Superior Plus Corp. (OTCPK:SUUIF) Q2 2022 Earnings Conference Call August 10, 2022 10:30 AM ET
Company Participants
Rob Dorran – Vice President, Capital Markets
Luc Desjardins – President and Chief Executive Officer
Beth Summers – Executive Vice President and Chief Financial Officer
Conference Call Participants
Nelson Ng – RBC Capital Markets
Chi Le – Desjardins
Joel Jackson – BMO Capital Markets
Ben Isaacson – Scotiabank
Robert Catellier – CIBC
Patrick Kenny – NBF
Matthew Weekes – iA Capital Markets
Steve Hansen – Raymond James
Daryl Young – TD Securities
Operator
Good day and welcome to the Superior Plus 2022 Second Quarter Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Rob Dorran, Vice President of Capital Markets. Please go ahead.
Rob Dorran
Thank you, Sheri. 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 SEDAR and Superior’s website yesterday for further details. Dollar amounts discussed on today’s call are expressed in Canadian dollars unless otherwise noted.
I will now turn the call over to Luc.
Luc Desjardins
Well, thank you Rob and good morning, everyone. Thanks for joining the call to discuss our second quarter results. It’s to say, we’ve maintained the strong momentum we generated in quarter one 2022 and through the quarter two. It is important to note that quarter two, along with quarter three, are seasonally slower quarters for our business due to the lower heating load and, typically together, amounts only approximately 10% of our annual EBITDA.
Keep in mind that recently, we’ve acquired Kamps and Quarles. So if you look at the full year, we get 25% of the cost of those two businesses for this quarter but only 10% of the sales. So no doubt that you’ll end up having a – for the timing of those acquisitions, this is how it connects for quarter two and three. So, they are – over a full year, of course, the full results are there and the integration plans are going extremely well. So our quarter two results are testament of our strength and our business in the face of rising costs due to inflation whether that in volatility commodity costs, which has driven some customer conservation. But as we look to the past, in 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 current year-to-year.
We saw the benefit of acquisitions completed over the last year to high volume quarter-over-quarter. However, we also saw a higher operating expense in the quarter based on our strong first quarter results and the second quarter results, we are confirming and are very comfortable that our adjusted EBITDA guidance range of CAD425 million to CAD465 million is right on target. We are making great progress on our Superior Way Forward EBITDA growth initiative through acquisition, continuous improvement and organic growth. On June 1, we closed acquisition and delivered fuel business of Quarles Petroleum, which expanded the operation in the attractive Virginia market. We’re excited about having this established retail propane distributor to our strong base in the Eastern U.S. region.
We also closed three smaller acquisitions in 2022, 1 in Ohio and 2 in South Carolina, for a total of CAD12.9 million, quite smaller add-on acquisition. With these 4 acquisitions, we’re on track to achieve the lower end of our previous statement – excuse me for a minute, acquisition target, excluding the Kamps acquisition, of CAD200 million to CAD300 million and core assets in 2022. We released our second annual sustainability report in June which contains improved disclosure from an inaugural report and demonstrate our focus on prioritizing ESG in our operation. We believe Superior Propane as a product will play a significant role and 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 are 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 InEnTec to bring renewable DME to our customer base, providing a carbon-friendly enhance to traditionally sourced propane. InEnTec plasma enhanced smelter PEM gasification process will divert organic waste from landfill and convert into carbon-friendly, clean-burning DME, which can be effectively blend with propane and use as an alternative renewable fuel of result.
We are 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 this will be selling our country plant fields. According to EPA, organic material continues to be a largest component of municipal solid waste and also contribute to increased 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 or gross proceeds of CAD288 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 growth through acquisitions, investment in organic growth and continuous improvement project. Having accelerated our acquisition in 2021, and to start 2022, our focus in 2022 will be integrating and capturing the synergy from acquired business. I can assure you, we have 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 U.S. and Canada. So we’re confident, and we will continue to acquire quality retail propane assets and achieve a Superior Way Forward target of CAD1.9 billion. And 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 two 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 initiatives and drive shareholder returns. A recount of what we’ve accomplished over those past 11 years, and we look forward to executing our plan for the ongoing benefit of all our stakeholders.
I will now turn the call over to Beth to discuss the financial results in more details.
Beth Summers
Thank you, Luc, and good morning, everyone. As Luc mentioned, Q2 is a seasonally slower quarter for our business as we exit the colder winter months, and the results are in line with our expectations. Superior generated second quarter adjusted EBITDA of CAD25.6 million, a CAD6 million or 19% decrease over the prior year quarter. This was primarily due to the impact from the huge benefit that was received in the prior year’s 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 U.S. Propane and lower corporate costs.
In addition, as Luc mentioned previously, with the Kamps and Quarles acquisitions, 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 CAD85 million, an increase of CAD48.9 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 CAD16.2 million, an increase of CAD2.2 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 CAD13.3 million, a decrease of CAD8 million from the prior year quarter, primarily due to higher operating costs as a result of the impact of the CAD7.8 million fuel 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 listing of public health measures associated with COVID. Wholesale Propane adjusted EBITDA was CAD1.8 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 CAD6 million, a decrease of CAD2.2 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 CAD0.3 million compared to a gain of CAD2.8 million in the prior year quarter due to lower average hedge rate relative to changes in exchange rates and a decrease in amount hedged as a result of the sale of the Specialty Chemicals segment.
Superior’s total net debt to adjusted EBITDA leverage ratio for the trailing 12 months ended June 30, 2022 was 3.7x, which is within our target range of 3.5x to 4x. As Luc mentioned, we’re maintaining our 2022 adjusted EBITDA guidance range at CAD425 million to CAD465 million with a midpoint of CAD445 million. For the remainder of 2022, we anticipate average weather to be consistent with the 5-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.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question will come from Nelson Ng with RBC Capital Markets. Please go ahead.
Nelson Ng
Great, thanks. And Luc congrats on your retirement plans.
Luc Desjardins
Thank you.
Nelson Ng
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 are 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?
Luc Desjardins
Yes. It’s very early to be 100% sure, but I am convinced personally, even before we get customer and what’s the pricing for customers by the time the production comes on, really confident we will have similar margin. We are 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 that margins are going to be as good. I’m even a bit optimist that we can try to get more because it’s green and there is a lot of customers that are going to want green propane. And I think there’s a tweaking for us that at least what we have at margin and maybe optimistically a bit more.
Beth Summers
And the one thing that I’ll just add, Nelson, is that we’ll have the ability to blend the DME. So we will have the product that we will 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 is the two options.
Nelson Ng
Okay. And there is probably limited CapEx you need to make for this, right?
Luc Desjardins
Right. Those CapEx are not on our watch.
Beth Summers
Yes, we are buying the product.
Luc Desjardins
Yes.
Nelson Ng
No, I am just thinking from an equipment perspective for blending and other things and you are just going to use the same propane trucks to make the deliveries, right?
Beth Summers
It will be the same propane trucks, but there will be a small capital requirement to have the equipment to do the blending.
Luc Desjardins
With the same thing…
Beth Summers
Yes, it’s the same thing. It’s just blending equipment.
Nelson Ng
Okay, got it. And then, Beth, you touched on consumer conservation of energy due to higher prices. So, can you – there is 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 that you see from some – versus what you expected, assuming a similar temperature of weather?
Beth Summers
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 at this point in time, we are 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. Luc, I am not sure if there is something you want to add?
Luc Desjardins
Yes. 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 the customer shouldn’t think, that Superior charging me too much. Philosophically, if you go back with a year, something like that happen, they are charging me too much. We’re 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, will be an issue too much because everybody knows wherever you are today, you know that every emerging content gone up so much, but people are aware it’s not Superior gauging and increasing their margin too much. So I think we had a path this year because it’s known around every segment of customer. Well, energy guys are really going up. So one thing I can also confirm is if there is a 1% conservation, I think what happens, I think that somewhat in quarter two, people might not take the fill. But when quarter three comes or four, they will take – will 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 am zero worried that we will not cover that some ways and make this a tougher process.
Nelson Ng
Okay, great color. One more question before I get back into queue. So Luc, in terms of your retirements, like what were the key factors that led to your decision to retire next year?
Luc Desjardins
A couple of things. First, I am very healthy, still full of energy and – so I just love work. But I think I could have done before here as you know from a part of an equity firm, I have done a real project that I am not CEO and done traveling, working present these 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’s a tough decision because company’s coming to the level that we can say, wow, like with the two acquisitions we just did, they are going to improve the bottom line by 25%. You can find that and put my name to it, it happens. So I think we’re in a good position of how we execute and the team in place and the operation effectiveness that’s coming, we have continuous improvement every year. We have to keep our margin in the 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 of all 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 to them, I am telling you that. I’m doing this, but at the same time, if a year becomes 14 months because of necessity or it already becomes 10, because you get to the new CEO person sooner, I’m flexible to help until the end, and I want this company to do well. I still own a ton of stock. So most probably maybe earlier than I would have expected from my own lifestyle, but get to a point and we say, well, maybe bring it down a notch from the fashion drive and experts and work. So it was all that.
Nelson Ng
Okay, thanks for the detail, Luc. Congrats again.
Operator
Thank you. [Operator Instructions] That will come from the line of Chi Le with Desjardins.
Chi Le
Hi, Luc and Beth. And Luc, congrats on your retirement and the achievement you have had at Superior.
Luc Desjardins
Thank you.
Chi Le
Maybe just a bit on that, 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 internal versus external? Would you be as to be looking into U.S. as well?
Luc Desjardins
That has not been decided yet. So what happened is by me confirming with the board what I will do and say, a year, so it’s like not tomorrow, lots of time. We have a great year, and I want to make sure we’re on every aspect for the next until there and after. So for them, they have to alter them, sit down and say, okay, let’s look at the type of CEO we would want and they have not done all that work yet. So developing a profile, organizing a search, which will come in months to come, it’s not a panic sort of situation that demands a rush and make quick decisions 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 profile and then come to those conclusions in the next 3, 4 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 in kind of some into December, CEO of a company. I’ve been here 11 years or plus coming. And then we said, look, you made that decision, you declare, let’s announce right away. We are a public company. We don’t want any shareholder out there to know a month later or – so we have announced before all the work of preparing the succession was – the profile and the type of CEO has been the work is coming. So we have decided to announce immediately as soon as I’ve made my decision.
Chi Le
Thank you, Luc. Great color. Maybe this question is for Beth. So operating cost was higher, especially in the U.S. So I know you said part of it is due to the fixed conversion by the acquisitions and partly from inflation. So just want to see how would be the split between the increase between the two factor trying to see like what the run-rate could be going forward?
Luc Desjardins
I think I missed the two myself.
Beth Summers
Yes. I just try to – let me – I think I heard the question, just you’re a little choppy, somewhat we can hear. So are you asking with respect to 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?
Chi Le
Yes. Just trying to see how much of the increase attributable for each factor. So we can look at the run rate going forward. Thank you.
Beth Summers
Yes. 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 CAD7 million to CAD9 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.
Chi Le
Thank you. Go ahead. Go ahead.
Beth Summers
I was just going to say, so for run rate, you could think of the costs from that perspective, but remember, a lot of the costs are variable in nature as well. So the costs will still always be higher in Q4 and Q1 on an even run rate basis.
Chi Le
Yes. Thanks, Beth.
Beth Summers
Okay.
Operator
Thank you. [Operator Instructions] That comes from the line of Joel Jackson with BMO Capital Markets. Please go ahead.
Joel Jackson
Good morning, Luc and Beth. If we look at the rest of the pipeline for prepaying tuck-ins or acquisitions this year, are we pretty much done or at least done for what actually could impact 2022 earnings?
Luc Desjardins
What could happen, Joel, is more small tuck-in, and the return are quite big when you do a small tuck-ins. So that could happen. When it comes to the mid to larger size, nothing this year. We really are focusing on the integration of the two, which is ahead of plan by the way of Quarles and Kamps, doing it faster and quicker than the 18 months we usually take because we ended up buying them at a propelling timing, if you want, look for the next 10, 20 years. But for this year, April, May, you’d rather buy something in November, you get the winter. So we have – but it’s giving us the opportunity to say, okay, this summer, we still made this happen sooner or faster. So there will be all hands on deck to integrate properly those two-sized company, small tuck-in and then review for bigger, larger deals in the years to come. We’re on a cheaper debt down. And so it’s not much coming in the next while.
Beth Summers
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 will only get roughly 35% of the EBITDA, and that happens in Q4. But as Luc’s saying, as we’re looking at it, it’s not – it’s like there is nothing in our view from a materiality for this year or that would impact guidance.
Joel Jackson
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 up something? I’m asking the question the same way…
Beth Summers
Yes. No, that makes sense based on what we know currently, yes.
Luc Desjardins
Yes, makes sense.
Joel Jackson
The other question I have is covering the stock or company for a long time, we’re kind of used to what Canadian Propane margins are, good years, CAD0.19 a liter, CAD0.20 a liter; not such good years, CAD0.15, CAD0.16 a liter of gross profit per liter. And now that we’ve done the resegmentation, 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 when the dynamic is not as strong?
Luc Desjardins
Yes.
Beth Summers
Yes. I think, including the segment, and currently where we’re looking at it just assumes sort of lead the U.S. as it is. With respect to Canada, if you want to think it based on the segment, somewhere between CAD0.25 to CAD0.30 would be a range. So a challenging year, CAD0.25; a good year, CAD0.30. Obviously, customer mix, kind of an influence in Canada over where it sits within that range. And maybe the best way to think about Wholesale now that we separated out, typically Wholesale, those volumes will generate around CAD0.03 per liter.
Joel Jackson
That’s very helpful. Okay, I will leave it there. Thank you very much.
Beth Summers
Thank you.
Luc Desjardins
Thank you, Joel.
Operator
Thank you. [Operator Instructions] That will come from the line of Ben Isaacson with Scotiabank. Please go ahead.
Ben Isaacson
Thank you very much and congrats, Luc. I’m sure it’s bitter sweet. Just two questions, if I may. Number one, on organic growth, can you – 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, our market share is increasing. That’s not getting kind of taken back by some of the competitors without any meaningful spend?
Luc Desjardins
Okay. So if you look at Canada, there is some good growth right now because we lost some commercial 20% of our volume, which is less margin, especially in the oil field due to COVID. And right now, you’ll see for the next 2 years, about 6% or 7% growth a year in that segment. And then from a residential, we tip a lot of tools. And we’re getting internal growth in the rate of about 3% in the retail Canada. So a lot of good, good success in Canada’s internal growth versus overall industry maybe growing only 1%. And the sales were 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 6 months to take all our – the way we built the business of innovation, development and digitalization with customers internally, we do projects in Canada, we execute. We now have a service project in works in Canada for orchestrating the distribution of the logistics and [indiscernible]. So once we cover all the province in Canada, that’s in works, the machine is now rolled. It’s working, and we’re starting with Maritime. We will cover all of Canada, then we will go to the States.
So I guess what I’m saying is the States have done a ton of work and a lot of work on acquisition and integration, will be number one. And we’re then dealing and servicing the customer day to day. And then the marketing part that we have developed, the machine and the best tools in Canada is now this year started to be applied in the U.S. business. And there is the coordination between the best tools 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. won’t come to more growth than the 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 is differential between Canada and U.S. growth.
Ben Isaacson
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 midterm 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?
Luc Desjardins
In Northeast U.S.A, the margins are good. They would be in the average that we’ve discussed earlier.
Ben Isaacson
Sorry, sorry, sorry. Just to be clear, Luc, what I really mentioned is entering the Northern U.S. states, so the Dakotas and Montanas and kind of anything South of the Canadian border.
Luc Desjardins
So you have the West Coast, I would say, very good and the East Coast very good. The margin, when you get to middle of U.S.A., more co-ops, more industrial and less margin opportunity. And that’s the middle of the U.S.A. That’s why we kind of start in the East and West, and we have a lot of opportunity in those two, East and West segment. Middle, we’re not doing that.
Ben Isaacson
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 are all – they all suffered through tough winters and therefore, presumably would have higher propane use, especially in those rural areas. Is that fair to say? So higher volume, lower margin?
Beth Summers
I think the fact that the north, 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 is a lot of places. Like, in particular, if you think of the Canadian market, where you’d have sort of similar profiles when you start having the industrial-type customers, etcetera, so your margins tend to be less from that perspective. I think if we look to those markets, there is, at some point, margins to be made or are a good business, but we want to have a platform to try to build greenfield and build out the customers on that basis. And to date, with the opportunities and 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 on those areas at this point in time. So that’s where – as we’re always talking about, we look to the coasts first.
Ben Isaacson
Great. Thank you very much.
Operator
Thank you. [Operator Instructions] That will come from the line of Robert Catellier with CIBC. Please go ahead.
Robert Catellier
Hi, good morning, everybody and congratulations, Luc, on that decision. I have a related question. Oftentimes, when there is 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?
Luc Desjardins
Yes. So when 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, I think there are strategies to do acquisition, which every time you acquire one, you improve it by 25%. There is no intention to change that. The strategy is clear. It’s functioning like to train a higher multiple that we trade having a one business that’s successful from a – we always – we execute on what we promised, but – so that’s probably one issue that, hopefully, the market will understand what time of day, and we will get fixed 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, and none of that is on the agenda, and I don’t see any change coming from our strategy.
Robert Catellier
Okay. And I know it’s still quite early days, but have you had any traction with customers following the announcement of the Charbone initiative?
Luc Desjardins
No, but it’s too early. But it’s a good question. I’m meeting with them in 2 weeks. They want to build multi plants, and they have area perspective of doing a lot more than one. And we will be the distributor for the multi plants on the build, actually, Canada and U.S., not just Canada. So I’ll get to know more, and I want to visit the plant that they expect by September to be online producing and then – Sorel, Quebec. I want to go visit that. So we’re not much – I don’t know enough because it’s too early, but at least we have something tangible happening before you ramp the big dollars to it, but it’s starting. And then we will – we have a marketing development plan that’s in place to reach customers and see where it fits the best and the most. We will probably know a lot more in that regard next quarter.
Robert Catellier
Okay. And last question for me. As you’re probably aware, the U.S. Inflation Reduction Act contain some provisions for an alternative minimum tax. I’m not sure if you’ve had a chance yet to assess this, Superior would trigger any of those – that tax and what the possible mitigation strategies might be?
Beth Summers
Yes. 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 in our corporate structures and what that impact would be.
Robert Catellier
Yes, that’s understandable. Thank you.
Operator
Thank you. [Operator Instructions] That will come from the line of Patrick Kenny with NBF. Please go ahead.
Patrick Kenny
Yes. Good morning, everybody. And Luc, congrats on your announcement.
Luc Desjardins
Thank you, Pat. The first time I’ve met when I came to Calgary 11 years plus ago.
Patrick Kenny
That’s right. Yes. It’s hard to believe it’s been, I guess, over 6 years since the head office was moved out East. But I guess in light of the upcoming transition and looking at the cash flow mix today being majority U.S. based, not to mention most of the M&A opportunities are likely – so opportunities are likely set for 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 you still see Toronto as being the right place for the new CEO and the executive office over the long-term?
Luc Desjardins
Yes. So as I said that to a question earlier, I made the decision, a year could be a bit more if necessary there to help fill somebody in place. So none of those questions have been addressed by the Board. And what we ended up doing as soon as my decision was made is I tell the Federal market immediately. So it’s like, okay, no, they didn’t work on. They always look at succession. But none of the discussion is to want a Toronto or States. They were 55%, 45% right now on EBITDA, so just a bit more in the States. None of that has taken place. So – and they have a year or so. It looks like, I guess, we could have worked differently if they have meeting next month, a different story, but I’ll been 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 about moving the head office, none of that. Now it’s just in 6 months, 9 months, they start to think that, well, I 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.
Patrick Kenny
Got it. Fair enough. Maybe just back to the business and the conversation around energy prices. 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?
Luc Desjardins
Beth, anything comes to your mind?
Beth Summers
Well, I mean I think from the initial part of the question, whether we’ve seen any change in the pace of activity. 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 is an NG or something close to natural gas that is 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, I mean, we have seen that there are some large industrial customers that certainly that works out to get answer if there is a compressed natural gas hub somewhere close or near where those entities are. I mean I think from that perspective, that 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 is that pricing changes. And if it settles out, it’s 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 under sort of.
Patrick Kenny
Okay. Great. Thanks for that, Beth. And one more if I could. Just 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?
Beth Summers
Okay. And I’ll cover off the question around high-yield and access to liquidity. So 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 is 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 CAD300 million accordion as well just based on the current deal. So I think from our perspective, if there is something there that we want to fund, that people are supportive certain in all the discussions that we have had to date. So we’re confident that we could go forward and find the liquidity that we require. Luc, do you want to talk about the…
Luc Desjardins
Yes, [indiscernible] there is something. So from M&B and Brookfield really like the activity of the acquisition, want to continue, I alluded to it earlier that the acquisition and the valuation are down a bit, which is good for us. And there is no acquisition that we intend to do that is not going to be bringing an internal rate of return that’s going to better than the past one. Hopefully a little bit better because these valuations come down. So it has been for us. We’ve been explained, we kind of did a great job. She did a great job with Rob and the team to position us for the long-term and on interest rate, which is great. So they are great acquisition. But for all future acquisitions, you see valuation coming down somewhat, and we see total return has gone or better for new future deals.
Patrick Kenny
Okay, that’s great color. Thank you very much.
Operator
Thank you. [Operator Instructions] That will come from the line of Matthew Weekes with iA Capital Markets. Please go ahead.
Matthew Weekes
Good morning. Thanks for taking my question and congratulations, Luc, on the plan to upcoming retirement.
Luc Desjardins
Thank you.
Matthew Weekes
I just want to ask about maybe potential you’re following the announcement about the DME and with hydrogen as well. If you could just comment on what the pipelines like the kind of conversations you’re having with additional parties on future opportunities for clean fuels distribution and in light of the climate bill that’s been passed in the U.S. and maybe seeing increased growth in sort of renewable fuel side of the economy. Thanks.
Luc Desjardins
Yes. Thank you and great question. And there is more discussion going on absolutely with – for a new project and additional project. I’ll talk to the fact earlier about Charbone, where they want to build many plants in Canada and some in the States. And we’re the player that’s going to be organizing the logistic distribution to the end customer. We will own the customer, and we will have good margin. And the same with DME, a lot of the work is getting done, it’s with first announcement, more to come and very exciting. I think we will be as a large propane company, will be – like us to be the lead player when it comes to modernizing our offer to customers to be more renewable. And that’s where I think we’re going to make happen. More to come in that regard, it’s the big plan.
Matthew Weekes
Okay, thank you. I appreciate the commentary. I will turn the call back. Thanks.
Luc Desjardins
Thank you.
Operator
Thank you. [Operator Instructions] That will come from the line of Steve Hansen with Raymond James. Please go ahead.
Steve Hansen
Yes. Good morning, everyone. Thanks for the time. Well, the data that you’ve 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. Can you just remind us 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 baseload business as you serve your retail business as well? Thanks.
Beth Summers
Okay. So I’ll touch the second part of the question first, which is when you’re asking if there is 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, 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, on average, CAD0.03, when you look at that volume, is a good number. There are levers within there. You’re correct. One is just be selling the Wholesale volumes drive a certain amount of that margin, but it is the overall fundamentals of the market, which you are right, there is times where there is 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 set 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 is 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 is 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 Edmonton would start to set pricing. So what we typically will do, there are fluctuations depending on 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 will layer in 5-year averages. We will do the same when we forecast margins coming out of the Wholesale business.
Luc Desjardins
Let me add a couple of points first and we have seen it in difficult time with the rail blockage or weather being really extreme, who service the customer the best by a long, long shot is Superior. And that’s probably why, to a degree, we are 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 service customer properly. On top of that, when you look at the cost of us to serve the phase, the storage and the people in the office that doesn’t work, your internal rate of return are very good, because you have very low cost of doing that job of procuring and servicing. So your – CAD0.03 is not a big margin. But if you look at the return on investment in that business versus others, it could be better than the rest of other business we have. So it’s like, CAD0.03 doesn’t show the reality here. We sell what we sell, but the cost of CAD0.01 to do all the work. So it’s kind of a good return on investment, and the margins are not – the main factor is a big volume and the cost of infrastructure to service such business.
Steve Hansen
That’s a really good 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 have already consolidated a large part of Western Canada. So I am 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?
Luc Desjardins
Yes. On the customer to customer, it’s hard to say because we like to – that cost of service is quite high and the margins are 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 while we service to build that business, because we like to make better profit than that. But there is a project of 1,000 miles of pipeline going into the West Coast to the ocean and we are even underneath [indiscernible] all the way to the 1,000 miles. And we won that contract and it’s going to be a long-term contract with big volume, which by the way, have – volumes have the kind of price we have in propane on our sales and margin that we make. It’s organize the sites for them on the line that they’re building. So those are projects that are special different need additional type of scale, which we have on the Western Canada to do a project like that. And so it wasn’t a propane per se business. It’s you have propane to give energy to those people that are going to build the 1,000 miles, but we also offer a lot of other work that goes with that. Project like that we are in it because we have the scale, the skill. And we’ve gained a good project in that regard. The rest of all, I would say we’re probably maintained our customer base. And it’s growing very well now, which is a good thing. It’s a long time due. So probably don’t expect to win new customers to answer today, feeling about that.
Steve Hansen
Okay, very good Beth. Appreciate the time and congratulations Luc as well.
Operator
Thank you. [Operator Instructions] That will come from the line of Daryl Young with TD Securities.
Daryl Young
Hey, good morning everyone. Just one quick one for me. With respect to the 5-year plan, I don’t think you have shared any per share metrics related to that growth objective yet. But I am just curious if you have some internally you would be willing to share related to maybe free cash flow per share or cash flow per share growth or if you would consider adding those?
Beth Summers
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.
Daryl Young
Okay.
Beth Summers
On the earnings per share, we wouldn’t typically look at that, because again, it gets somewhat skewed by the unrealized gains and losses.
Daryl Young
Yes, fair enough, but I am just curious if there were…
Beth Summers
Yes. No, no, no, I understand the question. So I mean that’s – you are right, we haven’t disclosed that, but mathematically, I think you can do it that way.
Daryl Young
Okay. Sure. Yes, I just wanted to get a sense in terms of how much dilution maybe contemplated as part of the strategy and it sounds like you would expect to keep the share count pretty tight from current levels.
Beth Summers
Yes. And then that’s why I was saying, looking at the current amount, like as we look at going forward to achieve that CAD1.9 billion over the next 4.5 years, if that happens on an even basis, our view in being within that 3.5x to 4x, if we do that on average, CAD200 million to CAD300 million a year that from a liquidity perspective we wouldn’t have to look to equity.
Daryl Young
Right. Okay. That’s great. Thanks.
Operator
Thank you. And speakers, I am 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.
Luc Desjardins
Thank you. As I wrap up this call, I’d like to thank our management and employees. Very proud of all the accomplishments to date of 2022, a solid position to deliver the 2022 adjusted EBITDA guidance. Our Superior Way Forward initiatives are in work. So business as usual. Things are really coming properly. Wish you all the best and looking forward to a good 12 months where we are all coming.
Operator
This concludes today’s conference call. Thank you for participating. You may now disconnect.
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