(Source: Canada Newswire)
TSX: SPB
CALGARY, Aug. 6 /CNW/ -
HIGHLIGHTS
- The rapid decline in economic activity in the first half of 2009 was
the most significant factor which contributed to reduced sales in all
business segments. Superior's customers continued to conserve and
reduce inventories due to the prolonged and deep impact of the global
economic downturn. Superior continues to see positive signs that the
economy has bottomed and is expected to improve in the last half of
2009.
- Superior's revised forecast for adjusted operating cash flow per
share is $1.95 - $2.10 in 2009 compared to $2.18 per share in 2008, a
decrease of approximately 7% based upon the mid-point of the 2009
financial outlook range.
- Strong first quarter adjusted operating cash flow of $0.70 per share
combined with a seasonal weak second quarter adjusted operating cash
flow of $0.21 per share resulted in year-to-date adjusted operating
cash flow of $0.91 per share, which was 14% lower than the 2008
year-to-date period.
- Gross profits were $134.9 million and $323.2 million for the second
quarter and year-to-date, a decrease of 12% and 0%, respectively,
compared to prior year periods. Gross profits in the current year
were impacted by the recession resulting in reduced sales volumes.
- Second quarter and year-to-date EBITDA from operations decreased by
41% and 10% to $31 million and $111 million, respectively, compared
to prior year periods reflecting reduced sales volumes.
- Four quarter trailing EBITDA was $232.4 million resulting in a Senior
Debt to EBITDA ratio of 2.3x and a Total Debt to EBITDA ratio of 3.4x
as at June 30, 2009.
- The Port Edwards expansion project is on schedule and is being
commissioned during the third quarter of 2009. The project is
expected to start to provide a positive contribution in the fourth
quarter with annualized incremental EBITDA of US$20 - $30 million at
full capacity.
- On August 6, 2009, Superior entered into a definitive agreement to
acquire Specialty Products and Insulation Co. ("SPI") for the total
aggregate purchase price of approximately US$135 million anticipated
to close in September 2009. For details on the acquisition, please
refer to press release entitled "Superior Plus Announces Expansion of
its Construction Products Distribution Business with a US$135 Million
Acquisition" dated August 6, 2009.
FINANCIAL SUMMARY
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Three months ended Six months ended
(millions of dollars except June 30, June 30,
per share amounts) 2009 2008 2009 2008
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Revenue 454.4 567.2 1,057.9 1,248.6
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Gross profit 134.9 153.3 323.2 323.2
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EBITDA from operations(1) 31.0 52.7 111.0 123.4
Interest (7.7) (8.4) (18.0) (18.2)
Cash taxes (1.2) (4.2) (6.2) (5.9)
Corporate costs (3.2) (2.0) (6.6) (5.5)
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Adjusted operating cash
flow(1) 18.9 38.1 80.2 93.8
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Adjusted operating cash
flow per share, basic(1)(2)
and diluted(1)(3) $0.21 $0.43 $0.91 $1.06
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Dividends/Distributions
paid per share/unit $0.405 $0.405 $0.81 $0.80
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(1) EBITDA from operations and adjusted operating cash flow are key
performance measures used by management to evaluate the performance
of Superior. These measures are defined under Non-GAAP Financial
Measures in Management's Discussion and Analysis of the 2009 Second
Quarter Results.
(2) The weighted average number of shares outstanding for the three
months ended June 30, 2009 is 88.4 million (2008 - 88.4 million)
(3) For the three and six months ended June 30, 2009 and 2008, there were
no dilutive instruments.
FINANCIAL OUTLOOK
"The length and depth of the global recession has made forecasting the recovery of the businesses difficult, but Superior has responded swiftly to minimize the short-term impact of the recession. Superior is well-positioned and diversified to capitalize on the recovery and future opportunities given its strong balance sheet and operational expertise. We have navigated through one of the most severe economic downturns in the past century and remain committed to stability of dividends and creating value growth for our shareholders," said Chairman and Chief Executive Officer Grant Billing.
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2009(1) 2009(2)(4)
(millions of dollars, except per share amounts) Prior Current
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EBITDA from operations
Propane Distribution 95-105 95-105
Specialty Chemicals 100-110 95-105
Construction Products Distribution 20-27 20-25
Fixed-Price Energy Services 9-12 9-12
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Adjusted operating cash flow per share $2.00-$2.15 $1.95-$2.10
Dividends paid per share $1.62 $1.62
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Senior Debt/EBITDA Ratio(3) 1.9 1.9
Total Debt/EBITDA Ratio(3) 2.9 3.0
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(1) As provided in Superior's First Quarter 2009 Financial Results.
(2) The assumptions, definitions, and risk factors relating to the
Financial Outlook are discussed in Management's Discussion and
Analysis of the 2009 Second Quarter Results.
(3) Superior's debt ratios take into account the impact of the
off-balance sheet receivable sales program amounts, the efficiency
and growth projects and excludes Port Edwards project debt of
$150 million (US$130 million) as well as project EBITDA contribution.
Including the Port Edwards project debt with no corresponding EBITDA
would result in a year-end Senior Debt to EBITDA ratio of 2.6x and
Total Debt to EBITDA ratio of 3.7x.
(4) The current 2009 financial outlook does not include any benefit or
cost associated with the proposed acquisition of SPI anticipated to
close in September 2009.
Superior has revised its annual expectations for adjusted operating cash flow by $0.05 to be $1.95 - $2.10 per share in 2009 based upon year-to-date results and its current outlook for the remainder of 2009. The forecast decrease in EBITDA from operations has been partially offset by reduced interest costs and lower income taxes as compared to the previous outlook provided in the 2009 First Quarter Results. Superior's financial outlook for 2010 adjusted operating cash flow has been decreased to $2.05 - $2.25 from its previous first quarter outlook of $2.20 - $2.40 to reflect a deeper more prolonged slowdown in economic activity. The current financial outlook for 2009 and 2010 does not include any benefit or cost associated with the proposed acquisition of SPI anticipated to close in September 2009. Superior expects to update its financial outlook upon completion of the SPI transaction at the next quarterly release of its financial statements.
Although the timing of the recovery remains uncertain, Superior continues to see positive signs that the economy has bottomed and is expected to improve in the last half of 2009. Superior's successful marketing programs, focused cost cutting initiatives, anticipated demand from its customers, and a successful closing of the SPI acquisition are expected to provide support for a solid finish to the year and an improved outlook in 2010. The Port Edwards expansion project continues to remain on time and is scheduled to be commissioned during the third quarter of 2009. The Port Edwards expansion project will require the closure of the facility for approximately 4-6 weeks and this reduced production is included in the current 2009 financial outlook.
SEGMENTED INFORMATION
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Three months ended Six months ended
June 30, June 30,
(millions of dollars) 2009(1) 2008(1) 2009(1) 2008(1)
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EBITDA from operations:
Propane Distribution 4.7 12.9 49.6 50.8
Specialty Chemicals 20.2 25.7 52.3 51.7
Construction Products
Distribution 3.3 11.0 4.8 15.8
Fixed-Price Energy
Services 2.8 3.1 4.3 5.1
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31.0 52.7 111.0 123.4
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(1) EBITDA from operations is a key performance measure used by
management to evaluate the performance of Superior. This measure is
defined under Non-GAAP Financial Measures in Management's Discussion
and Analysis of the 2009 Second Quarter Results.
Propane Distribution
- EBITDA from operations were $4.7 million and $49.6 million for the
second quarter and first half of 2009, a decrease of $8.2 million and
$1.2 million, respectively, compared to prior year periods, primarily
as a result of a 9% decline in sales volumes due to the impact of the
economic recession in Canada.
- Total gross profits per litre for the second quarter and first half
of 2009 were 21.9 cents and 22.8 cents, a decrease of 0.7 cents and
an increase of 2.1 cents, respectively, compared to the prior year
periods.
- Retail propane and delivery gross profits of $46.8 million and
$126.4 million decreased by 9% and 4% in the second quarter and first
half of 2009, respectively, compared to the prior year periods.
Superior's sales and marketing program has produced positive results
in the first half of the year with annualized new customer volumes of
approximately 81 million litres partially offsetting the impact on
sales volumes due to the economic recession in Canada.
- Wholesale and related gross profits were $2.8 million and
$18.2 million in the second quarter and first half of 2009, a
decrease of $2.7 million and an increase of $6.6 million,
respectively, compared to the prior year periods, substantially due
to the timing of gross profits recognized in the 2008/2009 winter
heating season.
- Superior substantially completed the implementation of its new
routing and scheduling system in the second quarter and expects to
consolidate the logistics functions from six Regional Operation
Centres into one National Operations Centre during the third quarter
of 2009. Superior anticipates the installation of handheld computers
on the service fleet will be completed by the end of 2009. These
productivity improvements are estimated to have annual cost savings
of $5.8 million upon completion.
- EBITDA from operations is expected to be $95 - $105 million for 2009
consistent with the previous outlook provided in the 2009 First
Quarter Results. The benefits of sales marketing initiatives,
projected efficiency improvements in the cost structure and a
forecast improvement in economic activity provide support for
maintaining the outlook range.
Specialty Chemicals
- EBITDA from operations were $20.2 million and $52.3 million in the
second quarter and first half of 2009, a decrease of $5.5 million and
an increase of $0.6 million, respectively, compared to the prior year
periods.
- Gross profits in the second quarter and first half of 2009 decreased
by $2.2 million and increased by $6.8 million to $51.0 million and
$113.7 million, respectively.
- Chemical sales volumes of 155,000 (MTs) for the second quarter were
33,000 (MTs) lower than the prior year quarter primarily due to
reduced demand for specialty chemical products as a result of reduced
sales volumes to pulp customers. The Valdosta, Georgia facility was
temporarily idled in the second quarter reducing capacity by 8,000 MT
per month with cell line upgrades expected to be completed during the
third quarter. The Valdosta, Georgia facility is anticipated to be
restarted by the fourth quarter of 2009 due to stabilization of pulp
prices along with a forecasted increase in sodium chlorate demand.
- The Port Edwards, Wisconsin chloralkali facility expansion project
remains on budget and is being commissioned during the third quarter
of 2009. The conversion project has started up many of the systems
and will require a temporary closure of the facility for
approximately 4-6 weeks to complete the changes resulting in reduced
revenue and production volumes which has been reflected in the
revised financial outlook. It is expected to provide an annual
incremental US$20 - $30 million of positive EBITDA contribution at
full capacity.
- EBITDA from operations is expected to be $95 - $105 million for 2009,
a decrease of $5 million from the previous outlook provided in the
2009 First Quarter Results reflecting reduced chloralkali pricing.
Construction Products Distribution
- EBITDA from operations were $3.3 million and $4.8 million in the
second quarter and first half of 2009, a decrease of $7.7 million and
$11.0 million, respectively, compared to the prior year periods.
- Gross profits in the second quarter and first half of 2009 were
$24.3 million and $48.7 million, a decrease of $11.8 million and
$16.0 million, respectively, compared to the prior year periods
primarily due to a 21% and 29% decline in drywall sales volumes in
the first and second quarter, respectively. Sales volumes declined
due to a rapid deterioration of the residential and commercial
construction activity as a result of the impact of a recession in
North America.
- Sales margins were consistent in most operating areas in the second
quarter and first half of 2009, compared to the prior year periods
due to a continued focus on margin management initiatives and the
impact of purchasing programs.
- Significant restructuring and cost reduction initiatives have been
made during the second quarter and first half of 2009 to adjust to
the changes in the market. These initiatives expect to have an annual
cost saving in excess of $6 million reflecting significant reductions
in employees in most locations along with consolidation of branch
locations.
- The fragmented nature of the specialty buildings products industry,
combined with the market downturn, provide additional consolidation
and product expansion opportunities for Winroc.
- Several leading indicators such as permits and housing starts have
provided positive signs of both the US and Canadian construction
markets bottoming with some improvement expected in the last half of
2009.
- EBITDA from operations is expected to be $20 - $25 million for 2009,
a decrease of $2 million in the upper-end of our previous outlook
provided in the 2009 First Quarter Results. The residential
construction activity in Canada and the US is starting to improve and
is expected to have limited benefit until later in 2009.
Fixed-Price Energy Services
- EBITDA from operations were $2.8 million and $4.3 million in the
second quarter and first half of 2009, a decrease of $0.3 million and
$0.8 million, respectively, compared to the prior year periods.
- Gross profits were $8.3 million and $15.3 million in the second
quarter and first half of 2009, a decrease of $0.3 million and
$0.1 million, respectively, compared to the prior year periods.
- SEM continued to focus its sales channels towards acquiring and
retaining Ontario commercial natural gas and electricity customers,
Quebec commercial natural gas customers and British Columbia natural
gas residential and commercial customers.
- Currently, SEM's portfolio of customers is approximately 70%
commercial and 30% residential by volume.
- EBITDA from operations is expected to be $9 - $12 million for 2009,
consistent with the previous outlook provided in the 2009 First
Quarter Results.
CAPITAL EXPENDITURE SUMMARY
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Three months ended Six months ended
June 30 June 30
(millions of dollars) 2009 2008 2009 2008
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Efficiency, process
improvement and growth
related 5.1 7.1 12.9 10.9
Other capital 1.8 2.8 3.3 4.4
Port Edwards expansion
project 29.6 3.3 56.2 8.5
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Earn-out payment on prior
acquisition - - 0.6 -
Acquisitions - 24.6 - 24.6
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Proceeds on disposition
of capital (1.1) (1.3) (2.9) (1.5)
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Total net capital
expenditures 35.4 36.5 70.1 46.9
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In the second quarter of 2009, Superior continued to improve its cost structure by investing $5.1 million of capital in efficiency projects primarily in the propane distribution and specialty chemicals divisions. The Port Edwards conversion project made good progress in the second quarter of 2009 with capital spending of $29.6 million (US$25.6 million). The project is on budget and scheduled to be commissioned during the third quarter of 2009. As at June 30, 2009, Superior has incurred US$91.6 million of the estimated US$130 million costs to complete the Port Edwards project.
KEY CORPORATE ITEMS
- Total interest expense of $7.7 million in the second quarter
decreased by $0.7 million compared to the prior year quarter
primarily due to lower average interest rates and the impact of the
appreciation of the Canadian dollar on US denominated interest costs,
partially offset by higher average debt levels.
- Superior had a $570 million syndicated credit facility with undrawn
credit capacity of approximately $293.5 million (excluding its
securitization program) as at June 30, 2009.
- As at June 30, 2009, Superior had utilized $85.9 million of its
existing securitization program.
- With the commissioning of the Port Edwards project, there will be
sufficient tax basis available to reduce 2009 US cash income taxes to
zero. Superior anticipates a US cash income tax reversal of
approximately $5.5 million to occur in the third quarter which will
result in an increase to adjusted operating cash flow per share of
approximately $0.06.
