Superior Plus' CEO Discusses Q1 2013 Results - Earnings Call Transcript

May. 3.13 | About: Superior Plus (SUUIF)

Superior Plus Corp (OTC:SUUIF) Q1 2013 Earnings Call May 2, 2013 10:30 AM ET

Executives

Luc Desjardins – President and Chief Executive Officer

Wayne M. Bingham – Executive Vice-President and Chief Financial Officer

Analysts

Jacob Bout – CIBC World Markets

Sarah Hughes – Cormark Securities Inc.

Alexandra Syrnyk – BMO Capital Markets

Patrick Kenny – National Bank Financial

Ian Smith – Private Investor

Operator

Good morning ladies and gentlemen, welcome to the Superior Plus Corp First Quarter 2013 Results Conference Call. I would now like to turn the meeting over to Mr. Luc Desjardins. Please go ahead, Mr. Desjardins.

Luc Desjardins

Thank you, so good morning and thank you. Welcome to Superior Plus 2013 first quarter results conference call. With me in this morning’s call is Wayne Bingham, Executive Vice-President and CFO and Jay Bachman, VP Investor Relations and Treasurer. Wayne Bingham will provide an overview of the first quarter results, after which I will provide an update on the strategic orientation of our business. So, I’ll now turn the call over to Wayne.

Wayne M. Bingham

Great, thanks Luc and good morning everyone and welcome to our first quarter 2013 conference call. Our consolidated AOCF for the quarter was $0.72 per share compared to $0.60 in the prior quarter and represents an excellent quarter performance for the company and in line with management’s expectations. All three business segments posted quarter-over-quarter growth, we continue with that focus to pay down debt and execute on our overall debt reduction program and I’ll touch on this a little later.

In the quarter, the company had a very successful common equity offering that closed in late March, I would like to thank our existing and new investors for the confidence in the company. On all fronts, we have excellent access to capital and bank markets. I’ll now make some brief comments on the individual business performance.

Turning to Energy Services, Energy Services reported an EBITDA of $67.7 million compared to $58.1 million in the prior quarter. Margins improved as a result of margin management initiatives and the lower commodity price environment, particularly for propane – in the Propane Canada operations margins were $0.18 per litre compared to $0.176 in the prior quarter.

Margins in U.S. improved slightly as well to $0.103 from $0.97 in the prior quarter.

Overall gross profit for Energy Services was $153.5 million versus a $142.7 million in the prior quarter representing a 7.6% increase. As can be seen in the gross profit detail, in the MD&A the 10.5% growth at Canadian propane USRF and supply portfolio was offset somewhat by lower fixed price Energy Services.

A more normal winter in terms of relative degree days provided more opportunities for SGL to take advantage of pricing differentials in the market. In USRF we’re seeing higher efficient rates on the heating oil side, however, this has been offset by growth on the propane side were margins are significantly better.

For 2013, we anticipate the retail propane book will exceed the retail heating oil book on an annualized basis. I should note we see 2013 EBITDA for fixed-price energy services indicative of future performance for SEN as the run off of the residential gas book is pretty much complete. We seen under current commodity prices as of $6 million to $7 million EBITDA business for 2013. For the quarter, weather and margin improvements were the key contributors to better performance for Energy Services.

Turning now to Specialty Chemicals. Fundamentals in the chemical industry continued to be very good with a first quarter EBITDA of $32.9 million compared to $29.1 million in the prior Q. Chlorate volumes were up about 70% reflecting the solid fundamentals in the pulp market for pricing and the inventory levels.

Pulp prices in the first quarter of 2013 are up in the $20 to $40 ton readings over the prior quarter. Pulp inventory drawdowns are anticipated in Q2 due to plan and maintenance for pulp mills and China has been actively buying in the first quarter of 2013.

On the [chlorate] side of the business the demand in pricing for caustic and caustic potash remains robust while chlorine and HCL were somewhat softer.

Turning now to Construction Products. Our Construction Products division reported a Q1 EBITDA of $5 million, compared to $3.3 million in the prior year. CPD had one-time restructuring charges of $1.1 million included in the first quarter of 2012. The first quarter saw the impact of the restructuring activities on our expense run rate with a $0.6 million decrease in the prior year.

Supply chain initiatives that closing of unprofitable branches in 2012 and pricing initiative had a positive impact on the quarter. Weather particularly in the U.S. Midwest was a factor with days loss and project delays. The U.S. construction industry fundamentals continue to improve and in particular the U.S. housing industry. The U.S. GSD is benefiting from the housing fundamentals with quarter-over-quarter revenue growth of 15%. The C&I business conditions continue to be difficult and based upon recovery recycles, typically follow after a sustained residential recovery.

Turning now to our debt management program. Our efforts to reduce debt continued in the quarter and our pro forma leverage ratio, after the April debenture redemption, is 3.6 times. This represents a reduction of 0.9 times from the December 31, 2012 ratio of 4.5 times, due to the successful common equity issue, which contributed 0.4 times, improved business performance and continuing working capital management initiatives. After the quarter-end, as I mentioned, we redeemed the remaining $25 million of the $585 converts. We currently have bank capacity in excess of $320 million.

And at this point based upon the midpoint of guidance for 2013, we anticipate to leverage at the end of 2013 to be in the 3.3 to 3.7 times range. Our ultimate goal is to achieve a consolidated leverage range of 3 to 3.5 times with emphasis on the lower end of the range and establish ourselves as a very strong BB, BB+ credits.

With regard to CRA, we did receive the assessment, reassessment for the taxation years 2009 and 2010. We have paid about 50% amounts with $6.5 million, which includes 50% of the assessed penalties in interest. We anticipate we will receive the 2011 assessments in the next 45 days, and we estimate we will need to bring that $5 million being again the 50%.

2012 will be reassessed once we filed the 2012 return on June 30 of this year, and we estimate $5 million at that time. I would point you to Page 6 for clarity for the analyst and our investors we put a table five year with estimated tax payable and the 50%, so you can see the total amount that we must pay pending the ultimate court litigation, which we are moving towards.

In summary then the total amounts that has been paid or is estimated to be paid for 2009 to 2012 is approximately $16.5 million. This is $1.5 million above our previous estimate we provided to you primarily due to penalty interest estimates.

And of course under the assumption tax losses, were not available and to assist our investors and analysts with their modeling. We again have based upon the mid point of guidance estimated cash tax of about $0.15 per share of AOCF. Overall guidance for the sale, for the year it’s $55 to $85. I will now hand it back to Luc.

Luc Desjardins

So thank you, Wayne. I’m pleased with the Superior’s performance during the first quarter with each of our businesses realizing an improvement in EBITDA relative to the prior year, we would also like to reintegrate Wayne’s comments that we are confirming a financial outlook for 2013 at 155 to 185 per share.

We continue to feel positive about our businesses and are confident that the remainder of 2013 will be another good year for Superior, that is not to say that there will not be challenge throughout the 2013 but we remain confident of our ongoing focus and improving the day-to-day operation of our businesses.

We will continue to move forward providing us with the foundation for operational, financial improvement on a continuous basis. Superior’s business continue to enjoy solid fundamental, I will just like to spend a minute to provide quick fundamentals on each of our business.

So in general, the Energy Services business continue to have strong fundamentals, particularly Superior anticipate that reduced cost of wholesale propane which has been attained for the last year and we’ll continue for the foreseeable future giving the access drilling for liquid rich natural gas combined with the limited infrastructure to transport this product to overseas market, the low price environment is a positive for our customers and for Superior business.

Superior U.S. refinery fuel business continue to see a decline in heating oil volume but we have been developing and aggressively increasing our sales successfully and the propane business, so we’re placing a portion of these volume of oil margin propane volume.

And the overall picture for margin continued to generally be positive and we continue to actively mange our pricing towards share we’re earning a fair margin for the goods and services we are providing. The fundamentals of our chemical business continued to be strong as well.

Sodium chlorate sales volume and pricing continue to be stable due in part to stability within the pulp market, which has resulted an improved North American chlorate sales volume. The chloralkali portion of our chemicals business has been somewhat more challenging as pricing for these products, particularly in recent quarters Chlorine has been soft due to weaker-than-anticipated demand.

Historically, the pricing of chloralkali products fluctuate with change in supply and demand fundamentals and some casing impact of seasonality, but overall, we remain very optimistic about the choralkali market, particularly, when you take into consideration the strategic advantage of Superior and (inaudible) because of our location and it’s facility in Port Edwards, Wisconsin and Saskatoon, Saskatchewan and I would add to that also our strong leadership with Paul Timmons and his team top of class to execute any project of that sort, makes us feel very, very comfortable with that business.

With prospect to our construction product business, which has dealt with very challenging market condition over the last several years. We remain cautiously optimistic that the fundamentals within this business will continue to improve albeit at a slow and measured manner, recent indication of the U.S. suggest that new residential construction starts for 2013 will be in the range of 950,000 starts or so. While the overall North American construction markets is still subject to challenging condition, we’re encouraged that we continue to see concrete evidence that we are on the path to a recovery within the construction sector for the U.S. portion of our business. Superior continues to focus, and the senior management of our CPD Group continues to improve the day-to-day operation so that improvement in the business is not solely dependent on end use markets.

I’d like to spend a several minutes to share with Superior’s focus from an operational perspective for the remainder of 2013 and beyond. As I have discussed on the past, 2012 and the early stage of 2013 have been focused on the initial implementation of transforming Superior into a best-of-class organization to a number of business improvement initiatives.

We have labeled this transformation Destination 2015, but I want to reiterate to our shareholder that Destination 2015 is intended to deliver more than short-term improvement. It is intended to deliver a mid and long-term operational and financial improvement throughout trading and culture of continuous improvement. We’re looking here for sustainability and solid company for years to come. Although we have realized some early success, as part of the initial implementation of Destination 2015, I want to reiterate that much work remains to be achieved on our goals. The remainder of 2013 will without a doubt present some challenges.

I want to reiterate that in spite of the challenges we’re likely to face, we remain committed and focused on not only navigating the complexity of running our business, well day to day, but that we also remain focused on executing the initiatives that underpin Destination 2015. We’re intently focused on ensuring, we execute in a timely and throughout manner on our initiatives that forms a basis of Destination 2015 throughout the remainder of 2013.

I want to remind our shareholders that the purpose of Destination 2015 is to improve our businesses and build a foundation which will result in medium and long-term success and sustainability for Superior Group. Although we anticipate that we will realize reduction in our cost structure, as we improve our underlying business processes, the focus is now on cutting cost to realize short-term benefit at the expense of building a good mid and long-term sustainable business. I previously mentioned that 2013 was going to be an important year for Superior. To that, I would like to spend a minute to provide a bit more clarity on where our efforts for 2013 will be focused on. Our top priority for 2013 include execution of the five initiative we have previously outlined (Inaudible) business, which underpin the destination 2015.

Continuing to become more customer centric in all aspects of our business, what does that mean? It mean from the center customer by segment finding ways to their franchiser products and services, which will allow us to reduce our customer attrition, which is happening to a certain degree already, generate internal growth and that a good margin, and you’ve seen our margin improvement with inroads. We also continue to focus on the intelligent pricing, overall supply chain management and improving all aspects of our assets utilization.

We will continue to focus on reducing our total debt, but our short-term objective of reducing total debt leverage to 2.5 times. We will continue to improve our core business processes, which will allow us to reduce our cost structure in a sustainable manner for many years to come. We’ll continue to invest on our business as evidenced by the capital investment and our chemical and energy businesses, investing in sales and marketing function to improve our market share and invest in people and system to build a better overall solid company.

More specifically, Superior is investing $42 million in capital to double our specialty chemical businesses capacity to produce hydrochloric acid. Although the financial benefit would be realized in 2014 and fully in 2015, a significant amount of effort will go to these projects throughout the year 2013.

An additional investment has been made in new IT system within our Canadian propane business. The majority of that IT system is anticipated to be rolled out by the end of the year 2013. The system will allow the Canadian propane business to improve customer service level, reduce cost of serve and prove the day to day operational decision making and we decide by redesigning our processes becoming more efficient.

Lastly, we will continue to assess our talent across the entire organization to ensure we have the right people in key position to facilitate and lead the execution of our short and mid and long-term business plan. We were currently continuing to assess long-term organizational design in a number of our businesses, I often to believe there is always room for improvement and efficiency and talent, focus, accountability makes the business better. And most importantly, the accountability for execution of all our 2013 initiatives will be a priority across the entire organization.

In conclusion, we continue to make progress on the objectives established as part of Designation 2015, but we also understand that we have a tremendous amount from work ahead of us in order to meet our goal and become the company, we can become which is the best and every industry we work in. I am confident that we will achieve this goal based on the commitment and active involvement I see from Superior’s leadership team in all of our businesses and all of our employees’ involvement. People are motivated and they’re happy to win in the last year or so and everybody is on the same program of making this business better.

With that said, I would like to open to any discussion, question that you may have. So question-and-answer period.

I think, I will go back to, I think, Jason, the operator for this.

Question-and-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. (Operator Instructions) The first question is from Jacob Bout of CIBC. Please go ahead.

Jacob Bout – CIBC World Markets

Good morning.

Luc Desjardins

Good morning.

Jacob Bout – CIBC World Markets

So, you’re maintaining your 2013 financial outlook here…

Luc Desjardins

Yes.

Jacob Bout – CIBC World Markets

… operating cash flow of $55 to $85, but given the weather that we’ve seen in the second quarter here, through April and the first part of May here, it’s actually been lot colder than what we saw last year. It’s surprising, you’re still maintaining your guidance and you didn’t raise it. Is there some offset here that I am missing or?

Luc Desjardins

No, certainly, yeah. We’re – with the first quarter behind us, it’s certainly getting a lot warmer in April and now May. It’s a little bit (inaudible) in Alberta, a little bit cool there. We didn’t do the math as to what the weather for this month of April has brought, but we are very cautious. When you think of just the project of the [ad system], we have 35 people full time from Halifax to Vancouver rebuilding our processes and then changing the weather from a system that won’t go as far, is telling you everything we have to live with from the weather and system information to run the business, but on that scale of one to ten, it’s very, very, very low that to say one.

So by, we building our (inaudible) and adding a huge focus on that with our senior management time and effort, it’s really hard to predict the number of hiccups that could come, it will come from that, there will be some things from our management and execution we all have the less experience and it’s hard to know that we’re going to do it at the best it can be done, but any types of project like that brings risk. So we’re not a two three months taking the year as extraordinary and much better will get, we’re cautious and we’re going to play it quarter-by-quarter.

Jacob Bout – CIBC World Markets

And then second question here just on the construction products division and the strategic nature of that. What are your thoughts here on a go forward basis including this division and what would be the driver here if you were to look at potentially splitting it out.

Luc Desjardins

Yes, well for the moment member at the (inaudible) there is not thing in the cards for short mid-term with CPD. I’ve answered that CPD might be the company we look at carving out. Remember, we didn’t do the equity, we have too much of that. Everybody was not very pleased with the corporation historical results. And had kind of answer that it comes to stock and we don’t turn it around fast and find solution. We do have solution to get cash and this was one of them. At this time, I’m not looking at a CPD for us a sale couple of reasons. The market is coming back in the States. We’ve predicted for 2013, we’ll develop better than 2012 and I can assure you what’s happening.

We are very optimistic about the results and how 2013 will unfold for CPD. So, really we’re gone in a $134 million of cash I think net – $137 million of equity so we don’t have that same pressure on too much debt and investor or concern about our debt level, it’s really going down and more with our cash flow of this year. So, pressure is off to make a quick sell out of the division like that. So our intend is next two years, lets make it better and we’ll, so I think it’s the focus short-term and you could (inaudible) when we think of two years as we have room to improve the business and that’s all we’re focusing on doing at this stage.

Jacob Bout – CIBC World Markets

Maybe just lastly if just you can provide a bit of an outlook on the hydrochloric what you are seeing there? I know you ramped up capacity. What’s the outlook here for hydrochloric over the next 12 to 24 months?

Luc Desjardins

That’s going through – we’ve done lot of work on that and I will ask him to respond to that question.

Wayne M. Bingham

Hi, Jacob, it’s softer. There is no question I think if you follow the drilling community and there is not that many rigs or rig count is down, but I think the pop in natural gas recently I think is going to prospectively be good. But the interesting fact if chlorine prices are down, hydrochloric asset prices are down, but the spread remains slightly more positive for upgrading chlorine. So as Luc mentioned, the projects are on-time, on budget and it’s a strategic investment. I am sure you well aware in the chemical side chlorine (inaudible) or merchant chlorine because of dedicated facilities is getting more difficult to put chlorine, spot chlorine into the market and we are a cost of producer primarily. So these projects in line have more strategic and financial value for us, now then when we announced them in 2012.

Luc Desjardins

And Jacob just for a little bit more color, don’t forget that are in our Wisconsin Port Edwards plant. We have an advantage because of location for the Chicago region. And then in Saskatoon, Saskatchewan, also have strong competitive advantage because of our salt that are in their basement, no tree and also our transportation because we’re in the wheelhouse of a lot of demand in that region. So we have a competitive advantage. We have a tremendous leadership and management team that always finds way to survive and do well and there won’t (inaudible) the building up of Wisconsin is on time and on budget again. So with great talent that we have and with a good focus, we’re still very optimistic about that business.

On the forecast, I think I have a one additional comment for you, for that’s why we didn’t change our objective for the year. Don’t forget that this year average, the weather is close to the five year average, and that’s what we budgeted for. So we’re marching on time and on budget for the forecast, we’ve used this year’s forecast which is the average of the last five years and that’s where we’re marching on. I think it’s pretty close to the average five years when it comes to forecast, so that’s also one reason why we have to build up expectation close to that five year average and that’s what’s happening.

Jacob Bout – CIBC World Markets

Okay. Appreciate the color.

Luc Desjardins

Yeah.

Operator

Thank you. The next question is from Sarah Hughes of Cormark Securities. Please go ahead.

Sarah Hughes – Cormark Securities Inc.

Just drilling in on the volume growth you saw in the energy business, I am just trying to sense with the large or all of it from the weather or have seen any improvement from internal initiatives that you have been focused on over the last year?

Luc Desjardins

Thank you, Sarah. Two things – I will give you two different things that shows it’s not just weather. You all know that the attrition of residential for the company on last many years has been too high and we are now with good marketing program and more touch point with customers. We are now capturing – let’s say – we are loosing 100% of those customer attrition. We are now capturing 60% of that, so we are loosing 40% versus a 100% of our historic loss. So it’s more than half of our residential loss is being captured by weather marketing approach and that too actually is quite big.

The other touch point, when we look at the weather, so what does that mean in growth? And in Canada alone, I don’t only feel say like that and I won’t predict next many years we’re going to be on that path to grow, internal growth market share growth. We grew 4% more in energy propane Canada than the weather, which is large growth. Now why, I don’t know, we are kind of buzzing here and we are freaking sort of everything, we don’t know how big and I will pass all of that will unfold, but we already see with our marketing focus, which there was none before and there was none before and there is sales approach, which where there is lot of segment, I have mentioned for the beginning who are not going after and where we did have some differentiation in the national supplier being one of them for large commercial customer, national large commercial customers, we know how people doing that and we’ll follow it regularly.

So we’re getting some growth more than the market, hope it will happen and we are going to build a marketing sales approach in all of our businesses to get growth more than the competition. And that can be done it before, many, many times and many companies and really become professional at those markets, you get that extra growth. So, two very large and true demand for us that had nothing to do with weather.

Sarah Hughes – Cormark Securities Inc.

Okay. And then just on the U.S. market on the heating oil side, I know you talked about attrition in that market.

Luc Desjardins

Yeah.

Sarah Hughes – Cormark Securities Inc.

So, these customers are leaving heating oil like what, you know what percentage of them are actually going to propane, not just within Superior but the overall market and kind of what percent are going to gas or be away from that?

Luc Desjardins

Yeah, very good question and there is a little boutique consultant that I know from the space in Boston that are getting hard by us, because we don’t know. We know it’s large oil continue to be fine. We know we are capturing 4% growth in propane, which is more than the market then we do will make twice the profit in propane, so we kind of front in line we don’t see any negative effect. Well, I am not happy with that.

So, what we’re doing now is becoming less more focused on segmentation, we’re hiring that team, they’re going to do all kinds of work for us and then U.S. marketing business to understand what’s happening in the oil? Where is it going? What’s happening in propane, who is winning in what region and why? And how that we become best of that and really win more than everybody. So, our marketing intelligence today is still very high level macro not good enough. We are now drilling down I think by the time those studies and understanding by details of those in the details here, I think we are two months away from having a lot more understanding by segment, by couple of customers, by region what’s going on and what can we do about it to win more. It’s a work in progress, we are not there but it’s a fantastic question, its must. We are working on – two, three months we will have a lot more detail and will have action to follow those details to make us win more.

Sarah Hughes – Cormark Securities Inc.

And how much was your propane U.S. business has been growing over the last year or two? Whatever percentage kind of ballpark?

Luc Desjardins

Remember, Greg McCamus took over the business couple of years ago. He is now helping us in running the Canadian business propane and he has put some sales focus approach on propane. So we are getting 4% growth. Now is the market growing one or two, hard to predict, hard to know, they’re certainly attending propane, which we don’t want to see for a year or two, so there is no use for that in your potential forecast but we here lot about propane cost being that much lower than oil. We know our customer residential, if we move from oil to propane the same 30% and we may close the margin so win-win. And so we are focused then is the bottom line growth and that’s because of all that work that has been done. I don’t think it’s got enough for us. We (inaudible) how do we do that and there will be investment and marketing and sales and approach so we are not satisfied four, and even though four is good, and we want to get to the next level, which is more on six plus.

Sarah Hughes – Cormark Securities Inc.

Okay. Great, that’s it for me. Thank you.

Luc Desjardins

Thank you.

Operator

Thank you. The next question is from Alex Syrnyk of BMO Capital Markets. Please go ahead.

Alexandra Syrnyk – BMO Capital Markets

Hi, good morning.

Wayne M. Bingham

Good morning.

Alexandra Syrnyk – BMO Capital Markets

So, is there a question – in the release you there was a mention of expectations of higher electricity cost? Could you give us a sense on the magnitude of that and any color you can give there would be helpful.

Wayne M. Bingham

Sure. Hi, Alex, this is Wayne. ERCO operates in two jurisdictions, where the price of power is market based, that being Alberta and the Valdosta, Georgia plant. And what we saw was slight upticks, $3 to $4 of megawatt hour in the first quarter. So, we’re just being cautious of that will continue going forward. We try and use hedging when we can. Our PPA is that we got the settlement on last year, if TransAlta gets those assets rebuilt, we’ll kick back in the hopefully in the fourth quarter of this year, and that PPA allows us to purchase power on a fixed basis until 2017, at $45 of megawatt hours.

So, in the mid-term there is, we have risk managed and provided those assets come back and the PPA is reinstituted, if can use those words. So, on balance of the impact on ERCO if these power prices would continue would be in the range of $1 million to $2 million of EBITDA, but all of that is factored into our outlook.

Alexandra Syrnyk – BMO Capital Markets

Okay. Great. And then just one other quick question in the chemical space, there’s been a few articles or I’ve seen a few articles lately about flooding risk in Saskatchewan, is that something you guys have to be worrier or is there something that you are worried about in regards to Saskatchewan facility?

Wayne M. Bingham

No, not at all we have not had an issue certainly since 2006 at that facility as the relates to flooding. So I’m not concerned about it.

Alexandra Syrnyk – BMO Capital Markets

Okay, great that’s it from me. Thanks guys.

Wayne M. Bingham

Thank you.

Luc Desjardins

Thanks.

Operator

Thank you. The next question is from Patrick Kenny of National Bank Financial. Please go ahead.

Patrick Kenny – National Bank Financial

Good morning guys.

Luc Desjardins

Good morning.

Patrick Kenny – National Bank Financial

Maybe just a follow-up on the previous question first, in other words the winter heating season for Canadian propane, if you add an updates estimated as market share across Canada, and I guess what you thinking you get that market share but level over the next couple of years as the inform strategy.

Luc Desjardins

Well, we has a company participate in the association of propane and we really don’t see how the information that really specifically gives market share. Quite disappointing actually and I know we will have to get back. I think I’ve mentioned earlier our marketing approach to the business is very-very-very new like six months old. And what we did first is focus immediately how do we reduce attrition, how do we gain a better market share with 4% here as you heard in the propane. So we kind of focused on a couple big initiatives in marketing and sales. We got four national commercial sales represented across Canada, so our focus and time resonates. And this is doing something on there, and we will do something that we’ve been not proactive enough.

And when it comes to good marketing and understanding of segments, customer of differentiation of market share, who come into U.S., where we waiting out there, we just don’t have it. When we have it, I’ll tell if we will, it’s another way you run the business without understanding of your market position, where you can grow, how you should win and then the details of being a good marketing and sales company has not been in the DNA of the business and it’s – so, now we’re focusing only one, that’s get some good people, let’s go out there and win some, and winning and gone already. So, next step, let’s keep working on this consultant I talked about of the work with very professional group, will help us a lot in the states and there is the (inaudible) now for that is to bring them to do the same in Canada, and let’s get our understanding of market, market share positioning by segment, how do we go out to market, lot of work ahead of us. We’re really not very advanced in that regard yet.

Patrick Kenny – National Bank Financial

Fair enough, I appreciate that color. And then I guess over at [User F]. I’m wondering if you would add an update there as well in terms of your current product mix between propane and heating oil and then again kind of what your target product mix would be over the next couple of years.

Luc Desjardins

Yeah, in June of this year, every group, every segment, they’re [luffing] their strategic plan as to, we’re a lot more is to in the faith, but we do a lot of wholesale. So we don’t see wholesale declining. When we talk about decline, we talk about the residential eventual. We just to clarify that and residential EBITDA and propane EBITDA is the same. Now, propane EBITDA is lot less in volume than oil. Let’s say you make twice the profit in propane. So that gives you an idea of volume. We will drill propane in the stage was eventual. Oil wholesale I think will kind of seems to be quite stable and not moving fine there, and then how that we really developed profitable business, which is more propane fro commercial. So we have a new focus on commercial propane in this stage. And then we’ll go as to developing and seeing what we can become down the road on propane U.S. market [entering] those lots.

So we’ve advanced our every group to do is really started about a month ago or so, preparing a lot of work together strategic review in June to have more clarity and understanding of what we can become. And all of that is really close to the same intro I gave on marketing. The strategic planning organization, understanding specifically our marketing position, and how we differentiate, and how we go to markets, very, not very high up to information, and understanding of that. So working projects which by June, I think we’ll have lot more clarity, because of all the work that’s getting done in all the divisions for every business, TPD of much as ERCO, much as U.S., SRS and propane candidate.

Patrick Kenny – National Bank Financial

Okay. Thanks for that. And may be just lastly with respect to the negotiations in North Vancouver, I guess if were to assume a more bare scenario just surrounding negotiations, is there a risk of this plan goes off line for next any time and I guess what would be the financial impact of may be on an annual basis from a potential outage at that plant?

Luc Desjardins

So it’s a very good question, we are in fact, we always nervous when we have negotiation with any of our plans of our unionized, and so there is work with the management team that’s starting at the end of the month of May with the employees and the unions, its kind of, I think the union was busy in Vancouver another priorities and none much happened in the past few months, but it’s all scheduled for discussion, negotiation at the end of the month of May. Are we nervous, yes, we are, but that’s what we do for living, and we worry about the risks and the problems, and we want develop the business to be a better company, so some there in mind, at this stage it has been quite as much as happens in the last month or two.

We’re the management team is working on the plant (inaudible) of and that’s getting to be developed as we see in more discussion this week about that, and then from all of your experience with companies and union, we don’t make the last call. We hope our employees are reasonable because we are. And we hope that the understand that were good companies that means well for them, and we want to treat them very well, and that’s sometime you cannot predict and people, what they have in mind, what the union helps them to think true that’s something we control, so yes, we were concerned. From a dollar point of view, we do some calculation going in the union.

Wayne M. Bingham

Yes, it’s a fleet based capacity as 92,000 metric tons, so under the assumption, let’s assume a 30 days strike that could have an impact of up to $1.5 million, but that would on the EBITDA line, but that would be mitigated to the extent we have – are able to find products from other locations or other competitors or to the extent we have inventory, we can work through, a short work stoppage, but I’d point out that the labor environment with ERCO and its employees is topnotch. And certainly since 2006, since I’ve been at Superior Plus, we have not had a major work stoppage. So the labor relations are very good and we’re very optimistic that we’ll get, as Luc mentioned we’ll get back together in May and get this things settled.

Patrick Kenny – National Bank Financial

And that’s great. Really appreciate those comments. That’s all I have.

Wayne M. Bingham

Thank you.

Operator

Thank you. The next is from Ian Smith, Private Investor. Please go ahead.

Ian Smith – Private Investor

Yes, good morning gentlemen.

Wayne M. Bingham

Good morning.

Ian Smith – Private Investor

I just wanted to ask about today’s earnings report. You seem to read through your corporate outlook and what we did in the first quarter and I felt that it was fairly strong. I didn’t see it reflected in the earnings per share. Could you elaborate a bit on that or?

Wayne M. Bingham

Well, I guess if the AOCF per share is what it is from my perspective as a CFO it’s a very strong quarter. Last year, we did $0.60, this year we did $0.72, that’s a 20% increase and certainly from the CFO’s chair, that’s very solid. Also our debt levels continue to reduce. So I think it’s a very strong quarter for us.

Ian Smith – Private Investor

Yeah, strong quarter, but in the earnings per share, last year it was $0.28 and this year it’s $0.29.

Wayne M. Bingham

Yeah.

Ian Smith – Private Investor

And I just don’t understand that the math behind that.

Wayne M. Bingham

Well, we managed the business. I understand what your question is. We’ve managed the business through our cash flow. So there are some other, as you can see, under the net earnings there’s things called unrealized foreign currency gains and losses, which are mark-to-market on some of the hedging that we do and from our perspective, let’s say a whole perspective, the most important numbers for us are the cash flow per share.

Ian Smith – Private Investor

Okay. I appreciate that and I didn’t know because there’s much more to this. I know that’s rather too perpetual.

Wayne M. Bingham

Yeah.

Ian Smith – Private Investor

I just want to add one more.

Wayne M. Bingham

But just to clarify what you’ve said last three months was $0.25 and this year…

Luc Desjardins

There was $0.28. $0.28 and $0.29, I think that’s what…

Wayne M. Bingham

$0.28 is this year. Just want to clarify the number.

Ian Smith – Private Investor

Okay. All right. Well, I’ll get reports on that. Now the other part of the question would be the revenue. Okay. Now I see the number $1.1 billion and it’s the same number, yet you’re much higher in your output or input

Wayne M. Bingham

Yeah, and it’s a very good question, sir. One thing that you don’t see is propane costs have come down in the last year and a half or so. So when you look we sell added value. So the propane cost $1 or $2 for us, we’ll make the same money. So as we do make a margin, which is added value on the cost. So if you have a propane cost of $2 becoming $1, even though you make the same added value, your revenue will come down.

Ian Smith – Private Investor

Okay. I get you. I get you. Then, once again the superficial number that I don’t see enough of.

Wayne M. Bingham

Okay. I’ll try. Good question

Ian Smith – Private Investor

All right. Thank you

Wayne M. Bingham

Thank you for asking.

Operator

Thank you.

Ian Smith – Private Investor

Thank you

Operator

Thank you. (Operator Instructions) There are no further questions registered at this time. I would like to return the meeting over to Mr. Luc Desjardins

Luc Desjardins

So thank you everyone. If there is no further question. I think it was good call, lots of very good specific questions. So, thank you all for all your good work and your interest in our company. I’d like conclude the call and thank you for your participation. And see you all in next quarter.

Operator

Thank you, Mr. Desjardins. The conference is now ended. Please disconnect your lines at this time. And we thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!