Superior Plus Corp · TSX:SPB
Superior Plus — Investor Day (November 2016)
81 slides from Superior Plus's investor day presentation, Nov 18, 2016
Slide 1: Investor Day
INVESTOR DAY November 18, 2016 TSX:SPB www.superiorplus.com
Slide 2: Opening Remarks and Corporate Overview
4 oP Superior Plus OPENING REMARKS AND CORPORATE OVERVIEW
Slide 3: Investor Day November 18, 2016
INVESTOR DAY November 18, 2016
Slide 4: Today's Presenters
Agenda Presenter Luc Desjardins Introduction & Luc Desjardins Strategic Overview President & Chief Executive Officer Today’s Specialty Chemicals Ed Bechberger Beth Summers Presenters Senior Vice President & Chief Financial Break Officer Energy Distribution Ed Bechberger President Specialty Chemicals
Slide 5: Forward-Looking Information
Certain information included herein and certain oral statements made by management at the Superior Plus Investor Day are forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information may include statements regarding the objectives, business strate
Slide 6: Introduction and Strategic Overview
4 oP Superior Plus INTRODUCTION AND STRATEGIC OVERVIEW
Slide 7: Introduction and Strategic Overview
INTRODUCTION AND STRATEGIC OVERVIEW Luc Desjardins, President & Chief Executive Officer 3
Slide 8: Investment Highlights
> Industry Leadership > Strong Financial Profile > Experienced management team > Achieving target leverage ratio > Best-in-class operations > Access to capital and liquidity to fund Investment future growth > Continuing focus to create value through Highlights differentiation and digitalization > St
Slide 9: A common vision and culture is key to Evolution 2020
A common vision and culture throughout the entire organization is key to the success of Evolution 2020 Evolution 2020 Vision: Culture and To become the leader in creating value through differentiation and best-in-class operations Vision in each of the business segments we operate Culture: Superior w
Slide 10: Evolution 2020 Strategic Plan: Key Themes
We will focus on building our future without losing sight of improving our day-to-day operations Evolution Key Themes: 2020 > Internal Growth Strategic > Effective sales and marketing programs to target annual growth of at least 2% more than the market Plan > De-commoditize our goods and services th
Slide 11: Evolution 2020 Business Overview
Energy Distribution > The ideal industry to grow through acquisitions and immediately leverage our solid platform, including: Evolution 2020 > Pricing intelligence for value-added services Business > Utilizing our supply cost advantage > Maximizing logistics capabilities Overview > Acquisition strat
Slide 12: Specialty Chemicals
4 oP Superior Plus / SPECIALTY CHEMICALS
Slide 13: Specialty Chemicals
SPECIALTY CHEMICALS Ed Bechberger, President Specialty Chemicals 8
Slide 14: Specialty Chemicals Overview
> Manufacturer and supplier of specialty chemicals and provider of technology-related CANADA services Grande Prairie > Eight facilities across North America and one Saskatoon facility in Chile Hargrave Vancouver Thunder Bay Specialty > 510,000 metric tonnes (MT)(1) of sodium chlorate Buckingham annu
Slide 15: Specialty Chemicals Product Diversification
Salt + Water + Electricity Specialty Chemicals Product Sodium Sodium Hydrogen Chlor-alkali Diversification Chlorite Chlorate (H2) 1.59 MT 1.13 1.00 MT MT Potassium 74% Caustic Soda Chlorine Hydrochloric Hydroxide (NaOH) (Cl2) Acid (HCl) (KOH) 10,000 MT 510,000 MT 94,000 MT 116,000 MT 157,000 MT Equi
Slide 16: Global Pulp Market
> World pulp demand is strong Global Pulp Market and growing > Market is expected to grow by 2.8% 160 90% 95% 89% 89% 89% per year 2015-2020 140 88% 86% 87% 87% 90% > Facility utilization was 120 85% Global Pulp approximately 89% in 2015 and is 100 80% expected to remain stable over the 80 Market fo
Slide 17: North American Pulp Market
> Softwood’s unique fibre strength North American Pulp Market properties are important to serve 50 93% 93% 92% 92% 92% 0.95 91% 94% 94% growing tissue/towel end-uses 40 0.9 > Limited substitution potential by North American other fibre grades Million MT 30 0.85 > Bleached softwood pulp has Pulp Mark
Slide 18: North American Sodium Chlorate Market
North American Sodium Chlorate Supply and Demand 1900 1700 1500 > ERCO’s focus over next '000 MT 1300 several years is on reducing 1100 North American production costs 900 Sodium Chlorate > ERCO is a major player in 700 Market the export market and 500 2013 2014 2015 2016 2017 expects to export addi
Slide 19: North American Chlor-alkali Market Fundamentals
North American ECU values are beginning to recover from cyclical lows: > End-markets for caustic (consumer) and chlorine (PVC/construction) expected to improve over the near term North American > Positive outlook for North America ECU values Chlor-alkali > North America continues to benefit from low
Slide 20: Chlor-alkali Fundamentals
ERCO plant locations are well positioned for a market recovery > Increased flexibility with HCI burner expansions in Saskatoon and Port Edwards completed in 2014 > HCl demand currently depressed due to weak oil and gas markets, but ERCO well Chlor-alkali positioned for market recovery > Local chlori
Slide 21: Chlorine Market Fundamentals
Chlorine Revenue by Customer Segment > Chlorine pricing stable 3% 17% > Vinyl industry is driving demand > Ability to convert up to 74% of 27% Chlorine chlorine into hydrochloric acid Market > ERCO has been shifting between chlorine and hydrochloric acid to Fundamentals satisfy customer demand 6% 31
Slide 22: Hydrochloric Acid Market Fundamentals
HCl Revenue by Customer Segment > Three largest demand segments are food, 4% oil and gas, and distribution 29% > ERCO burner acid operating at 50% of capacity 25% Hydrochloric year-to-date Acid Market > Food and distribution demand has been stable > Oil and gas segment demand expected Fundamentals t
Slide 23: HCl Oil & Gas Segment Fundamentals
> The oil and gas industry expects to recover in 2017 and beyond > Burner acid operating rates should improve from 2016 > No significant new capacity additions announced beyond 2016 > Recent data published by IHS indicates acid consumption per active drilling rig is increasing > ERCO believes this r
Slide 24: Caustic Soda Market Fundamentals
> Two main industry segments are pulp Caustic Soda Revenue By Customer Segment and paper, and oil and gas 6% 12% 5% > Port Edwards facility demand remains Caustic Soda robust, driven by pulp customers and 12% Market water treatment demand 22% Fundamentals > Saskatoon demand is stable, driven by West
Slide 25: KOH Market Fundamentals
> Demand fundamentals improving after: KOH Revenue By Customer Segment > Warmer than average winter in 2015; 2% 6% and 22% 8% KOH Market > Agricultural weakness negatively Fundamentals impacted fertilizer demand > Food and distribution demand has been stable 30% 18% 14% Ag Intermediates Chemical Dis
Slide 26: Sodium Chlorite Market
> Two North American producers, approximately same size Sodium Chlorite Revenue by > Demand initially slowed in 2016, now showing Customer Segment signs of improvement 8% 4% Sodium > Municipal water treatment is the largest market 24% and continues to grow Chlorite 16% > Oil and gas industry breaker
Slide 27: Evolution 2020
> Sodium chlorate optimization and sales strategy > Improved go-to-market strategy > Increase export volumes Evolution 2020 > Evaluate plant expansions and continued focus on low-cost operations > Chlor-alkali sales and distribution optimization > Continuous cost improvements > Optimize the supply c
Slide 28: Specialty Chemicals Evolution 2020 Targets
Key Performance Targets for 2020 Metric Objective Growth (p.a. – “per annum”) Specialty Organic EBITDA growth 5% p.a. Chemicals Evolution EBITDA margin 2020 Targets EBITDA to revenue 18% Customer experience Net Promoter Score 50+ Sodium Chlorate Average Operating Rates(1) 100% Operating efficiency 8
Slide 29: Specialty Chemicals Growth Profile
Evolution 2020 goal of achieving $10-$50 million increase in EBITDA from organic growth, sodium chlorate optimization and chlor-alkali recovery Specialty Chemicals Chlor-alkali Recovery Growth Profile Sodium Chlorate Optimization Organic Growth of 3%-5% 2016E 2020E See “Forward-Looking Information”
Slide 30: Summary
> Customer-centric business > Strategically located sodium Summary chlorate and chlor-alkali production facilities > Export capability from East and West coasts > Demonstrated ability to effectively execute a variety of projects > Internal technical strengths > Proprietary technology > Targeting run
Slide 31: Questions
x QUESTIONS wr “Superior Plus 26 i
Slide 32: Energy Distribution
4 oP Superior Plus / ENERGY DISTRIBUTION
Slide 33: Energy Distribution
ENERGY DISTRIBUTION Greg McCamus, President Energy Distribution 27
Slide 34: Energy Distribution Overview
2015 EBITDA: $166.3 million 2015 Sales Volumes: 3.0 billion litres Energy Distribution Energy Distribution 2015 Gross Profit (1) Overview 9% 54% 37% Canadian Propane Distribution U.S. Refined Fuels (USRF) Supply Portfolio Management (1) Canadian propane distribution and USRF include other services g
Slide 35: Retail Energy Distribution Overview
United States Canada 1.6 Billion litres delivered 1.2 Billion litres delivered (413M USG) 4 Pipeline connected terminals 158 Distribution points 153,000 Customers 200,000 Customers Retail Energy 667 Vehicles 46 Bulk storage facilities Distribution 44 Market offices 117 Million litre storage capacity
Slide 36: Propane Market Fundamentals
Propane ग़ 4.1 billion litre retail market in Canada Market ग़ 11.0 billion litre retail market in current U.S. footprint Fundamentals ग़ Flat to 0.5% overall annual growth(1) ग़ Highly fragmented market with many players ग़ Heating oil conversion is expected to increase over time – carbon agenda ग़ Propa
Slide 37: Canadian Propane Distribution Overview
> 65 year old iconic Canadian retail brand Canadian > ~30-35% market share(1) Propane Distribution > National coast to coast propane Overview solution > A leader in safety and complex solutions for commercial and industrial customers > Leading customer portal and digital sensor solutions > 1,200 emp
Slide 38: Canadian Propane Retail
Gross Profit by Line of Business(1) > Geographic and end-use market differentiation 7% 4% 24% > Residential and commercial growing contribution Canadian > Improving overall mix Propane Retail 33% Customers 28% 4% Residential Commercial Agricultural Industrial Wholesale Auto (1) Based on 2015 results
Slide 39: Retail Energy Distribution - U.S. Operations
Competitive Position > Superior Plus Energy Services – 13th largest propane company (LP GAS) > Compete with large MLP’s (Amerigas, Suburban, Ferrelgas) in propane > Relatively low market share at 14% in propane with room to grow Retail Energy > Roughly 5,000 small oil and propane competitors Distrib
Slide 40: Improved Business Mix at USRF
Propane heating mix has improved from ~40% in 2011 to ~60% in 2015, a 50% improvement from a more profitable line of business compared to heating oil Improved Business Mix at USRF 2011 Residential Gross Profit 2015 Residential Gross Profit by Business Line(1) by Business Line(1) 42% 42% 58% 58% Prop
Slide 41: Leadership at USRF Division
Andy Peyton, President, USRF Division Leadership at Mr. Peyton, President of the U.S. Refined Fuels USRF Division business, started with Superior on October 3, 2016 and will be located in Rochester, NY > Proven track record of success in the propane industry in operations, sales, and business develo
Slide 42: Sales and Marketing Execution
Sales and Marketing Execution 36
Slide 43: Industry Differentiation: Digitalization Journey
Integrated with Digital platform evolution • Service platform integration B2B (SMB) for appt. scheduling, asset Digitalization INDUSTRY DIFFERENTIATION information, compliance • Real time delivery and service Journey at • Small and medium status Superior B2B (Enterprise) commercial customers • Indus
Slide 44: Net Promoter Score Impact of mySUPERIOR
For 8,144 registered customers, mySUPERIOR.ca shifted sentiment from Significant Net detractors to promoters resulting in a 12-point NPS improvement: Promoter Score Impact of MySUPERIOR In the propane business you guys are leading edge, there is no question about it. There is no one in your industry
Slide 45: Residential Alternative Energy: Environmental & Economic Benefits
Residential Alternative Energy: Environmental & Economic Benefits 39
Slide 46: Fleet Conversion: Opportunities & Benefits
Fleet Conversion: Opportunities & Benefits 40
Slide 47: Remote and Temporary Power Generation
Remote and Temporary Power Generation: Opportunity & Benefits 41
Slide 48: Customer Experience Journey
Significantly improving the customer experience by solving customer inquiries from our contact centres in a “ONE and DONE” fashion Customer Experience 1. Improved Customer Satisfaction Journey 2. Reduced operating costs 3. CSR satisfaction and engagement 4. Customer retention 5. Increased revenue op
Slide 49: Service Business Evolution
Real-time service Mobile workforce scheduling management Service Service Management Business System integrated Evolution with Paperless billing Barcoding-enabled asset management Paperless work order management 43
Slide 50: Growth Through Acquisitions
Superior is uniquely positioned > Strong operating team > Good synergies in existing footprint Growth > Expertise in assessing and Through integrating Acquisitions > Rich opportunities > 110 target companies in Canada > 1,600 target companies in current U.S. footprint > Expansion opportunities in th
Slide 51: Caledon Propane Acquisition
> Locations: Bolton, ON (18M litres), Winnipeg, MB (4M litres) > Customers: 1,800 Caledon > Employees: 40 Propane > Assets: 5 Bulk, 11 Cylinder Acquisition “Superior’s team has the expertise to ensure the transaction meets my needs. They have ensured the stability of the company, reliability to our
Slide 52: Supply Portfolio Management
4 oP Superior Plus SUPPLY PORTFOLIO MANAGEMENT
Slide 53: Supply Portfolio Management
SUPPLY PORTFOLIO MANAGEMENT Shawn Vammen, Senior Vice President, Supply Portfolio Management 46
Slide 54: Supply Portfolio Management Overview
2015 Gross profit: $44.2 million > Supply Portfolio Management or Superior Gas Liquids (“SGL”) provides Edmonton expertise in wholesale supply, risk Supply management and logistics to Regina Superior’s businesses, and Portfolio third-party wholesale business Management > Third-party marketing (whole
Slide 55: Supply Portfolio Management Overview
Supply Portfolio Management Overview 48
Slide 56: Supply Portfolio Management Overview
> Significant growth over past five years Supply > Driven by improved procurement Portfolio and expanding wholesale Management presence Overview > Increased wholesale marketing staff in focus regions > Improved customer service > Increased utilization of internal assets to drive wholesale propane gr
Slide 57: Wholesale Marketplace
SGL’s 2015 Propane Distribution Market SGL’s 2020 Market Share in North America (1) Share Aspiration Wholesale 2% increase in market share Marketplace 4% Volumes increase by ~750 million litres 6% SGL SGL Market Share Market Share SGL Competitors SGL Competitors > SGL aspires to add ~750 million lit
Slide 58: Organic Wholesale Development
> Expanding presence on U.S. West Coast and in New York/New England states Organic > Deploying marketing resources Wholesale in expansion areas Development > Expanding butane sales coverage > Improved customer service > Increasing utilization of existing facilities > Continuing to develop offshore p
Slide 59: Wholesale Development Through Acquisition
> Pursuing potential opportunities for accelerated growth through acquisitions in Wholesale wholesale sector: Development > Wholesale companies Through > Wholesale assets in Acquisition strategic areas, including terminals and/or storage facilities > Strategic areas for asset development include Can
Slide 60: Summary
> LPG wholesale sector provides room for growth > Multiple growth avenues through organic initiatives and Summary potential acquisitions > Focus on increased sales into U.S. markets > Focus on customer service for growth and retention > Focus M&A efforts to identify possible targets > Ambitious five
Slide 61: Energy Distribution Evolution 2020 Targets
Key Performance Targets for 2020 Canadian Operating Expenses to Gross Profit (1) Metric Objective 78% Growth (p.a. – “per annum”) Energy 66% Active customer growth 3% p.a. Distribution Wholesale volume growth 10% p.a. Evolution 2011 2015 U.S. active propane customer growth 3% p.a. 2020 Operating rat
Slide 62: Energy Distribution Summary
> Solid leadership team with a proven track record > Strong market position and value proposition based on the “Digital Advantage” Energy > Attractive internal growth opportunities across our businesses Distribution > U.S. propane retail and commercial sales Summary > Canadian residential and commer
Slide 63: Evolution 2020 Energy Distribution Growth Profile
Evolution 2020 goal of achieving $40-$100 million increase in EBITDA from organic growth, continuous improvement and acquisitions Evolution Synergies 2020 Energy Acquisitions Distribution Growth Organic Growth of 3%-5% Profile 2016E 2020E See “Forward-Looking Information” 56
Slide 64: Questions
x QUESTIONS wr ™ Superior Plus 57 cc
Slide 65: Financial Overview
4 oP Superior Plus / FINANCIAL OVERVIEW
Slide 66: Financial Overview
FINANCIAL OVERVIEW Beth Summers, Senior Vice President & Chief Financial Officer 58
Slide 67: Superior Plus at a Glance
Shares outstanding (1) 142.8 million Performance vs. S&P/TSX Index to October 31, 2016 (5) TSX share price (2) $11.39 250% Superior Plus Market capitalization (2) $1.6 billion 200% at a Glance 150% Enterprise value (2) $2.1 billion 100% Monthly dividend per share $0.06 50% 0% Dividend yield (2) 6.3%
Slide 68: Financial Highlights
Reduced Leverage: Reduced Interest Burden: Total Debt/EBITDA (1) Interest Expense (1) 7.0 $90.0 31% 35% 6.0 $80.0 28% 26% 30% $70.0 21% 5.0 25% $60.0 15% Millions 4.0 $50.0 14% 20% 13% 3.0 6.0x $40.0 $79.2 15% 5.1x $68.9 $71.7 $30.0 Financial 2.0 1.0 4.3x 3.9x 3.5x 3.2x 2.2x $20.0 $58.7 $48.0 $47.1
Slide 69: Financial Outlook 2016 & 2017
2016 2017 Adjusted Operating cash flow per share (1),(2) $1.40 - $1.60 $1.45 - $1.75 Leverage 2.0X – 2.4X 1.8X – 2.2X 2016 & 2017 Financial Guidance commentary: Outlook > 2017 financial outlook of AOCF per share represents a 7% increase compared to the 2016 financial outlook using the midpoint of th
Slide 70: Debt Management & Capital Spend
> Objective for long-term total debt to EBITDA of 3.0X has been achieved > As at September 30, 2016 total debt to EBITDA was at 2.2X(1) 2016 and 2017 Estimated Capital Spending $115-$120 Debt 120 $100-$105 Management 100 & Capital 80 Spend $ in millions 60 40 20 0 2016 2017 Maintenance Growth Financ
Slide 71: Term Debt Maturity Profile
Debt Maturity Schedule ($ millions) Credit Facility High-Yield Convertible Debentures (1) 97 200 Term Debt 149 Maturity Profile as at 2016 2017 2018 2019 2020 2021 September 30, > Superior’s maturity schedule is being actively managed 2016 > The next material maturities are: > 2019 $97 million 6.0%
Slide 72: Credit Rating Summary
DBRS Corporate Rating BB (high) Stable Credit Rating Senior Secured BB (high) Stable Summary Senior Unsecured BB (low) Stable S&P Corporate Rating BB Stable Senior Secured BBB (-) Senior Unsecured BB 64
Slide 73: Summary
Summary > Leverage below long-term target of 3.0X > Hedges associated with 2016 & 2017 reset at ~$1.30 CAD:USD > Continued strong access to capital > Target payout ratio of 40% to 60% (including maintenance capital, CRA and lease repayments) > Sustainable dividend with growth potential 65
Slide 74: Questions
x QUESTIONS wr “Superior Plus 66 i
Slide 75: Summary
4 oP Superior Plus / SUMMARY
Slide 76: Summary
SUMMARY Luc Desjardins, President & Chief Executive Officer 67
Slide 77: Superior Plus: Goals for 2017
Ŀ Execution on key themes of Evolution 2020 Superior Plus: ग़ Internal growth ग़ Continuous improvement programs Goals for Superior Plus ग़ Talent management 2017 ग़ Sustainable capital structure and cash flow profile ग़ Increased resources focused on acquisitions Ŀ Continuous focus on cost improvement Ŀ
Slide 78: Our Vision – Evolution 2020
We will focus on improving our operations and building our future Internal Growth > Effective sales and marketing to target 2% growth above the industry Our Vision – > Differentiate our products through industry-leading customer service Evolution 2020 > Leverage our superior logistics and technology
Slide 79: Our Vision – Evolution 2020 EBITDA Goal
Evolution 2020 goal of achieving $50-$150 million increase in EBITDA from organic growth, continuous improvement and acquisitions Our Vision – Specialty Chemicals Evolution 2020 Energy Distribution Organic Growth Superior Plus: > Attractive and sustainable dividend > Low leverage > Compelling growth
Slide 80: Questions
x QUESTIONS wr “Superior Plus 7 i
Slide 81: Non-GAAP Financial Measures
Throughout the presentation, Superior has used the following terms that are not defined by GAAP, but are used by management to evaluate the performance of Superior and its businesses. Since non-GAAP financial measures do not have standardized meaning prescribed by GAAP and are therefore unlikely to