Superior Plus Corp. ('Superior') (TSX: SPB) today released its first quarter results for the period ended March 31, 2023.
Record First Quarter 2023 Adjusted EBITDA1 of $272.1 million, a 9% increase from the prior year
First Quarter net earnings of $147.1 million, an increase of $6.1 million from the prior year
Superior is increasing its 2023 Pro Forma Adjusted EBITDA1 guidance range to $620 million to $660 million, with a midpoint of $640 million, which includes the expected full twelve months of Certarus 2023 Adjusted EBITDA in the range of $175 million to $185 million. The full economic benefit of Certarus' expected 2023 Adjusted EBITDA will be retained in the business Certarus also achieved record First Quarter Adjusted EBITDA of $62.8 million, a $35.0 million or 126% increase from the prior year quarter 1 Adjusted EBITDA and Pro Forma Adjusted EBITDA are Non-GAAP Financial Measures.
In announcing these results, Allan MacDonald, President and Chief Executive Officer of Superior said, 'I would like to congratulate the Superior and Certarus Ltd. ('Certarus') teams on delivering solid results to start 2023. The Superior team delivered a strong first quarter consistent with management expectations, even with significantly warmer weather in most regions compared to the prior year and the five-year average. The first quarter Adjusted EBITDA of $272 million was a $22 million increase from 2022, and a record first quarter for Superior. The Certarus business continues to perform well ahead of expectations, delivering record first quarter EBITDA of $63 million.'
We are also increasing the 2023 Pro Forma Adjusted EBITDA guidance range driven by higher expected results for Certarus, which we now expect to deliver 2023 Adjusted EBITDA in the range of $175 million to $185 million,' continued Mr. MacDonald. 'I look forward to working with the Superior organization and welcoming the Certarus team to our organization in 2023.'
FIRST QUARTER HIGHLIGHTS
Net earnings of $147.1 million in the first quarter compared to $141.0 million in the prior year quarter driven by higher revenue and gross profit, partially offset by higher selling, distribution and administrative expenses ('SD&A'), a lower gain on derivatives and foreign currency translation of borrowings, higher income tax expense and finance expense.
Basic and diluted earnings per share attributable to Superior was $0.63 per share, a decrease of $0.05 per share from the prior year quarter due to the impact of the higher amount of weighted average shares outstanding, partially offset by higher net earnings.
Adjusted EBITDA for the first quarter was $272.1 million, an increase of $21.7 million compared to the prior year quarter as a result of higher EBITDA from operations2, partially offset by higher corporate costs2 and a realized loss on foreign currency hedges compared to a realized gain in the prior year quarter. EBITDA from operations increased primarily due to higher Adjusted EBITDA in North American wholesale propane distribution ('Wholesale Propane') and U.S. retail propane distribution ('U.S. Propane'), partially offset by modestly lower Canadian retail propane distribution ('Canadian Propane') Adjusted EBITDA.
U.S. Propane Adjusted EBITDA for the first quarter was $175.9 million, an increase of $13.0 million from the prior year quarter of $162.9 million due to the impact of acquisitions completed in the prior year and, to a lesser extent, higher average margins related to increased prices to offset inflation and the impact of the weaker Canadian dollar on the translation of U.S. denominated transactions, partially offset by lower volumes related to the significantly warmer weather and higher operating costs2 related to inflation and labour costs.
Canadian Propane Adjusted EBITDA for the first quarter was $65.8 million, a decrease of $3.8 million from the prior year quarter of $69.6 million as a result of higher operating costs, partially offset by higher gross profit. Operating costs increased due to higher costs associated with inflation and the impact of the Canadian Emergency Wage Subsidy recorded in the prior year quarter. Gross profit increased driven by higher average margins related to increased sales prices to offset the impact of inflation, partially offset by lower sales volumes related to warmer weather.
Wholesale Propane Adjusted EBITDA for the first quarter was $40.2 million, an increase of $21.1 million from the prior year quarter of $19.1 million primarily due to contribution from the acquisition of Kiva Energy, Inc. ('Kiva') and strong wholesale market fundamentals related to colder weather and lower propane inventories in the Western U.S.
Corporate costs for the first quarter were $5.7 million compared to $2.7 million in the prior year quarter due to higher incentive plan costs related to the change in the share price in the prior year quarter. Superior realized a loss on foreign currency hedging contracts of $4.1 million compared to a gain of $1.5 million in the prior year quarter due to lower average hedge rates relative to changes in USDCAD exchange rates.
Superior's Leverage Ratio2 for the trailing twelve months ('TTM') ended March 31, 2023, improved to 3.9x, which is within Superior's targeted range of 3.5x to 4.0x and is expected to remain within Superior's targeted range upon the closing of the Certarus transaction. The improvement from 4.1x at December 31, 2022 was a result of lower debt levels.
EBITDA from operations is a Non-GAAP Financial Measure. Leverage Ratio is a Non-GAAP ratio.
CERTARUS UPDATE
As previously communicated, the waiting period under the Hart-Scott-Rodino Act in the United States, where over 85% of Certarus' revenues are generated, expired on February 13, 2023. Superior and Certarus have now each complied with the Supplementary Information Request from the Canadian Competition Bureau, and the Canadian Competition Bureau continues its review of the transaction. Superior expects the acquisition will close in the second quarter.
In the first quarter of 2023, Certarus achieved record Adjusted EBITDA of $62.8 million, which was a $22.4 million improvement compared to the previous record quarter set in the fourth quarter of 2022, and a $35.0 million or 126% improvement from the prior year quarter. The growth in Adjusted EBITDA was driven by contribution from a new utility support contract, improved pricing, lower product costs, an increase in average mobile storage units ('MSUs') for the quarter, increased efficiencies and strong demand for Certarus' low carbon energy offering. Average daily sales volume was 71,723 MMBtu per day, a 17% increase compared to the prior year quarter. Average MSUs for the first quarter were 646, an 18% increase compared to the prior year quarter as a result of MSU purchases made in the past twelve months. As a result of the record quarter and expectations for the remainder of the year, Certarus now expects to achieve 2023 Adjusted EBITDA in the range of $175 million to $185 million.
We are proud of the continued strong execution by the Certarus team to start 2023', said Curtis Philippon, President and CEO of Certarus. 'The success of the regional and industry diversification initiatives has driven strong year over year organic growth across our compressed natural gas ('CNG'), renewable natural gas and hydrogen platform. We continue to improve MSU operating efficiencies and utilization, and in the first quarter, we added 10 more MSUs taking our total MSU count to 650 at March 31, 2023. We are excited about joining the Superior Plus team once the transaction closes, and look forward to working together to continue to organically grow the Certarus business.'
Certarus continues to be a leader in the distribution of hydrogen in North America and has supported more than 40 hydrogen projects. Recently, through a collaboration with ATCO, Certarus provided a 20% hydrogen and natural gas blend to the Edmonton Convention Centre that was used to power the Canadian Hydrogen Conference. At the conference, Certarus was also the proud recipient of the Hydrogen Delivery Award.
Capital Allocation
Capital Expenditures
Maintenance capital expenditures were $13.4 million in the quarter, compared to $7.3 million in the prior year quarter related to the timing of expenditures.
Efficiency, process improvement and growth-related capital expenditures were $16.7 million compared to $7.9 million in the prior year quarter due to the timing of tank purchases for new customers, integration activity and the impact of the weaker Canadian dollar on U.S. denominated capital expenditures.
Investment in leased vehicles and other leased assets was $9.0 million compared to $6.0 million in the prior year quarter related to the timing of renewing property leases, partially offset by the timing of delivery of leased vehicles.
Tuck-in Acquisitions
On February 1, 2023, Superior acquired all the issued and outstanding shares of ACME Propane, Inc. ('ACME'), a residential and commercial retail propane distributor in Lincoln, California for an aggregate purchase price of approximately US$3.3 million (C$4.4 million) before adjustments for working capital.
Normal Course Issuer Bid
On October 11, 2022, the TSX accepted Superior's notice of intention to establish a new normal course issuer bid program (the 'NCIB'). The NCIB permits the purchase of up to 10.1 million shares of Superior's common shares, representing approximately 5% of the issued and outstanding common shares as of September 30, 2022, by way of normal course purchases effected through the facilities of the TSX and/or alternative Canadian trading systems.
About Superior
Superior is a leading North American distributor and marketer of propane and distillates and related products and services, servicing approximately 936,000 customer locations in the U.S. and Canada.
About Certarus
Certarus is the North American leader in providing on-road low carbon energy solutions through a fully integrated CNG, renewable natural gas and hydrogen platform. Certarus safely delivers clean burning fuels to energy, utility, agricultural and industrial customers not connected to a pipeline. By displacing more carbon intensive fuels, Certarus is leading the energy transition and helping customers lower operating costs and improve environmental performance. With the largest fleet of mobile storage units in North America, Certarus is uniquely positioned to meet the growing demand for low and zero emission energy distribution.
Contact:
Tel: (403) 830-4262.
Non-GAAP Financial Measures and Reconciliation
Throughout this news release, Superior has identified specific terms that it uses that are not standardized measures under International Financial Reporting Standards ('Non-GAAP Financial Measures') and, therefore may not be comparable to similar financial measures disclosed by other issuers. Reconciliations of these Non-GAAP Financial Measures to the most directly comparable financial measures in Superior's annual financial statements are provided below. Certain additional disclosures for these Non-GAAP Financial Measures, including an explanation of the composition of these financial measures, how they provide helpful information to an investor, and any additional purposes management uses for them, are incorporated by reference from the 'Non-GAAP Financial Measures and Reconciliations' section in Superior's 2022 Annual MD&A dated February 16, 2023, available on www.sedar.com.
SUPERIOR PLUS CORP. 
