Luc Desjardins - CEO, President and Director Wayne Bingham - CFO and EVP Jay Bachman - VP of Investor Relations and Treasurer

Joel Jackson - BMO Capital Markets Sarah Hughes - Cormark Securities Jacob Bout - CIBC Benoit Laprade - Scotia Bank Patrick Kenny - National Bank Financial Steve Hansen - Raymond James

Good afternoon, and thank you, for joining us late on Friday. Sorry about that.

And welcome to the Superior 2015 first quarter results conference call. With me this afternoon call is Wayne Bingham, Executive Vice President and CFO; and Jay Bachman, Vice President of Investor Relation and Treasurer.

Wayne Bingham will provide an overview of the first quarter results, after which, I will provide an update on the strategy of the businesses. I’ll now pass the call to Wayne.

Thanks, Luc, and good afternoon, everyone. I'll make a few brief comments on the financial performance for the first quarter and then turn it back to Luc.

Our consolidated AOCF for the quarter was $0.75 per share compared to $0.77 before restructuring costs in the prior quarter, and represents a solid quarter performance for the company and in line with our expectations. The increase in the price of Superior shares during the quarter impacted AOCF by approximately $0.03 per share for LTIP costs on a quarter-over-quarter basis.

I'll now make a few brief comments in the individual business performance. Turning to the Energy Services.

Energy Services recorded an EBITDA of $83.3 million compared to $81.7 million in the prior quarter. Margins improved as a result of margin management initiatives and a lower commodity price environment.

In the propane Canada operations, margins were $0.209 per liter compared to $0.199 in the prior quarter. Margins in the USRF improved as well to $0.15 per liter as compared to $0.124 cents in the prior quarter.

Overall gross profit for Energy Services was $182.6 million versus $188.7 million in the prior quarter. On the operating cost side, the costs incurred of $99.3 million were 8% below the prior quarter, reflecting the initiatives of Destination 2015.

Average weather was 6% warmer in 2015 versus 2014, with weather in the East being 5% colder while weather in the West was 15% warmer than the prior year. Turning now to Specialty Chemicals.

The fundamentals in the chlorate side continue to be very good with the first quarter EBITDA of $30.5 million compared to $29.6 million in the prior quarter. EBITDA was assisted by a working - a foreign exchange benefit on the working capital revaluation.

Chlorate pricing was favorable to the prior quarter while volumes were down slightly. On the chloralkali said, volumes were up but were offset by lower realized prices.

The HCl market is weaker from the impact of lower oil prices on the demand for fracking services. Turning to Construction Products.

Our Construction Products Distribution division recorded a Q1 EBITDA of $4 million compared to $4.5 million in the prior year. We have re-launched the system integration project at CPD for a total estimated cost of $22 million to be incurred in 2015 and 2016.

I should note, the quarter includes $2.3 million of one-time costs related to LTIP and the increase in Superior shares and some system costs which were expensed. On the debt management side, we continue to track to meet our leverage goal of 3x to 3.4x as of the end of this year.

At March 31, 2015 we were at 3.4x. On the guidance front, our overall guidance remains solid and unchanged for 2015 at $1.80 and $2.10.

And I would remind you, that excludes costs any relocation costs that we will incur to move the Calgary office to Toronto. I'll now hand it back to Luc.

Well, thank you, Wayne. And overall, we were pleased with the Superior performance for the first quarter, with results being consistent with the prior year quarter, remembering that the prior year quarter results benefited from near record low temperature throughout most of North America.

We are encouraged by the improved financial performance, but even more so, that the majority of the improvements are due to the ongoing operational improvement. In particular, reduced costs in our Energy Service business due to the operational restructuring initiative that were completed throughout 2014.

Because these financial improvements are largely due to operational restructuring and reduced headcount, we’re confident that we will continue to see sustainable financial improvements throughout 2015 and beyond. Turning to our Specialty Chemicals business.

Specialty Chemical business had a strong first quarter, which was in-line with our expectation. Fundamentals with the chemical business remains largely unchanged from the update provided on our fourth quarter earnings release.

As we discussed in the fourth quarter call, we anticipated that there would be some weakness in the HCl related to pricing and sales volume due to the weakness in oil and gas sector. Although our first quarter result did not have a significant impact due to weakness in HCl, we do have improved clarity on the potential impact for the remainder of 2015.

And as a result, we have modestly reduced the outlook for chemical business for the remainder of 2015 from our previous estimates to reflect the large impact from HCl pricing weakness. We now anticipate that EBITDA from Specialty Chemical would be modestly lower than the prior year.

As noted in our press release, the fundamentals within the sodium chlorate business and our chloralkali business excluding HCl as noted above are consistent with the update provided in the fourth quarter. The core of our chemical business remains stable with a solid outlook.

With the Superior sodium chlorate business, Superior has determined that it will not be nominating any volume for 2016 or beyond as part of the Superior 130,000 ton supply agreement with Tronox. The potential to remove 130,000 ton of sodium chlorate supply from the North American market would largely balance the North American supply and demand fundamentals, which should provide Superior an improved opportunity to recover production costs, increase we have observed over the last several years.

We anticipate Tronox making a decision as early as the second quarter 2015 on whether it will decommission the facility after completion of Superior contractual volume. In addition to the benefits that we are hopefully to obtain throughout the Tronox volume elimination decision, I want to remind our investors that Superior businesses, including the Specialty Chemical business, have significant exposure to the U.S.

dollar. Beginning in 2016, Superior will begin to realize the benefits of the stronger U.S.

dollar which should result in incremental earnings of approximately $15 million to $20 million on a consolidated basis. We remain very optimistic on our chemical business and are confident that 2015 is a transition year as we bridge to improve in 2016.

As I’ve just discussed, we are optimistic that 2016 we will realize improvements results from our sodium chlorate business due to the reduced Tronox volume elimination, as well as the first wave of the impact of the stronger U.S. dollar.

In addition, we will maintain the flexibility to upgrade chlorine to HCl and are optimistic that the HCl pricing will improve with improved oil and gas activity levels, although we realize there is uncertainty with respect to activity levels and the timing of it. Turning to CPD.

We continued to be pleased with the underlying results in the CPD business as we are able to realize both, volume and more margin improvements, throughout the majority of the business in the first quarter. As Wayne noted earlier, the headline EBITDA number is modestly lower than the prior year, which is largely due to $2.3 million in the non-typical operating costs due to our long-term incentive plan cost and cost associated with ERP system upgrades that we’re starting.

As disclosed in the press release, we are proceeding with a system integration project that will replace two legacy ERP systems with a single standardized solution. The update system will provide enhanced procurement, pricing, operational effectiveness, enabling CPD to further enhance margin and operating cost once complete.

We are encouraged by the momentum we are beginning to see in the business, in particular, the ongoing improvements in the U.S. construction markets.

We feel strongly that under the direction of Mike Farrell, who was appointed President in November 2014 and the rest of the leadership team at CPD, we will continue to see ongoing financial improvement throughout 2015, as we further implement our pricing and procurement strategy, combined with a tailwind of an improved U.S. economy.

As a result of all these factors, our financial outlook for 2015 is unchanged from the update provided in the fourth quarter. As it relates to our energy business, I would like to reiterate Wayne’s comments regarding the first quarter performance.

We are very pleased with the financial and operational performance of the energy business in the first quarter. EBITDA from the energy business was modestly higher than the prior year quarter, despite less favorable weather.

The benefits of improved sales margin and reduced operating costs have allowed us to report a strong first quarter, more than offsetting the impact of reduced sales volume to the oil and gas customer from two of our segment, propane Energy Canada, as well as ERCO, our chemical business. Sales margin continued to be favorable compared to the prior year quarter, due to a combination of margin management initiatives and the benefits of a low wholesale cost of propane.

Although we believe the wholesale cost of propane will remain low for the remainder of 2015, due to oversupply of propane in the Canadian market. We do anticipate that the spread between retail pricing and wholesale will normalize throughout 2015.

I'm very pleased to report that we’re seeing the financial benefits of operational initiatives that have been completed over the last several years, in conjunction with the completion of Destination 2015. The execution of these initiatives has allowed us to sustainably reduce our cost structure and our first quarter results are evidence of the financial benefits of our hard work.

Over the past two years, we have completed the implementation of our add IT system, rollout standardized operating procedure, as well as our Superior Way project and reduced our headcount by approximately 225 employees. Although we have accomplished much in the energy business, we still have work to be done to transform the business from good to great.

We have not lost sight of this goal and it is our intent that the Superior Way project will transition from a one-time undertaking into our continuous improvement project providing the foundation to transition the business from good to great. Our 2015 financial outlook for the energy business is modestly higher than we previously thought as a result of the strong first quarter.

As it relates to 2015 as a whole, we continue to see further financial improvement due to the ongoing benefits of operational restructuring, intelligent pricing initiatives and investment in the sales and marketing function that will start to bear fruit. Our 2015 outlook, assume that weather will be consistent with the five year average for the remainder of the year.

So in summary, we continued to walk hard at improving all aspects of our business and we remain very optimistic about our future growth aspect. We continue to see three-year average growth within the business of 5% to 10% range as communicated at the 2014 Investor Day.

And while our 2015 financial outlook is at the lower end of this range due primarily to the weakness in HCl market and oil and gas related sales volume, we see a clear and executive goal to improve earnings in 2016 and beyond with the benefits of foreign exchange tailwinds, improved chemical pricing and ongoing operational improvement. With that said, I would now like to open up to any questions you may have.

Hi, happy Friday.

Thank you.

First question on Tronox and Specialty Chemicals. Can you help us walk through the math of maybe something like how much margin per ton or price per ton increase do you need on the rest of your chlorate production business to make up for the earnings you would lose from not getting any Tronox tons?

So the curtailments, if they shut down the business and help chlorate prices grow up, how much do you need to offset this loss?

Wayne, do you want to start?

Yes. Basically because this year, we had nominated not the full 130,000 tons.

The contribution in our outlook - in our guidance is negligible i.e. $1.5 million to $2 million of EBITDA.

So to the extent this is positive for us and it is in terms of balancing the market, any incremental price increases or improvement of margin will fall into the bottom line.

Yes, and I would add to that, that about 50% or so of our customers are contractors getting renewed this fall and then the rest will - so we'll take a year and a half, 18 months to really cover all the markets with those increases.

Okay. Second question is on CPD.

It looks like you're trying to guide to roughly about $40 million EBITDA run rate in CPD. Is that a base case, or is that a bear case?

And then also, for the IT projects, what kind of margins improvement can we expect to see when the systems in and when do you first start to see it?

Okay. So we've done a good quality process to execute on IT.

When we talk about $40 million, or a bit more this year in Canadian dollar, we include the costs that we are going to start to incur this year in IT. And the payback, if you - there is two way.

You have the initiatives of price, supply chain. There is a lot of initiative that you need a system, and some - you could do some of it without a system.

If I had to give you a number once the system is in place, I think there is a $20 million delta that we cannot get if there wasn’t - we need the system to get it. And we can get additional EBITDA like we’re getting this year from last year.

We’ll get more next year, but if you do have the right system in the distribution business, 110 location and you know pricing by product and ABCD product, ABCD customer and you start to work on that, you look on supply base 110 different branch and you start to combine some - with buying more from supplying region, you need system to do that, and that $20 million is probably very, very close number. So $20 million of investment or so, and the $20 million gain that comes from having the right systems.

And on the $40 million, is a base case or bear case for 2015?

Yes I think you’re - Jay, you...

Yes, I would say it’s a base case.

Okay. Final question for me is, because of Q1 results in terms of SG&A expense, your operating costs for the Energy Services business as a percentage of revenue spiked up in Q1.

Do you think it will be higher in ’15? In 2016 what sort of improvements can we get back to sort of operating costs as a percent of revenue?

Would it be more so in 2014 numbers of better?

Joel, I guess comparing the revenue can be somewhat misleading in Energy Services because of the change in wholesale price. So when we're looking at op-costs, it’s generally more beneficial to look at the percentage of gross profit, because revenues are going to be down only because the price of propane has - it’s a third of where it was.

So that will improve in ‘16 versus ‘15 do you think on the metrics that you say?

It's improving in ‘15 and it will continue to improve in ’16. And I think the reason you don’t see it to the top line depending how you do your math, the top line - because propane is less than half the price as it was.

And as a ratio it's more, but in dollar it's less, dollar expense is less. Very good amount.

Thank you very much.

Okay. Thank you.

Hello?

Hi, Sarah.

Hi. So I guess just starting on HCl pricing.

Can you just talk a little bit about the trend in the pricing you saw through Q1 and what you’ve seem to-date in Q2? And then I'm trying to get a sense of what pricing you’re incorporating into your guidance in terms of where you are, what you saw Q1 and today in Q2?

Hi, Sarah, it's Wayne. Obviously there has been pressure on that.

We don't like to talk about the specific prices.

Yes, I'm just trying to get more trends in kind of - I’m trying to get a sense of have HCl prices stabilized from the decline, and is your guidance based on the low price?

Okay, I understand. January and March were okay - sorry January and February were okay.

March was a very tough month. So we think as part of our guidance and what we call our three-and-ninths, we've taken that all into account.

And as we had talked to the market and given a range of $7 million to $9 million back in January/February as to what we might incurred as a reduction in EBITDA. That has occurred on the Specialty Chemicals side, but given our guidance has not moved, we'd be able to offset that based on first quarter performance as, Luc mentioned, and other offsets in other businesses.

And in recent weeks over the past months when you've seeing kind of oil price stabilize and has the price of HCl that you guys are lever to, has that stabilized at all or is it still coming down?

It's pretty much stabilized in terms of - as you mentioned it’s been positive that oil has moved back up, but we're not at a point where we've seen a move on the fracking side of the business. There is still some pain on that side of the business, but we’ve fully incorporated that.

We talked in the February call, that we didn't have enough line of sight. The ERCO team did talked to us our customers et cetera and we’re confident.

We’ve got our good solid forecast now.

Okay. And then I guess with your consensus on the propane side of things, the energy side and Superior Way.

When do you expect the full benefit of that to really kick in? Is it late ’15, or is it more of ‘16 thing?

No, I think it's happening now. I think you'll see the full-year 2015.

Okay. And then have you - and then on the U.S.

market on energy, just wondering what the conversion has been from heating oil to propane customers. Is that slowed at all with the decline in heating oil or are you still successful on that?

We are still successful. We have a game plan of 2,000 conversion and its happening.

So 2,000 is a good amount.

And is that per year or what’s the 2,000?

Per year. And maybe I'll add a little bit of color on that.

We're looking at doing our strategic plan by business, by segment, and started the work a month ago. And by June we’ll have a clarity of what else we could do to grow the business and improve it, all the businesses.

And then we look in the fall to communicate that with our board and think of the portfolio of the businesses. And I would like to think that we could step that to another level, but that's what's going to challenge why that 4,000 a year versus 2,000 and what does it take to go to the next level, because that's very important with so many residential customers in North East USA that are on forum [ph] and they are going to - 15% of them a year move to something else.

So we want to capture when it's propane, we want to capture a majority of those. And we’re really, really well equipped compared to MLP propane company competitor to do, because we have a base of work.

We have the technician that are equipped to do that, capable of doing that.

That's it for me. Thank you very much.

Sure.

I wanted to go back to Tronox and talk a little bit about the decommissioning of the facility. Can you just tell us how that works now that you’ve nominated not to take any volumes for 2016 and what are the fees associated with that?

I think the fee is - the older fee is going to be one-time $3.3 million. And by November of this year, we are going to stop the production.

So what’s your other question on Tronox?

Yes, I mean is that basically their decision, or is that your decision to decommission the facility?

It's our decision to end the contract with them. But they have to decide what they do with the plant, but we are at the right to say how much we do every year.

But I guess what I'm getting at is when do we find out when that facility will be taken out of the industry permanently?

Sorry, likely it would be towards the end of the May. We'll get notification from them and likely we’ll issue a press release at the time, Jacob.

Okay. And then on the CPD system integration project.

You talked about a one-time operating cost of $10 million. How should we be thinking about that [indiscernible]?

Yes, the total cost is about $20 million including capital and operating costs. So I would divide the operation costs in two.

I would say 2015 and 2016. And the capital cost of course will be depreciated over many years.

When we looked at selling that business there was a couple of points that investor, potential buyer who are concerned about, this was one of them because if you don't have the right system, you don't get the same value as the business with a modern system. So for 2015, the operating cost is $3 million.

In 2016, it will be $7 million.

Okay, that's helpful. And then just switching over to the Energy Services side.

How quickly do you think that spread between the wholesale and the retail prices start to close?

So I think during quarter two. I think by the end of quarter two, we’ll be clearly pretty much there.

Some of our increase in margin is not related to the decrease in price of propane, it's related to better pricing.

And how about that East-West arbitrage? How much of that contribute in the quarter?

If you look at our improvement this year versus last year, I would say half of the margins improvement. Well, Jay has done some homework on that and…

That's not the East-West arb. So the East-West arb that falls into the wholesale supply line item.

Okay.

None of the retail piece is impacted by East-West arbitrage.

Okay. And then maybe just lastly.

Do you have any comments here on that Conexus [ph] North Vancouver sale?

No comment on our competitors in what they are doing and we don't have any comments for them for you.

All right thank you.

Okay. Thank you.

Thank you. Good afternoon gentlemen.

Two questions. One, would you be able to tell us what were the volume that were nominated on the Tronox agreement in 2014 and 2015?

And second, just as a follow-up on Sarah’s question about the 2,000 conversions per annum, are these superior customers currently on oil that you're moving to propane, or the competitor’s customers that you’re bringing in or a mix of both?

Yes, a mix of both. When we know our customers wants to change their tank, as most of the time the customer makes that decision when they have change their tank.

So we do promote to other - of our competitor clients and it’s working. I couldn't tell you how much of the 2,000 is internally and externally.

We'll get to that for the next quarter or I'll find it, but it's a mix of both for sure. And your other question was - can you repeat it?

Just curious what were the tonnage nominated on the Tronox agreement in ’14 and ‘15?

Okay. I'll ask Wayne to take that one.

Hi Benoit, 2014 I’d say 105,000 to 110,000 and 2015 around 75,000.

Thank you very much.

And Benoit, don’t forget they’re dropping the park in 30 minutes.

I will try to do better than you guys.

I'm a Canadian in fact. My kids are benefiting.

Thanks. I'll turn it over.

Thank you.

Yes, hi guys. I'll make this quick so we can get in front on the TVs.

But Luc, I think you touched on this already, the Canadian propane margins bumping up a penny per liter year-over-year, but can you just quantify for us how much of that was wholesale pricing related versus the improved sales mix and pricing management?

Half and half.

About half and half, okay.

Yes.

Perfect. And also in the U.S., I guess similar half and half split there?

The mix is more difficult because of the - whatever - they always have a wholesale business. We have an oil business.

We have - any size that I'm looking around here Wayne of Jay has a point of view or they know that number?

No. But I don't think it's going to be far off the guidance you gave for propane, yes.

Okay, great. And then lastly, I know you guys can't comment too much on the North Vancouver plant, but I'm just thinking in terms of hydrochloric acid pricing and maybe what you can do down the road to recover some of the loss margin there, whether it be through consolidation of other assets or other Tronox-like type deals.

Are there any other opportunities on the asset front?

Not that we've seen or - I mean this is just speculation from my part, Canadian dollar I think from U.S. will get bit more difficult to shift in the North - in West of Canada because of the dollar, and Canadian dollar being $.80 or so.

So that might give us more share and more opportunity. We haven't been able to find of a way to combat this slowdown and we had a perspective that if the oil price came back to $70 or $75, we’d be back in the business quite a lot and that's speculation and that's actual analysis because we cannot find that.

Basically the other comment I'd make, just add on to those comments. When the hydrochloric acid market is reduced, we just don't make the HCl and we sell it as chlorate, which is good flexibility.

We prefer to be making it as hydrochloric acid because it’s a higher margin as we chatted. But to the extent you see less on the chlorine side of the business as we move it as chlorine.

That could be positive for us as well, Pat.

Great. Thanks for the color guys.

Thank you.

Yes, hi guys. Just wanted to inquire about the acquisition landscape, particularly in the U.S.

Northeast. Curious about a couple of things, I guess first whether the drop in energy prices impacts any of the potential acquisition prices in those businesses, I guess the earnings streams of those businesses given that it tend to be more diversified in nature and fuel type.

And then just secondly really whether or not again the drop in Canadian dollar really impacts your view on making acquisitions in the U.S. given the disparity we’ve been seeing off late?

Yes. Well, two things.

I think from doing add-on acquisitions, we are just getting organized and we do have a small line of $1 million EBITDA that we just added. That's in the Northeast I would say.

As you know when Canadian dollar upfront value and then you get EBITDA that comes back our way. So over long period of time, you recuperate the value.

So not going to stop us from doing acquisition. We are very diligent on not overpaying and we are going to be excellent on execution of integration and looking at what we can do in Canada and what we can do in the states more than ever.

Looking at hiring a VP of Merger and Acquisition located in Toronto office that’s where we are moving and from the Toronto Center lot of opportunity in the East for us in the North American east energy group, so we are going to do them and that's not stopping us.

Okay, that's helpful. And then just moving back to the Tronox situation again.

I'm just trying to understand sort of the process around recovering some of these costs that you described as the market becomes more balanced. Are we looking at a scenario where the price increases start to roll through in advance of the production shutting down just in anticipation of it, or should we expect that to start rolling through later on?

And I guess any sense of the magnitude that you're expecting would be helpful.

That’s a good tough question.

Hi Steve, it’s Wayne. Basically our contracts are staggered, so 50% of contracts come up this year, 50% come up next year.

So it is a discussion with our customers through negotiations. But the whole portfolio will be reviewed by the end of call it November/December 2016.

In the prior two years with the market being as it was and electricity costs growing up 4% to 6% and the overcapacity, it was not a market conducive for price increases. So now we've got a balanced market, pretty much balanced.

And when we can't - as you know we can't sell products in North America, we go to the international market, which has lower netbacks because of the freights. So it will be the dynamic of volume in North America and maybe pulling volume out of the international market to place in my North America.

So it's just a different backdrop which we think should be positive for us.

Probably about starting more into next year though than this year because the contracts are mainly really goes into the fourth quarter.

No, that sounds reasonable. Thanks guys.

I appreciate.

Thank you.

So I would like to conclude the call and thank you for your participation Superior first 2015 first quarter results and wish you all a very good weekend.