Superior Plus Corp.

Good day and welcome to the Superior Plus 2022 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Rob Doran. Vice President of Capital Markets. Please go ahead.

Thank you, Cherie. Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2022 second quarter results. On the call today from Superior Plus are Luc Desjardins, President and CEO, and Beth Summers, Executive VP and CFO. For this morning's call, Luc and Beth will begin with their prepared remarks and then we will open up the call for questions. Listeners are reminded that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections, and risks. Further, some of the information provided refers to non-GAAP measures. Please refer to Superior's continuous disclosure documents available on CDAR and Superior's website yesterday for further details. Dollar amounts discussed on today's call are expressed in Canadian dollars unless otherwise noted. I'll now turn the call over to Liz.

Well, thank you, Rob, and good morning, everyone. Thanks for joining us all to discuss our second quarter results. Needless to say, we've maintained the strong momentum we generated in quarter one, 2022, and through to quarter two. It's important to note that quarter two along with quarter three are seasonally slower quarters for business due to the lower heating load and typically together amount for only approximately 10% of our annual EBITDA. And keep in mind that recently we've acquired 10s and 12s. So if you look at a full year, we get 25% of the cost of those two business for this quarter, but only 10% of the sale. So no doubt that you'll end up having a, for the timing of those acquisitions, you know, This is how it connects for Quarter 2 and 3. So, we're a full year, of course. The full results are there and the integration plans are going extremely well. So, our Quarter 2 results are a testament of our strength in our business in the face of rising costs due to inflation, volatility, commodity costs, which has driven some customer conservation. But as we look to the balance of 2022, we're comfortable in our ability to manage the impact of the inflationary pressures on our business by passing on these rising costs to our customers, which is evident in our average margin growth over the period of year to year. We saw the benefit of acquisition completed over the last year to higher volume quarter over quarter. However, we also saw higher operating expense in the quarter, Based on our strong first quarter results and second quarter results, we are confirming and are very comfortable that our adjusted dividend guidance range of $425 to $465 million is right on target. We're making great progress on a superior way forward in the dividend growth initiative through acquisition, continuous improvement, and organic growth. On June the 1st, we closed acquisition and delivered fuel business of Walls Petroleum which expanded operation in the attractive Virginia market. We're excited about adding this established retail propane distributor to our strong base in the eastern U.S. region. We also closed three smaller acquisitions in 2022, one in Ohio and two in South Carolina for a total of $12.9 million. Quite small add-on acquisition. With these four acquisitions, we're on track to achieve the lower end of our previous statement Excuse me for a minute. Acquisition target, excluding the camps acquisition of $200 million to $300 million and acquired assets in 2022. We released our second annual sustainability report in June, which contains improved disclosure from an inaugural report and demonstrates our focus on prioritizing ESG in our operation. We believe superior propane as a product will play a significant role in the transition to a lower carbon and eventual net zero emission future. We have put an energy transition team in place to identify and develop opportunities in this space, and recently hired a director of sustainability. We're working on various projects, mainly focused on lower carbon propane source, currently including renewable DME and hydrogen. Following the end of the quarter, we entered into an agreement with Initech to bring renewable DME to our customer base, providing a carbon-friendly enhanced to traditionally sourced propane. Initech Plasma Enhanced Melter, PEM, application process will divert organic waste from landfill and convert into carbon-friendly, clean-burning DME which can be effectively planned with propane and used as an alternative renewable fuel of its own. We're excited to enter this partnership where we will not only be able to provide carbon-friendly fuel to our customer, but we will also be reducing the waste that is necessarily filling our country's landfills. According to EPA, organic material continues to be a largest component of municipal solid waste and also contribute to increase greenhouse gas being released into the atmosphere. So we will now be part of the process of recycling that waste material by converting it into clean burning fuel and providing it to our customers. We are in a strong financial position from our debt and leverage perspective, following our recent common equity insurance of gross proceeds of $288 million. The additional liquidity from the equity insurance and our stable cash flow from operation is expected to provide us with capital to continue our goals to acquisition, investment and organic growth, and continuous improvement projects. Having accelerated our acquisition in 2021 and to start 2022, our focus in 2022 will be integrating and capturing the synergy from acquired businesses. I can assure you we've had a review of those two larger acquisitions this week, and everything is on plan and doing very well. We still see a strong pipeline of acquisition opportunity in the U.S. and Canada, so our confidence will continue to acquire quality retail propane assets and achieve a superior way forward target of $1.9 billion. We've passed about 40% of that target as we speak today. and the price of acquisition, the valuations are coming down somewhat, which is good for us. Before I turn the call to Beth, I would like to make a brief comment on my planned retirement. As mentioned in Quarter 2 press release, I will be formally retiring on July 31, 2023. With our seasoned executive and strong team, Superior is well positioned for the future. The Board has appointed a succession committee to find a new CEO for Superior and to address the transition. I will work with the Board to ensure a smooth transition as we continue to build on our operational momentum through the implementation of superior way forward, initiative, and drive shareholder returns. Very proud of what we've accomplished over those past 11 years and we look forward to executing our plan for the ongoing benefit of all of the stakeholders. I will now turn the call over to Deb to discuss the financial results in more detail.

Thank you, Luke, and good morning, everyone. As Luke mentioned, Q2 is a seasonally slower quarter for our business as we exit the colder winter months and our results are in line with our expectations. Superior generated second quarter adjusted EBITDA of $25.6 million, a 6 million or 19% decrease over the prior year quarter. This was primarily due to the impact from the Q's benefit that was received in the prior year quarter and lower realized gains on FX hedging. The decrease was partially offset by improved sales volumes and higher average margins in our Canadian propane business and higher results from US propane and lower corporate costs. In addition, as Luke mentioned previously, with the Camps and Corals acquisition, in Q2 we have 25% of the cost but only approximately 10% of the volume. This is all factored into Superior maintaining our guidance for the 2022 year. As you will have noticed, we updated our reporting segments in our Q2 financial statements, and we will be reporting the following three segments going forward, Canadian propane, U.S. propane, and wholesale propane. These segments are better aligned to the specific characteristics of our operations and will provide a higher level of detail with regards to those customer segments. The second quarter loss from continuing operations was $85 million, an increase of $48.9 million compared to the prior year quarter. The primary driver for the higher net loss was an unrealized loss on derivatives and foreign currency translation of borrowings compared to an unrealized gain in the prior year quarter. Turning now to individual business results, U.S. propane adjusted EBITDA was $16.2 million, an increase of $2.2 million from the prior year quarter, primarily due to contributions from acquisitions completed in the past 12 months and higher margins. U.S. propane sales volumes of 246 million liters increased 16% compared to the prior year quarter, primarily due to contributions from acquisitions partially offset by an impact from unseasonably warm and inconsistent temperatures in Q2 and customer conservation stemming from the high commodity price environment. Canadian propane adjusted EBITDA was 13.3 million, a decrease of 8 million from the prior year quarter primarily due to higher operating costs as a result of the impact of the 7.8 million fused benefit recorded in the prior year quarter. Canadian propane sales volumes of 226 million liters increased 5%, driven primarily by commercial volumes. Commercial sales volumes increased due to improved oil field demand and the impact from the lifting of public health measures associated with COVID. Wholesale propane adjusted EBITDA was $1.8 million, which was consistent with the prior year as the impact of the Kiva acquisition was offset by weaker market fundamentals in California. Turning to corporate results, the adjusted EBITDA guidance and leverage. Corporate operating costs were $6 million, a decrease of $2.2 million compared to the prior year quarter. primarily due to lower longer-term incentive plan costs related to the share price decline in the current quarter. Superior realized gains on foreign currency hedging contracts of $0.3 million compared to a gain of $2.8 million in the prior year quarter due to lower average hedge rates relative to changes in exchange rates and a decrease in amounts hedged as a result of the sale of the specialty chemical segments. Superior's total net debt to adjusted EBITDA leverage ratio for the trailing 12 months ended June 30, 2022 with 3.7 times, which is within our target range of 3.5 times to 4 times. As Luke mentioned, we're maintaining our 2022 adjusted EBITDA guidance range at $425 million to $465 million with a midpoint of $445 million. For the remainder of 2022, We anticipate average weather to be consistent with the five-year average for the U.S. and Canada and wholesale propane fundamentals to be consistent with 2021. With that, I'd like to turn the call over for Q&A.

Thank you. As a reminder, to ask a question, you will need to press star 1 1 on your telephone. Please stand by while we compile the Q&A roster. Our first question will come from Nelson Ng with RBC Capital Markets. Please go ahead.

Great, thanks. And Luke, congrats on your retirement plans. Thank you. First question is related to the renewable DME. I think similar to, I guess the question is, last time when we talked about green hydrogen, you said the margins were pretty similar to propane. Is this arrangement similar to green hydrogen where you essentially get supplied the DME you distributed and the margins are similar as well?

Yes, very early to be 100% sure, but I am convinced personally even before we get customer and what's surprising for customers by the time the production comes on, very confident we'll have similar margins. We're into the added value business and a lot of service comes around supplying tanks and fulfilling tanks and our technician work that they do. So my expectation from what I've seen so far is that margin are going to be as good. I'm even a bit optimistic that we can try a bit more because it's green and there's a lot of customers that are going to want green propane. I think there's a tweaking for us that at least what we have is margin and maybe optimistically a bit more.

Yeah, the one thing that I'll just add, Nelson, is that we'll have the ability to blend the DME. So we'll have the product, we'll buy the product, and then we will blend it with propane in addition to the ability to use it as a renewable fuel completely on its own. So there's the two options.

Okay, and there's probably limited capex you need to make for this, right?

Right. Most capex are not on our watch.

Yeah, we're buying the product. Yeah.

No, I'm just thinking from an equipment perspective for blending and other things, and you're just going to use the same propane trucks to make the deliveries, right?

It'll be the same propane trucks, but there will be a small capital requirement to have the equipment to do the blending. Okay.

With the same thing.

Yeah, no, the same thing. It's just lighting equipment.

Okay, got it. And then Beth, you touched on consumer conservation of energy due to higher prices. So there's two questions. I guess the first question is for the average retail consumer, roughly what was the cost increase they saw year over year? And then I guess the second part of that question is roughly what percentage decline in demand did you see versus what you expected, assuming a similar temperature or weather?

Yes. So on the first part of your question, from an overall cost increase on average that would be seen by the customer all in, it would be roughly 20%. And then from a conservation perspective, that one there is, you know, at this point in time, we're seeing some impact, but it wasn't from a percentage perspective. I wouldn't even say it's necessarily 1%. I do think as we go forward with the higher prices, there is potential for us to see more impact from a conservation perspective. Luke, I'm not sure if there's something you want to add.

Yes, and you know, the theory from the beginning when all the energy price went up 20% is a lot, but it's a lot when you think of filling up your car with energy, oil, and diesel, and all the natural gas. So, net-net, we thought that their customers would say, oh, the spare is charging me too much. If you go back over the years, something like that happens. Oh, they're charging me too much. I'm going to call the competitor, which is a lot of trouble to get the tank and make the change. Today, I didn't expect that to come to be an issue too much because everybody knows Whoever you are today, you know that every energy costs have gone up so much that people are aware it's not spare gouging and increasing their margin too much. So I think we have a path this year because it's known around every segment of customer that, wow, energy costs are really going up. So one thing I can also confirm is if there's a 1% conservation, I think what happens, I think it happens somewhat in quarter two. People might not take the fill, but when quarter three comes or four, they'll have to fill up more. So it might be that they put the thermostat down and that affects a small percentage of our customer. I can assure you from a guidance point of view, I have zero worry that we will not cover that some ways and make the same type of profits.

Okay, great color. One more question before I get back in the queue. So Luke, in terms of your retirement, what were the key factors that led to your decision to retire next year?

A couple of things. First, I'm very healthy, still full of energy and excited. I love work. But I think I could have done before here, as you know, from being part of an equity firm. I've done other projects that are not CEO and son traveling, working projects. the pace that you need to work, so maybe bringing the pace down somewhat. That was my first objective. And so when it comes to the company, it was a tough decision because companies are coming to the level that we can say, wow, you know, like the two acquisitions we just did, we're going to improve the bottom line by 25%. You can find that and put my name to it. It happens. I think we're in a good spot from how we execute and the team in place and the operation effectiveness that's coming. We have continuous improvement every year. We have keeper margin and recession or whatever doesn't affect our industry as much as others and the team is there to really execute properly. So when I thought about that, what's the right timing? Many of you probably don't know. I'm just 70 years old so I'll be 71 plus when this happens. And I've offered the board, I said, I'm telling you that, I'm doing this, but at the same time, if a year becomes 14 months because of necessity or it becomes 10 because you get to that new CEO person sooner, I'm flexible to help until the end and I want this company to do well and I still own a ton of stock. So it was probably maybe earlier than I would have expected for my own company but you get to a point where you say, well, maybe bring it down a notch from the passion drive and the effort and work. So it was all that.

Thanks for the details, Luke. Congrats again.

Thank you. One moment for our next question. That will come from the line of Chiwai with Desjardins.

Hi, Luke and Beth. And Luke, congrats on retirement and, you know, the achievement you have had is superior. Maybe just a bit on that. You know, I know it's early in the process, but what would the board be looking for in terms of the next CEO? Is there any preference for, you know, internal versus external? Would you guys be looking in the U.S. as well?

That has not been decided yet. So what happens is, By me confirming with the board what I'll do and say, hey, a year, so it's like not tomorrow, lots of time. I hope we have a great year, and I want to make sure we're on every aspect for the next, until I'm there and after. So for them, they have to sit down and say, okay, let's look at the type of CO we would want. And they have not done all that work yet. So developing a profile, organizing a search, you know, will come in months to come. It's not a panic or situation that demands a rush and make quick decision because I'm giving them a year. So they're really going to take their time to look at all the angles, how to proceed, what are the profiles, and then come to those conclusions in the next three, four months, and then move on to decide what's the right CEO for this company going forward. None of that work has been done. But we wanted to announce, it kind of sounds a bit bizarre, but, you know, CEO of a company, I've been here 11 years or plus coming, and then we said, look, you made that decision, it's clear, let's announce right away. We're a public company, we don't want any shareholder up there to know a month later or... So we've announced before all the work of preparing the succession was... The profile and the type of CO has been, the work is coming. So, we decided to announce immediately as soon as I made my decision.

Thank you, Luke, for the great color. Maybe this question is for Beth. So, you know, operating cost was higher, especially in the U.S. So, I know you said part of it is due to the fixed cost absorption by the acquisition and part is from inflation. So, I just want to see, you know, how would be the split between the increase between the two factors, trying to see, like, what the run rate could be going forward.

I think I missed the cue myself.

Yeah, I'm just trying to, let me, I think I heard the question, it's just you're a little choppy from what we can hear. So, are you asking what is the incremental cost associated with the U.S. business? How much is due to acquisitions and how much is from an inflationary perspective or other cost increase perspective? Is that the question?

Yeah, just trying to see how much of the increase attributable for each factor so we can look at the runway going forward. Thank you.

Yeah, so I mean, maybe the best way from an inflationary and a labor cost perspective where we've seen those impacts overall in the business, For Q2, if you want to think about it, the impact is somewhere, like it's in that $7 to $9 million range. So predominantly or primarily the rest of the cost increases would all be associated with acquisitions. A little bit for organic growth potentially, but the vast majority, I think it's reasonable to just sort of put it all in a bucket for acquisitions.

Thank you. I'll pass the mic.

No, I was just going to say, so for run rate, you could think of the cost from that perspective, but remember a lot of the costs are variable in nature as well. So, the cost will still always be higher in Q4 and Q1 on an even run rate basis.

Yes, thanks, Beth. Okay.

Thank you. One moment for our next question. That comes from the line of Joel Jackson with BMO Capital Markets. Please go ahead.

Good morning, Luke and Beth. Good morning. If we look at the rest of the pipeline for propane tuck-ins or acquisitions this year, are we pretty much done or at least done for what actually could impact 2022 earnings?

What could happen, Joe, is more small tuck-in and the return are – quite big, you know, when you do small trucking. So that could happen. When it comes to mid-larger size, nothing this year. We really are focusing on the integration of the two, which is ahead of plan. By the way, we've called in camps, doing it faster and quicker than the 18 months we usually take, because we ended up buying them at the wrong timing, if you want, not for the next 10, 20 years, but for this year, you know, April, May, you'd rather buy something in November than in the winter. But it's giving us the opportunity to say, okay, this summer, let's go make this happen sooner, faster. So there will be all hands on deck to integrate properly those two-size companies, small tuck-in, and then review for bigger, larger deals in the years to come. We want to keep our debt down, so it's not much coming in the next...

And, Joel, just as a refresher, I think, with respect to your question, so if we did close an acquisition or we close acquisitions in Q3, we'll only get roughly 35% of the EBITDA, and that happens in Q4. But as Luke's saying, as we're looking at it, it's not. Like, there's nothing in our view from a materiality for this year or that would impact items.

Right. So the kind of guidance, what's the guidance range now, which never includes future acquisitions, at least from a future acquisition perspective, you're kind of done for what can impact 2022. Does that make sense of what I'm saying? I'm asking the question the same way.

No, that makes sense based on what we know currently.

Yes. Um, the other question I have is, you know, I'm covering the stock or company for a long time, you know, we're kind of used to what Canadian propane margins are, you know, good years, 19 cents a liter, 20 cents a liter, not such good years, 15, 16 cents a liter. Of gross profit per liter and now that we've done the resegment ation sort of all changes Can you talk about kind of now what the range is now for kind of like?

Good dynamics for Canadian propane margins and and when the dynamics not as strong Yeah, yeah, I think and you know including the segments I'm currently we're looking at it just assumes sort of leave the u.s.. As it is with respect to Canada I If you want to think it based on the segment, you know, somewhere between 25 to 30 cents would be your range. So a challenging year, 25 cents, you know, a good year, 30 cents. Obviously, customer mix has an influence in Canada over where it sits within that range. And maybe, you know, the best way to think about wholesale now that we've separated out Typically, wholesale, those volumes will generate around $0.03 per liter.

That's very helpful. Okay, I'll leave it there. Thank you very much.

Thank you. Thank you. One moment for our next question. That will come from the line of Ben Isaacson with Scotiabank. Please go ahead.

Thank you very much and congrats, Luke. I'm sure it's bittersweet. Just two questions, if I may. Number one on organic growth. Should we be modeling an increase in volume slowly over time without meaningful acquisition costs? In other words, do we see in certain regions that volume is increasing or market share is increasing? That's not getting kind of taken back by some of the competitors without any meaningful spend.

So if you look at Canada, there's some good growth right now because we lost in commercial 20% of our volume, which is less margin, you know, especially the oil field due to COVID. And right now you'll see for the next two years about 6%. or 7% growth a year in that segment. And then from a residential, we've developed a lot of tools and we're getting internal growth in the rate of about 3% in retail Canada. So a lot of good, good success in Canada internal growth versus overall industry may be growing only 1%. Equal to the industry growth, so we're flat. We're not gaining on internal growth We've done a lot more work in the last six months to take all over it You know the way we build a business every innovation development and digitalization with customers internally we do project in Canada we execute we now have a service project and works in Canada for orchestrating the distribution of the logistic and the digital. So once we cover all the province in Canada, that's in works, the machine is now loaded with work and we're starting with maritime. We'll cover all Canada, then we go to the state. So I guess what I'm saying is the states have done a ton of work and a lot of work on acquisition integration, that'd be number one. in dealing and servicing the customer day-to-day. And then the marketing part that we have developed, the machine and the best tool in Canada, is now this year started to be applied in the U.S. business. And there's a coordination between the best tool and the best marketing approach by segment. And we're now pushing that in the U.S. business. So you'll see, I think I'm expecting by next year, U.S. will come to more growth and industry growth. For the moment, it's not the case. But we haven't executed on our marketing, all of our marketing approach to the U.S. at this stage. That's why there's a differential between Canada and U.S. growth.

That's helpful. Thank you. And then just my second question, transitioning from organic growth to strategic growth. Can you just talk a little bit about the northern U.S. states and what is the kind of long-term or mid-term strategy there? And the margins in that region, are they closer to the eastern U.S. or closer to Canadian margins? How should we think about that opportunity set in terms of the timing as well?

The north-east U.S.A., the margins are good. There would be in the average that we've discussed earlier.

Sorry, sorry, sorry. Just to be clear, Luke, what I really meant is entering the northern U.S. states, so the Dakotas and Montanas and anything south of the Canadian border.

So you have the West Coast, I would say, very good, and the East Coast, very good. The margin when you get to the middle of the U.S.A., more co-op, more industrialization, and less margin opportunity. And that's the middle of the USA. That's why we kind of start in the east and west, and we have a lot of growth opportunity in those two, east and west segment. Middle, we're not doing that.

So just to be clear, the margin opportunity is probably lower in those northern U.S. states. But presumably the volume opportunity must be quite good. I mean, they're all, you know, they all suffer through tough winters and therefore, you know, presumably would have higher propane use, especially in those rural areas. Is that fair to say? So higher volume, lower margin?

I think the fact that you have a higher heating load, right, in the northern states, so that makes total sense that you would have more volume on a per customer basis on a like-for-like customer. I think as we look to those markets where the margins may be narrower, there's a lot of places, like in particular if you think of the Canadian market, where you have similar profiles when you start having the industrial type customers, etc. So your margins tend to be less from that perspective. I think as we look to those markets, there is at some point margin to be made or good business but we want to have a platform to try to build greenfield and build out the customers in that basis and to date with the opportunities and you know resources are always limited it makes more sense for us where we do have platforms or where we know that there are stronger margins from a customer perspective for us to focus in those areas at this point in time so that's where you know as we're always talking about we look to the coasts first.

Great. Thank you very much.

Thank you. One moment for our next question. That will come from the line of Robert Cattelier with CIBC. Please go ahead.

Hey, good morning, everybody, and congratulations, Luke, on that decision. I have a related question. Oftentimes when there's an important leadership change like that, it can prompt a broader strategic review at the board level. What is your sense that the board might undertake a strategic review to go along with their CEO search?

Yes, so we do the strategic review every year. We have one scheduled in October with the board. I can assure you that from a continuous improvement initiative, from having a good team in place in all the businesses and corporate, having a strategy to do acquisition, which Every time you acquire one, you improve it by 25%. There's no intention to change that. The strategy is clear. It's functioning. Like to trade a higher multiple than we trade, you know, having a one business that is successful from a, we always execute on what we promise, but that's probably one issue that hopefully the market will understand one day and we'll get the real value. But from the strategy, from the execution, from the team, I don't see any change coming. And we just had our board meeting the last few days. None of that is on the agenda. I don't see any change coming from that strategy.

Okay. And, you know, I know it's still quite early days, but have you had any traction with customers following the announcement of the Charbonne initiative?

No, but it's too early, but it's a good question. I'm meeting with them in two weeks. They want to build multi-plants, and they have an area and perspective of doing a lot more than one, and we will be the distributor for the multi-planting of the build. Actually, Canada and U.S., not just Canada. So I'll get to know more, and I want to visit their plant that they expect by September to be online producing in Sorel, Quebec. I want to go visit that. So we're not much, don't know enough because it's too early, but at least we have something tangible happening before Iran. Not big dollars to it, but it's starting. And then we'll have a marketing development plan that's in place to reach customers and see where it fits the best and the most. Hopefully, they know a lot more in that regard next quarter.

Okay. And last question from me. As you're probably aware, the U.S. Inflation Reduction Act contains some provisions for an alternative minimum tax. I'm not sure if you've had a chance yet to assess if Superior would trigger any of those, that tax and, you know, what the possible mitigation strategies might be?

I think from our perspective, we're still working through some of the rules. And frankly, it's not just rule changes in the U.S. It would be anticipated rule changes that would be occurring in Canada and some of the other areas where we are. So at this point in time, I don't think we can flag what we think the impact will necessarily be, but we are working through the process and with our various tax structures that we have in place and our corporate structures and what that impact would be.

That's understandable. Thank you.

Thank you. One moment for our next question. That will come from the line of Patrick Kenny with NBS. Please go ahead.

Yeah, good morning, everybody. And, Luke, congrats on your announcement.

It was the first time I met when I came to Calgary 11 years ago. That's right.

Yeah, hard to believe. It's been, I guess, over six years since the head office was moved out east. But I guess, you know, in light of the upcoming, of the upcoming transition and looking at the cash flow mix today being majority U.S.-based, not to mention most of the Yemeni opportunities are likely south of the border as well. Just curious if you think now is a good time to once again consider a new domicile for HQ and perhaps a U.S. listing at some point down the road, or do Do you still see Toronto as being the right place for the new CEO and the executive office over the long term?

I said to a question earlier, I made the decision a year could be a bit more if necessary. I'm there to help until there's somebody in place. None of those questions have been addressed by the board. What we ended up doing as soon as my decision was made is I tell the federal market immediately. So it's like, okay. Now, they did work on, they always look at succession, but none of the discussion is to one at Toronto, the state. They were 55, 45% right now, and just a bit more in the state. None of that has taken place. So, and they have a year, so it's not like, I guess we could have worked differently if they are leaving next month. Different story, but being healthy and still passionate about doing some stuff and helping for this change. So the whole work that the board has to do is like starting now and in the months unfolding, things will clarify. But I haven't heard of one question or one discussion of the last board we had this week moving the head office, none of that. Now, is it in six months, nine months, they start to think that way? Don't know. But for the moment, it's business as usual. Let's find a succession that's right for the future. And all of their good questions are going to be addressed, but in times, not done so far.

Got it. Yeah, fair enough. Maybe just back to the business and the conversation around energy prices, and specifically the doubling of natural gas prices year over year. I'm not sure if you're seeing any residential or commercial pockets geographically where you're seeing a slowdown in switching or connecting into natural gas infrastructure. And also maybe on the industrial side, if you're seeing... Any customers choosing to stay on propane as opposed to, say, sourcing compressed natural gas supplies?

Beth, anything comes to your mind?

Well, I mean, I think, you know, from the initial part of the question, whether we've seen any change in the pace of activity of, you know, companies arguably, I guess, building the infrastructure for natural gas where they might choose not to. I can't say that we've seen any change in activity. Typically, if there's an entity or somebody close to natural gas, that would typically be the direction that they would go. I don't know that we've seen any fundamental change. I mean, the reality is the natural gas has increased a lot. All energy has increased. There could be instances, perhaps, where that starts impacting, but I can't say we've necessarily seen that at this point in time. I think with respect to your question on compressed natural gas and what we're seeing, we have seen that there are some large industrial customers that certainly that works out to a good answer if there's a compressed natural gas hub somewhere close or near. where those entities are. I mean, I think from that perspective, you know, that Fed is still developing. I don't think we've seen any difference in that pace of development right now based on the cost of natural gas. Again, I do agree with you that pricing changes, and if it settles out for an extended period of time, you would think it would have an impact on the economic decision that you make associated with either using, say, propane versus compressed natural gas. But I think that will take a little bit more time for that to fall out or sort out.

Okay, great. Thanks for that, Beth. And one more if I could. I guess given the high-yield market remains quite fickle these days, can you just remind us what other levers you might have from a liquidity perspective should you need to take advantage of, say, a new large-scale growth opportunity? And perhaps any update on just how supportive – your two largest shareholders are right now with respect to remaining active on the M&A front in light of the, I guess, uncertainty surrounding inflationary pressures out there today?

Okay, and I'll cover off the question around high yield and access to liquidity. So, you know, from a high yield market, you're correct. I mean, I think the market doesn't look the same as it did certainly when we were refinancing last year and we did our notes. That being said, I think there's still access to that market if we chose to. So there would be access from that perspective. The pricing would be a lot different than our current notes. I think the most obvious access to liquidity is our line of credit, which we're currently only 50% drawn. And just as a reminder, I mean, we did extend that, renew and extend that just a few months ago, and from that perspective, we do have access to a $300 million accordion as well, just based on the current deal. So I think from our perspective, you know, if there's something there that we want to fund that, you know, people are supportive, certainly in all the discussions that we've had to date. So, you know, we're confident that we could go forward and find the liquidity that we require. Luc, do you want to talk about that?

Yeah, and you can add something. Sure. From M&B and Brookfield, really like the activity of the acquisition, want to continue. I alluded to it earlier that the acquisition, the valuations are down a bit, which is good for us, and there's no acquisition that we intend to do that is not going to be bringing return or rate of return as good or better than the past ones. Hopefully a little bit better because the valuation comes down. So for us, we're kind of did a great job. She did a great job with Rob and the team to position us for the long term on interest rate, which is great. So we're in a great position. But for all future acquisition, you see valuation coming down somewhat. we see a total rate of return as good or better for new future deals.

Okay, that's great, Keller. Thank you very much.

Thank you. One moment for our next question. That will come from the line of Matthew Weeks with IA Capital Markets. Please go ahead.

Good morning. Thanks for taking my question, and congratulations, Luke, on the planned upcoming retirement. Thank you. I just want to ask about maybe potential – you're following the announcement about the DME and with the hydrogen as well. So if you could just comment on what the pipeline is like, the kind of conversations you're having with additional parties on future opportunities for clean fuels distribution. And, you know, in light of the climate bill that's been passed in the U.S. and maybe seeing increased, you know, growth in sort of renewable fuel side of the economy. Thanks.

Thank you. Great question. And there is more discussion going on, absolutely, for a new project, an additional project. I talked to the fact earlier about Sharon, where We want to build many plants in Canada and some in the States, and we're the player that's going to be organizing the logistics distribution to the end customer. We will own the customer and we'll have good margins. And the same with DME. A lot of work is getting done. This is the first announcement. More to come. And very exciting. I think we'll be, as a large propane company, we'll be... I like us to be the lead player when it comes to modernizing our offer to customers to be more renewable, and that's what I think we're going to make happen. More to come in that regard big time.

Okay, thank you. I appreciate the commentary. I'll turn the call back. Thanks. Thank you.

Thank you. One moment for our next question. That will come from the line of Steve Hansen with Raymond James. Please go ahead.

Oh, yes. Good morning, everyone. Thanks for the time. Well, the data that you provided on the new segmentation is still a little bit limited. It does point towards some pretty significant swings in those wholesale margins. And Beth, I know you commented on sort of general ranges earlier, but just perhaps a two-part question focused on wholesale specifically is, can you just Remind us of the one or two key drivers we should be mindful of here that drive that margin variance. I know we often talk about regional spreads, but I'm just curious what else we should be monitoring. And then the second part is, do you need to actually be in the wholesale business given the lower margin profile and or is there real strategic value into having that base load business as you serve your retail business as well? Thanks.

Okay, so I'll touch the second part of the question first, which is when you're asking if there's value to be in that business, the answer is yes. We need those skill sets internally to ensure that we have security of supply. We're comfortable. The bulk of the activity that's done by that business is internal. The additional benefit that we have as we move into, as we did with California, By having that wholesale business, we also have links to the other retail businesses, which are potential targets, and we have relationships with potential targets going forward. So there is a benefit, and it is a way for us overall in the entire, I'm going to say the value chain, to also make the margin associated with that. And we have the highly skilled individuals doing that work, where if we're doing it internally, then it makes sense to also use that skill set to supply the market and again, you know, have some incremental margin associated with that because we need the skill set to effectively run our current internal business. So I think that's sort of the second part of the question. The first part around drivers, I think, you know, on average, three cents when you look at that volume is a good number. There are levers within there, you're correct. One is just the selling the wholesale volume drives a certain amount of that margin, but it is the overall fundamentals of the market, which you are right, there's times where there's differentials in the market or inefficiencies in the market, where in particular, as I would have talked about in the past, it could be very much that based on weather patterns, pricing is a lot lower, and I'll talk about Canada right now, say in Edmonton, And as a result of that in the east, because there's cold in the east in the winter, prices are quite high. There's some arbitrage by buying out of Edmonton and then railing it to the east and using that product. So that generates some incremental margin when that market efficiency is in place. There are also margins to be gained when there's basically differentials associated with The pricing that comes from an index perspective, because we'll typically buy on index, either Conway or Bellevue index. And from there, we will sell at RAC pricing, where there's differentials. So the RAC pricing would be, you know, Edmonton or Sarnia site pricing. So what we typically will do, there are fluctuations depending on a year where those differentials are robust. or if they are weaker or much more narrow, which you would have seen over the past. It just would have been embedded in that margin number you were looking at from Canadian propane. And what we will do from a forecast perspective is typically the same way that we look at weather, and we'll layer in five-year averages, we will do the same when we forecast margins coming out of the wholesale business.

Let me add a couple of points first. And we've seen it in difficult times with the rail blockage or weather being really extreme. Who serves the customer the best by a long, long shot is superior. And that's probably worked to a degree. We're getting more internal growth in the market overall, but the main reason or the only reason, but it's certainly one of them. And so it's a great tool and a great tool that our competitors don't have to serve as customer properly. On top of that, when you look at the cost to serve the space, the storage, and the people in the office that does the work, your internal rate of return are very good because you have very little cost of doing that job of procuring and servicing. So your three cents is not a big margin. But if you look at the return on investment in that business versus others, it's a bit better than the rest of other businesses we have. So it's like 3 cent doesn't show the reality here. We sell for 3 cent, but it costs us 1 cent to do all the work. So it's kind of a good return on investment, and the margins are not the main factor. It's the big volume and the low cost of the infrastructure to service.

That's a really great perspective. I appreciate that. Just one last one, actually, if I may, is just around the opportunity on the oilfield recovery side. Is there anything you can do to gather or capture more scale or market share in that business that does appear to be relatively high growth here, at least in the relatively near term? I know you've already consolidated a large part of Western Canada, so I'm presuming you've got good exposure there. But just trying to think of anything you can do strategically to advance your position as that becomes a pretty high growth vertical here for the next couple of years.

Yeah, so customer to customer, it's hard to say because we like to – that cost of service is quite high and the margin is low. So it's like not where we're happy to have those customers, we like to service them, but that's where we would put a lot of time and effort on the service to build that business because we like to make better profit than that. But there is a project of a thousand mile pipeline going into the west coast, to the ocean, and we're even, oh, they need cats and they need energy all the way to the thousand miles, and we want that contract, and it's going to be a long-term contract with big volume, which, by the way, more than half the contract isn't even propane. Our sales and margin that we make is to organize the sites for them on the line that they're building So those are projects that are special, different, need additional type of skill, which we have in Western Canada to do a project like that. And so it wasn't a propane for safe businesses. You have propane to give energy to those people that are going to build the thousand mile, but we also offer a lot of other work that goes with that. Projects like that, we're in because we have the scale, the skill, and we've gained a good project in that regard. There is some more, I would say. We've probably maintained our customer base, and it's growing very well now, which is a good thing. It's been a long time due. So probably don't expect to win new customers, but to answer to the feeling about that.

Okay, very good. I appreciate the time, and congratulations, Luke, as well.

Thank you. One moment for our next question. That will come from the line of Darrell Young with TD Securities. Please go ahead.

Hey, good morning, everyone. Just one quick one from me with respect to the five-year plan. I don't think you've shared any per share metrics related to that growth objective yet, but I'm just curious if you have some internally you'd be willing to share related to maybe free cash flow per share or cash flow per share growth, or if you'd consider adding those.

I think maybe the best way to think about it is mathematically you can just take the EBITDA and then divide it by the number of shares that are outstanding now. Right? Okay. For share, we wouldn't typically look at that because, again, it gets somewhat skewed by the unrealized gains and losses.

Yeah, fair enough. I was just curious if there was... Yeah, no, no, no.

I understand the question. So, I mean, you're right, we haven't disclosed that, but mathematically, I think you can do it that way.

Okay, sure. Yeah, I just wanted to get a sense in terms of how much dilution may be contemplated as part of the strategy, and it sounds like you'd expect to keep the share count pretty tight from current levels.

Yeah, and then that's why I was saying looking at the current amount, like as we look at going forward to achieve that 1.9 over the next four and a half years, you know, if that happens on an even basis, you know, our view in being within that three and a half to four times, if we do that on average 200 to 300 million a year, that, you know, from a liquidity perspective, we wouldn't have to look to equity.

Right. Okay. That's great. Thanks.

Thank you. And speakers, I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Luc Desjardins, President and CEO. Please go ahead.

Thank you. So as I wrap up this call, I'd like to thank our management and employees. Very proud of all the accomplishments to the date of 2022. A solid position to deliver to 2022 address the BIDA guidance. superior way forward initiatives are in works. So business as usual, things are really humming properly. Wish you all the best and looking forward to a good 12 months with you all coming.

This concludes today's conference call. Thank you for participating. You may now disconnect.