Superior Plus is a premier North American diversified industrial company. The company is a leading distributor and marketer of propane and distillates, in the U.S. and Canada. It is also one of the largest suppliers of sodium chlorate, chlor-alkali and potassium and sodium chlorite in North America and internationally.
Superior Plus operates through Energy Distribution (accounting for ~75% of EBITDA from operations) and Specialty Chemicals (25%) businesses. The company operates eight production facilities in North America and one in Chile and is the second largest producer of sodium chlorate in North America and worldwide.
- Opportunity Score: 38
- Ticker: TSE:SPB
- Sector: Utilities
- Industry: Utilities - Regulated Gas
- Market Cap: 2.09B
- P/E: 60.65
- Dividend Yield: 6.08%
- Payout Ratio (Earnings): 360.00%
- Canadian Dividend Aristocrat: NO
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 1/10
- Dividend Income Fit: 4/10
Revenue Growth & Market Exposure
Superior Plus through its subsidiaries offers delivery, procurement and retail marketing of propane-related products, as well as distribution of liquid fuels including heating oil and propane gas. Its Specialty Chemicals business is popular as “ERCO Worldwide” with a rich history of 100 years and focuses on the production and supply of sodium chlorate and chlor-alkali products. ERCO serves a diversified end market and customers in various segments ranging from pulp and paper, food, and energy, to agriculture, water treatment, fertilizers and specialty chemicals. The residential segment accounts for the highest proportion of Superior’s gross profits followed by commercial and wholesale segments and others like motor fuels, oilfields and industrials.
Superior Plus is well positioned in the North American propane industry and should gain from a transition from traditional distribution model to Canadian platform, that it follows, resulting in improved efficiencies and reduced costs. The company is also favorably placed to benefit from the growth opportunities in new markets and through industry consolidation given its leading retail propane supplier status in Canada. The company is growing through tuck-in acquisitions. It acquired the assets of Rymes Propane and Oil and Champagne’s Energy recently. While Rymes added ~88,000 residential and commercial customers, Champagne increased propane and heating oil delivery volumes by ~11 million gallons.
Superior has demonstrated strong operational performance in the past few years but crashed along with many energy stocks this year. Superior ensured critical infrastructure was in place for uninterrupted supplies to its customers during COVID crisis. The company focuses on improving its product offering and delivery efficiency through the deployment of tank sensors.
Superior Plus sports a dividend yield of 6.14% but a high payout ratio. The company has grown its dividends at 3% CAGR In the last five years. It is currently paying a monthly dividend of $0.06 per share but did not increase its dividend payout this year. Superior’s targeted payout ratio is 40%-60%
Brookfield Asset Management bought preferred shares worth $260 million of Superior Plus having the option to exchange them for common shares of Superior. The company is set to benefit from Brookfield’s investment as it provides the necessary liquidity to pursue future acquisitions as well as maintain a strong balance sheet. It will target companies with attractive synergy opportunities and low valuations. Superior used the net proceeds to pay down a credit facility. It is also making good progress integrating the operations of NGL Propane and realized $20 million in run-rate synergies in the last year.
Superior has no material maturities until 2024. The company expects to maintain leverage in the target range of 3.0x – 3.5x in 2020 and a reduction of ~$30 million in cash capital expenditures and ~$30 million in operating expenses. Superior incurs about 70% in variable cost granting it the flexibility to control costs in response to low demand. The company’s roll out of its propane distribution model into the U.S. business should further improve operational efficiency and reduce costs. The company expects 2020 adjusted EBITDA within $475-$515 million guidance range.
Most competitors in the North American propane industry have traditional distribution models while Superior’s propane distribution model is modern, providing it a competitive advantage. Other than Superior Plus, Fortis, AltaGas, Hydro One also operate in the Regulated Utilities industry in Canada. Superior also competes with large, full-service, national marketers and smaller, independent local marketers in the U.S. propane distribution market. Its Specialty Chemicals business competes with other sodium chlorate, chlor-alkali and potassium producers on a worldwide basis. Superior might face a decrease in volumes of hydrochloric acid and sodium chlorite due to lower price of oil and reduced drilling activity. Customer mill shutdowns could further trigger a decline in sodium chlorate volumes.
|TickerKey||Ticker||Company||Sector||Industry||Score||Quote||Market Cap||P/E||FPE||EPS||Yield Raw||Yield||PayoutRatio||Payments||Dividend||Chowder||GrowthRating||IncomeRating||Tollbooth||Ambassador||Achiever||Aristocrat||King||Country||Graph|
|TSE:FTS||FTS||Fortis||Utilities||Utilities - Regulated Electric||0.67||52.63||24.46||19.73||19.73||2.67||0.0384||3.84||0.7566||4||2.02||0.0964||6||7||Tollbooth - Regulated||NO||YES||YES||NO||Canada||1|
|TSE:BEP.UN||BEP.UN||Brookfield Renewable Partners L.P.||Utilities||Utilities - Renewable||0.35||72.20||22.78||0.00||0.00||-0.61||0.0320||3.20||1.0000||4||1.74||0.0613||2||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1|
|TSE:BIP.UN||BIP.UN||Brookfield Infrastructure Partners||Utilities||Utilities - Diversified||0.68||57.00||17.89||71.16||71.16||0.80||0.0503||5.03||3.5816||4||2.15||0.1423||8||7||Tollbooth - Regulated||YES||YES||NO||NO||Canada||1|
|TSE:H||H||Hydro One||Utilities||Utilities - Regulated Electric||0.52||29.11||17.39||9.80||9.80||2.97||0.0348||3.48||0.3415||4||1.01||0.0767||3||6||Tollbooth - Regulated||NO||NO||NO||NO||Canada||1|
|TSE:EMA||EMA||Emera||Utilities||Utilities - Diversified||0.73||53.15||13.21||15.69||15.69||3.39||0.0480||4.80||0.7522||4||2.55||0.1078||6||9||Tollbooth - Regulated||NO||YES||YES||NO||Canada||1|
|TSE:AQN||AQN||Algonquin Power & Utilitties Corp||Utilities||Utilities - Renewable||0.78||20.20||11.96||15.79||15.79||1.28||0.0409||4.09||0.6459||4||0.62||0.1276||7||8||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:NPI||NPI||Northland Power Inc.||Utilities||Utilities - Renewable||0.47||43.09||8.64||22.77||22.77||1.89||0.0278||2.78||0.6349||12||1.20||0.0384||3||5||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1|
|TSE:CU||CU||Canadian Utilities||Utilities||Utilities - Diversified||0.69||31.14||8.48||20.89||20.89||1.49||0.0559||5.59||1.1689||4||1.74||0.1473||6||8||Tollbooth - Regulated||NO||YES||YES||NO||Canada||1|
|TSE:ALA||ALA||AltaGas||Utilities||Utilities - Regulated Gas||0.63||16.89||4.72||14.16||14.16||1.19||0.0568||5.68||0.8067||12||0.96||0.0568||3||6||Tollbooth - Regulated||NO||NO||NO||NO||Canada||1|
|TSE:RNW||RNW||TransAlta Renewables Inc.||Utilities||Utilities - Renewable||0.50||16.70||4.44||42.12||42.12||0.40||0.0563||5.63||2.3490||12||0.94||0.0783||4||4||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:ACO.X||ACO.X||Atco||Utilities||Utilities - Diversified||0.68||37.09||4.30||15.87||15.87||2.34||0.0469||4.69||0.7439||4||1.74||0.1712||6||7||Tollbooth - Regulated||YES||YES||YES||NO||Canada||1|
|TSE:INE||INE||Innergex Renewable Energy Inc||Utilities||Utilities - Renewable||0.44||24.02||4.19||0.00||0.00||-0.60||0.0300||3.00||1.0000||4||0.72||0.0300||4||6||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:BLX||BLX||Boralex Inc.||Utilities||Utilities - Renewable||0.42||38.75||3.97||0.00||0.00||-0.24||0.0170||1.70||1.0000||4||0.66||0.0659||5||4||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:CPX||CPX||Capital Power Corporation||Utilities||Utilities - Independent Power Producers||0.55||29.36||3.09||0.00||0.00||-0.70||0.0698||6.98||1.0000||4||2.05||0.1418||5||8||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:SPB||SPB||Superior Plus||Utilities||Utilities - Regulated Gas||0.38||11.85||2.09||60.65||60.65||0.20||0.0608||6.08||3.6000||12||0.72||0.0608||1||4||Tollbooth - Regulated||NO||NO||NO||NO||Canada||1|
|TSE:TA||TA||TransAlta||Utilities||Utilities - Independent Power Producers||0.33||7.90||1.64||26.63||26.63||0.30||0.0215||2.15||0.5667||4||0.17||0.0215||0||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1|
Superior Plus is an essential service provider. The company distributes propane which is required to heat and power customers’ homes, businesses, and vehicles. As one of largest propane and specialty chemicals distributors in North America, Superior is steadily consolidating propane operations and the current crisis further gives it many lucrative acquisition opportunities to further expand. The Brookfield investment will also support Superior Plus financially while synergistic acquisitions could boost future cash flows substantially.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.