double and that southeast region.
Okay, that's great context, and just as a related question.
You know I think freemen, if I'm not mistaken and had some interesting ancillary businesses in and around it the sale of per diem based appliances, and I Wanna say prior places and and are appropriate and heaters et cetera. That's that's a fairly unique twist on and on.
And I suppose.
Barack range provides.
And I have more broadly and the platform or is it very specific to that region and some of the relationships that gets you there.
Yes, very good point on.
Jungle book pressed you've cut that it's not a lot of Fitbit dog.
And not at all like a 5% and I think of their total EBITDA, but it's a good marketing tool and the South East region globally.
So what happens is people those particular location and front do you have kind of a little retail store with a lot of products and the.
And the technician that can help those people and their cargoes from those moves.
Accessory product to install them. So it's a good good marketing and sales.
And that's why they're gaining good sales growth actually they're like us they are getting a three plus percent of the market could growth every year and it helps there it's not something that works and the north or California or their region within that region, where we're glad to have that extra marketing tools.
No. They don't have that we could apply as a lot of our digital approach to different segment of the customers will apply applied that as well, but yeah. It is a plus to have that only from that region.
Very helpful. Thanks, guys. That's it for me.
Hmm.
And your final question comes from the line of Joel Jackson.
Good morning, everyone and thank Joe.
It's early for 2022, but on can we think about this and speak about the CW were asked and I if FX was flat.
For the for definitely here on the card and U S dollar and.
And what growth and 2022, you would need from organic and acquisitions to offset lower gws payments and and the currency headwinds like I have you thought about that what you need to get to kind of offset.
Yep.
And of thing and I'm sure that to probably add to that day.
And the new a lot less this year as you saw.
<unk>.
And we losing more business than what we get [laughter]. If you think of the commercial business and industrial.
And Canada, I'm talking about a lot less and we're not getting share there, but as you go up on them and grant and the states and its retail and its theres no not much issue with COVID-19 and the retail business and then Canada, absolutely what we're getting from Citadel due is less than what it costs us to have all of those businesses.
Either closed or running how far off from there a world opportunity capacity. So I'm not concerned the day see you double your goes let's say bug a quarter for this year and their index here, we're back to 90 per cent normal and know about hundred per cent for awhile and.
And we're going to gain some business that we know the customer we have the tank and they're just using half of what they use or less a lot less and that that has cost us a lot of volume because we're very skewed commercial industrial and kind of do so.
So when that goes away it will be replaced with newer business opening up.
So that'd be I'm looking forward to that.
They'll pay more for us and then getting going and my granddad doesn't cover Oliver.
And though and the business is humming.
Organic growth a very very true to me, it's always been on top.
Three to five Big project, I believe and organic growth. It's the cheapest growth you can have and we have the mechanic and place I'll always succeed a lot them and their internal growth and a better margin. So it's not giving a price away and you'll see me 25th full details explaining all of the above.
Hum.
Yeah.
We do have our and you'd be aware hedging program and plan. So when you have 78 million of Aurora and U S sales through 2022, which is roughly 40%.
Yeah.
And we'd be lucky.
So again and not sitting at $1.
And pretty true.
That's helpful and covered for that.
Okay. That's helpful. I have a couple more questions. So my understanding of CW assets basically a program that you wont fire and ice fishing on idle workers because the business is struggling from macro recovery recovery. So if the business per paying volume is don't recover and Canada as much as you want.
And CW payments go down and sell.
Are you do you have some flexibility to basically.
Lay off temporarily or permanently some workers to help offset that maybe talk about that.
Absolutely.
And good point. So we can we can adjust the fortunate parts, we have and in the energy business and we didn't have and other segment of their business, we had and the path. We have more flexible variable cost so drug library technician and employees call centers. If you have.
This business you can you can move the needle on your costs. So if if.
The business 2020 two doesn't come back fully.
And for commercial and industrial business, we will adjust costs accordingly absent.
Absolutely.
Yeah, I think something else.
Something else to keep in mind with respect to the subsidy and where the number you know on a TTM perspective quite large if you look to them.
Assumptions around and while it would be in 2020 one.
The reality is we had $5 2 million and Q1 for the remainder of the year, it's likely going to be something in and around double that or and that $10 million range and likely what we would anticipate obviously until we have the calculations and we go through the process. We don't know and in fact number would be but that would be what.
And we would be expecting so again just.
Just to give you a sense of the magnitude of that.
We see and what would be included and the 2021 here.
I always try and left to go for the rest of the year after Q1, right and so he said.
You said tend to go after Q1, no not at all in total.
And all and toll on.
I was gonna make said that it's on.
Total GAAP here.
Thank you very much.
Okay, and and then and.
Think about cost inflation going on just everywhere.
When you think of cost inflation and your business.
You know you have taught me how.
And with that affect your margins and your.
On your fleet on margins.
In an inflationary environment.
Yeah and.
And I alluded to death, I already answered to that partly and then another question that came with.
We beat inflation every year because of our operating continuous improvement project.
So for us no.
Only we will beat inflation will Sue you may 25th that we're going to reduce overall costs more than inflation.
And that comes from a continuous culture and are.
Continuous improvement of continues and this thing and technology to take place a lot of people and.
And and working and paperwork and.
So all of that is is and our cards, we've done it and the path and we will improve our cash.
Costs over and above inflation for the next five years, its and the top five of our big priority, we always of death, and and we have project and place to beef inflation and more.
Okay, and maybe I'll ask one more question since I'm last.
And I know around this time, you do a lot of tuck in acquisitions, I think there's conferences and trade show you go to and you.
And because of different smaller players don't want to be taken out and.
Right.
Because of our May or June speaking accomplished Atlanta, I forget the back and set up but is this year from the U S. Reopening now is that season going to be a lot better than last year like is it going be more tuck ins more acquisitions more smaller deals that share the master available too.
No no.
It's something that I'm personally I, yeah, I was thinking about that are locked through simply I'm disappointed we tend to go to those big event and meet 15, 20 players, but because of the tax issue I would think and the states are number one and people are more inclined to the community.
With us and.
And we have dialogue and they know us from being 10 years from assisting and those association meeting every year and one on the West coast one than the East coast.
And the day, they are coming back and try and are there was a big event that I will go to and we will go to our some of our management and our November so it will be there and will line up tons of meeting for three or four days.
The California is they're pushing it out it was not to do it in August and I guess, it wont happen there'll be labor, but because of all the leg work we've done with a lot of people are over historically and the last let's say five seven years more than 10.
The connection and the relationships there because of our acquisition and the industry looks at us.
Theres certainly one of the best buyer and button and we have the best reputation from everything we bought how we and don't people are net present score on the customers. We're almost we're at 75 per cent 80 per cent is best of class and the world.
And we're really out there and we are with customers and employees as well so by having a that chilled share of treating all the stakeholders to give them a win and be best of class the relationship and what.
And with the thousands of people in the states and joined US from descend to sweep the buzzers out there like superior are great. They are first class they confirm what they're doing they're doing what they're saying and we have a real big first brand name and I would say to you guys.
Make acquisition, so there's no way when they're getting their kids are call. We've passed on more than we acquire if we don't like the there's no loyalty aspect to it.
More than five per cent, we don't like that we want the propane we pass on time on deals because of value and we don't want to pay overpay and we pass on deals.
But we're we're.
I would say, we're the number one brand all very respected and industry and also coming in and you're absolutely right I can't wait to go there again and I think all of those discussions on relationship when fall opens and I'm gonna start traveling and I've told the ore body and many group and the V. P of other people are with Beth and and.
Rob will go and do a lot of traveling to visit the potential new investors and the state being the per play I think and Mr. And Mrs. Tastes are more interested in us and the bus they always most of them would say Ah.
We don't like the fact, you have two legs and one on buying to one industry and I would say 80 90 per cent prefer and energy. So we will do tons of traveling and death regard and we'll do the same and and visiting company and propane industry to see if we could buy that.
Thank you very much.
And too Joe.
Okay.
Our net.
Okay.
Yeah.
Hi, It's Elias and you hear me.
Yes, very well.
Good thanks.
Just a couple of questions.
And that's got to 2020 acquisitions, Luxe and you obviously made a lot of acquisitions and late and here you have Ryan.
A question I bought is would it be fair to say that you didn't get the synergy capture that you would typically get in the first year and and <unk>.
Really I'm, focusing and Q1 that you would normally get if you could have closed the acquisition earlier in 2020 I'm just trying to see if you know there's a call it a little more upside when we go into next year.
A question over here.
It is clear and Youre, absolutely right when we acquired business and.
The winter time and quarter. One comes after we get zero just above zero synergy, we don't touch it and we're all about customer and product.
And real customer, we don't touch it and then moving the summer starts we get going.
So you're absolutely right, there's synergy and we always say synergies come 18 months, a bigger deal it might be 18 to 24 and the reason for that and we shut the door on moving things around and the six months, where we're busy with customer.
We don't want to do that so it's not something we can address the month. After we acquire a business we wait for the summer time to apply our synergy and do the work.
Absolutely right.
Great I appreciate that clarity.
My last question, maybe two questions I'm going to focus a bit on on capital.
The first one and and.
And I understand this might be a bit granular and.
If you don't want to talk to it we can save it from Investor day, I noticed that your efficiency and improvement capital year over year was down and may be I would've expected it.
To be a bit higher could you comment as to my you know micrometers the bricks to March by looking at the quarter and what kind of returns you get on your efficiency capital if you could comment on that.
Yeah, I bet you want to start yeah sure. So from us from a return perspective, I mean, we typically manage it using hurdle rate. So typically it would be you know and return on that.
And Nick teams and there are instances where.
And it systems et cetera, and could be a little lower and in and around 12 per cent range.
And that probably manage that and typically target those expenditures.
From a from a year on year perspective, not knowing the exact numbers youre looking at part of that reduction.
And is potentially day.
Associated with the specialty cans businessperson.
And just the energy distribution business going forward, we are targeting roughly $40 million to $50 million and we refer to them and the growth capex growth capex and that split somewhat evenly between Canada and the U S start at $20 million to $25 million and each and then you know look.
And for our superior gas liquids and their wholesale business and and around a $5 million range and that is primarily software and terminal upgrade expenditures and me and wholesale.
Okay Yeah.
Thanks for that I was actually referring to the M D and a table on page 22, which I think are you continuing ops.
One last question off that table on maintenance capital run rate looks like it's consistent at about seven and a half million a quarter.
And I potentially take that and annualize it to get a pretty good number.
Okay.
But maybe I'll answer that and different way.
If you're lucky and maintenance Capex from on.
He bought 45 and 50 million.
Sure.
Okay, that's good enough cash.
So maybe a little higher annualized and yourselves.
Okay.
Yeah, that's it for me thank you.
Thank you.
And your next question comes from the line of Patrick Kenny.
Yeah, Good morning, Luke and Rob Hey, Hello, Pat.
I.
And with our drilling activity starting to come back here in Western Canada, and I guess, assuming oil prices stay relatively flat through the back of the year.
Curious, what what do you see as being a reasonable recovery and propane volumes say for the rest of 2021 relative to 2020 from your oil and gas customers.
And.
Also you know how far off would we still be from say normalized 2018 levels.
That's a tough course from Europe.
Youre, absolutely right and we've started the last month, some good volume and for the first time and many years and the all the drilling.
Drilling market. So we're very pleased to see that as kind of moving back somewhat.
When it comes to 2018, Oh My God.
And I know, Rob or Beth if you have an idea, it's probably half or less than what it was in 2018.
And I'll, let on that.
No.
Currently looking at the numbers right now to answer you but.
And it's a lot less and a little bit of tweaking now that's going up and we're like Okay. This is good.
And not calculate what it means for the rest of the year, yet we're ready to forecast.
And you're doing for the next six months. So we're looking at that.
And when they have a number for you, but it's tweaking up which is great news.
Long long time to do.
Right, Yeah, we can follow up offline or wait for the Investor day for the.
Revised outlook there but.
Maybe just switching gears look too and b and and their ownership looks to be now.
And now above Brookfield level at least on a fully diluted basis.
And apologies if I missed it at the AGM, but you know is there a request from EM and beef or a board seat at some point.
And I guess anything you can share on you know some recent conversations you've had with them with respect to staying below 20% ownership or you know remaining a passive investor going forward.
Yeah. So.
They come to new to be interested in acquiring stock and.
The.
Whenever they are today, let's say 15, and 16% and there certainly wanted to get to $19 nine.
We don't know.
Our discussion and I know, we've talked to them and the CEO and the V. P M and they and they selected us a what's interesting from your they selected US and this is a good company with great management and they've been falling us we'd before they start buying stock and.
And we wanted to have a position and the company.
And their position and so far that we know is less than 20 per cent.
And that's what they say.
So it's a day.
Got to have some good song investor behind Us.
And I'm sure. If we were on one day the more equity we would want to think of Oliver shareholder 12, a chance, but not for tomorrow, but they certainly would want to come to new 2019.
Cordless and 20% if there was a demand for equity and time for bigger deals and they wouldn't be there and so as Brookfield. So we're kind of there.
And in a good position once we know we're telling you as a day.
They're good people, a very classic and very good on the health and safety and work the work or.
And just send their company very well there.
They're very excited to take care of their position and the less than 20 per cent overstock and that's what we know for now.
Okay, that's great I'll leave it there and here's hoping you're right that we are.
And having these meetings face to face and the fall thanks very much okay great.
Yeah.
And then no further questions at this time.
No Mark no other question.
And there are no further questions.
Okay.
So thank you for the question and they're always very good and makes us think true lots of detailed before the call to be prepared for you and.
After the thank you for listening on the call and supporting US through this difficult time, and again I'd like to thank management and inventories. This has not been normal or easy, but we've succeed I was quite impressed when we finish our year on guidance last year with very warm weather and annuities and <unk>.
COVID-19 and taking a good part of our business away and the commercial and industrial and we finish on plan, Let me tell you where.
I think we show resilience as a company and.
And I I conducted.
Emphasized more to all of you that if you wanted to know a lot of detail that you are asking for the years that we're probably not giving to every detail of our digital segmentation and operating excellence, how we do that.
And you're going to get the whole picture may 20th and they won't be.
It's the biggest largest presentation we ever made.
And if you're interested in there and business. This is the best time to listen and understand I think we will cover lots of stuff that will satisfy you need on understanding and to Christie or Ho.
And there are a source or a magic sauce that is.
Operating on there and why we're having that kind of success.
So.
Thank you everyone and are looking forward to the mid 25th.
This concludes today's conference call you may now disconnect.
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