Luc Desjardins - CEO, President and Director Wayne Bingham - CFO and EVP Jay Bachman - VP, IR and Treasurer Ed Bechberger - President, Specialty Chemicals Business

Benoit Laprade - Scotia Bank Joel Jackson - BMO Capital Markets Steve Hansen - Raymond James Jacob Bout - CIBC

Well, good morning and thank you and welcome to Superior Plus 2015 second quarter results conference call. With me on this morning call is Wayne Bingham, EVP and CFO; Jay Bachman, VP Investor Relations and Treasurer and Ed Bechberger President of our Specialty Chemicals Business.

As you are aware Superior pre-released our second quarter earnings and updated our 2015 financial outlook on Thursday, July 23rd. Our earnings AOCF per share of $0.18 are unchanged from the disclosure provide last week.

As discussed last week our second quarter results were below expectations due to weaker than anticipated results in Specialty Chemicals division. Result for the energy services business and our construction product distribution business for the second quarter were consistent with management expectation and we continue to be pleased with the progress we are making on operational and financial improvement within these businesses.

Fundamentals within both the energy and CPD business continued to be positive within the energy services business a key driver for the business has been the low cost of wholesale propane and heating oil. The low cost environment has been conducive to ongoing margin improvement within the business.

Although margin have benefited from lower wholesale environment the larger impact on margin has been the result of ongoing margin management initiatives. Offsetting the impact of improved margin has been reduced industrial volumes as a result of reduced oil field demand in light of current market conditions.

Cost reduction initiatives to mitigate the impact, the financial impact of reduced oil field volume have been successful and the volume reductions Superior’s experienced are tracking consistent with our forecast. Looking at the energy business as a whole we continue to see ongoing operational and financial improvement throughout the remainder of 2015 as financial results benefit from improved average sales margin and an improved cost structure as a result of operational restructuring activities completed throughout.

As highlighted in our earnings release on last week the financial outlook for energy services is unchanged from the first quarter and that we expect 2015 financial results to be consistent to modestly higher than 2014. Turning to CPD we continued to be pleased with the underlying result of CPD business as we were able to realize both volume and margin improvements throughout the majority of the business in the second quarter.

Fundamentals in the CPD business continue to be excellent particularly in U.S. portion of our business where we continue to see positive momentum under the direction of Mike Farrell who was appointed as President in November of last year.

The rest of the leadership of CPD will continue to see ongoing financial improvement throughout 2015 as we further implement our pricing procurement strategy combined with the tailwinds of our improved U.S. economy income structure.

The Canadian portion of our business continued to be steady and we’re closely monitoring our Canadian market to ensure we’re well positioned if there was a slowdown in any of our markets. The ERP system upgrade which disclosed in the first quarter tracking two plans with both execution and cost perspective the updated system will provide enhanced procurement pricing and operational effectiveness enabling CPD to further enhance margin and operating cost once complete.

The cornerstone for every top and plus distribution business is our top end class systems and I am extremely confident and a positive outcome the system will have on the business once complete. As highlighted in our earnings release from last week the financial outlook for CPD is unchanged in the first quarter in that we expect 2015 financial results to be higher than 2014.

Before I discuss the chemical business I would like to highlight the impact that foreign currency is having on the comparability of certain aspect of our business. The speed and significance of the appreciation of the U.S.

dollar as it relates to translation of our U.S. operation to Canadian dollar has been mapped in the operational and financial improvement we have been realizing.

Although the change in currency hast not currently impacted Superior bottom line as a result of our hedging program, it does impact individual line items. And example being that revenue and expense from our U.S.

refinery fuel business in the U.S. portion of our CPD business which is approximately two third of the business will both be higher as a result of the impact of foreign currency.

This result in operating expense on a year-over-year basis appearing to be increasing when in fact on a currency adjusted basis where I realizing improvement. As disclosed and discussed last week result on Specialty Chemical business in the second quarter was 14.7 million lower than the prior year quarter.

Approximately half of the reduction relates to sodium chlorate which is generally is related to the second quarter with the remaining half of the reduction related to the chloralkali side of the business. Sodium chlorate sales volumes were 22% lower than the prior year with approximately half of the decrease due to the reduction of sales volume under our agreement with Tronox which is something we want to do and as a result of reduction of nominated volume in 2015 compared to 2014.

The reduction in volume associated with Tronox agreement is consistent with the define in the first quarter 2015 and part of Superior ongoing effort to provide improved supply and demand condition for sodium chlorate. The remaining reduction in sales volume is due primarily the impact of the extended pulp producer downtime the current year quarter.

On average many of our customers have maintenance down time that was up to two-time longer than historical level. The increased maintenance on a quarter-to-quarter basis resulted in a reduced EBITDA of approximately 5 million.

We do have by plan, by location the extra date of downtime and it does amount to $5 million. As highlighted in last week call our understanding is that extended maintenance was do impart to many of our customer running at extremely high utilization rates over the last year due to a strong market total.

In addition some of the maintenance was specific to our customer base in particular recovery dollar maintenance was incurred by several of our customers which resulted in an extended maintenance shutdown. The maintenance work for our customer has largely been completed and all do expect the modest impact into the third quarter I want to reiterate that the reduction in volume due to maintenance is not reflective of the overall outlook of sodium chlorate volume for 2016 and going on.

We did call every one of customers and talked to them by plans to receive a more accurate quarter three expectation of their volume. So we think we are on track with what reality is going to be going forward.

The second area impacting Superior’s second quarter result was weaker pricing and hydrochloride acid which has been driven by reduced demand from oil and gas sector. Asset pricing related to the prior year is approximately 15% lower than the prior year.

I’d now like to provide some additional point on the second half of 2015 Superior anticipate that second half of 2015 will be weaker than previously anticipate due to the combination of weaker sodium chlorate and chloralkali gross profit. I will first discuss sodium chlorate.

We’re anticipating that we will some modest volume decline in the second half 2015 not even close to the first half compared to our previous forecast. The modest volume declines we’re anticipating are largely driven by some ongoing pulp producer maintenance that will carry to the third quarter in addition to reduce general pulp producer demand for sodium chlorate.

As producers seem to be focused on managing inventory levels, lower for the remainder of 2015, the reduction in inventory level is creating a short-term reduction in chlorates demand nothing to do with the long-term or mid-term short demand and supply of the industry. In addition the high U.S.

dollar has resulted in an increase of import pulp derivative products such as slotted paper as international producer look to take advantage of strong U.S. dollar.

The increased level of imported derivative product has result in decreased demand for domestic producer and they have therefore reduced production. With respect to chloralkali the reduced outlook is a result of a weaker anticipated contribution from hydrochloric acid.

The reduction and the contribution from hydrochloric acid is primarily being driven by reduced selling price due to oversupply market and reduced sales volume. Sales volume of HCL have been negatively impact by increased competition as the oversupply of HCL throughout North America has resulted in competitors aggressively placing product into different market segments.

In particular this has negatively impact sales volume from reported with the Wisconsin facility. Although 2015 is providing to be challenging than we’d originally thought we remain very optimistic in our chemical business and are confident that 2015 is a transition year as we bridge to improvement in 2016.

Our focus remains on operational and financial improvement while building a business that is sustainable for medium and long-term. More specifically as it relates to 2016 and beyond our energy construction businesses continues to perform management expectation I’m happy with ongoing progress we are making on improving the operational and financial performance of these businesses.

The weakness in chemicals business is short-term in nature. The termination of our supply agreement with Tronox will have balanced the supply demand fundamental for sodium chlorate in 2016 and beyond.

By nominating to zero in 2016 and Tronox committed to permanently decommission the facility in November of this year. We see less volume being produced in 2016 compared to 2015.

The appreciation of the Canadian dollar will begin to provide significant tailwinds of approximately 15 million to 20 million on a consolidated basis beginning in 2016 and much further improvement will be realized in 2017 and 2018 as existing adds rolled out. In addition we maintained significant leverage to future improvement and HCL pricing and demand which we anticipate will improve with future improvement in the oil and gas industry and we don’t know exactly when, but in the future.

All-in-all we remain very encouraged by what we see in 2016 and beyond and we believe that we are continuing to make decision that will benefit the mid long-term success of Superior and its shareholders. With that said I would now like to open it up to any question that you may have.

Just quickly going back to the sodium chlorate market for a second, you did mention in your release that shipments in Q2 were about 22% down year-over-year, understanding that most of it is actually maintenance related would you have a sense at this point as to what Q3 could look like year-over-year and/or sequentially in terms of volumes?

Yes so maybe I will take the first part. When we talk about the 22% some of it is something that we planned to do as we know the Tronox you go back 18 months ago 130,000 tonne we wanted to bring to zero so we are organizing to do less because we want that volume to go away for 2016.

So partly is ours. The other part which is the many broader and many companies having longer maintenance according to what the big-big surprise expect it to be a lot less in quarter three.

We do now have by plan, by volume the quarter two reduction and due to shut down on longer maintenance and we follow every customer for quarter three have specifically asked for more color and they did give us what we expect to be quarter three, so lot less. Now let me ask if Wayne or Ed can add to that on what is more specific may be number, so Wayne?

I don’t remember it by quarter [indiscernible] but just looking at the back half repo and comparing our forecast for the six months to 2014 second half slightly better but maybe 0.5 million better or something like that, so pretty comparable that may split a little bit between the third and the fourth when we actually get there, but looking at the six months it's comparable.

Okay and is it fair to assume that a lot of that I guess volume shortage was in the U.S. Southeast which will be a natural destination for the Tronox production, so by having Tronox down zero next year that should improve quite a bit the regional supply and demand?

Absolutely, a lot more in the Southeast region and as a percentage…

Yes, it was probably about 75% of the deduction was in the U.S. and the majority of that was in the Southeastern region.

And lastly, if we bring the currency into that with the dollar dropped the way it is, you have production capacity on both side of the border and obviously customers on the both side of the border, what type of discussions are you having and how different is that discussion today with Canadian customers versus U.S. customers when you're thinking about next year?

Yes so Ed can you tell me is that the one?

Well we are certainly looking at how the currencies impact the opportunities and we continue to try to look at balancing our netbacks back to our facilities, so we will be having certainly lots of discussions with Canadian producers and U.S. producers at the contracts at the end of the year rollover.

And maybe Benoit for additional color, we would be advantageous of a lot today if we were not adds on the Canadian dollar like a lot and it would not be the type of result even though the volume would be the same it is but the result would be a lot better. So for us every time the dollar Canadian goes up and goes down we gain nothing but that gain is coming in the future.

So our hedge position makes us short-term 1 to 2 years look more like the U.S. producer compared to the Canadian producer and then when that goes away and the tens and millions are going to come back in routine by '16, '17, '18.

Yes, actually that's exactly where I was aiming, so you mentioned 15% to 20% tailwinds for next year everything else gets eagled just on currency, if I looked at your hedging position right at the end of Q2 would it be fair to assume that everything else unchanged we're talking about another at least 10 million for 2017 on the same basis?

A lot more so let’s see a lot more and that is due to some big picture on foreign exchange position yes.

So Benoit the easiest way to think of the FX position as a whole is the total U.S. dollar exposure assuming no change the standard change to the business mix where it is today is $250 million a year.

And I think what I would do is direct you to Page 30 of the second quarter results we breakout all of the hedging positions and what the average rate is and it will let you look at it in a variety of ways, but I would estimate for '17 would be in the $10 million to $15 million a year range pick up.

What about 15, 20 for next year?

Incremental, yes.

And does that change your view or strategy on hedging, should we expect you to put new hedges today at today's rate or?

I'll ask Wayne to answer that.

We are actively looking at it Benoit I mean I think there is a lot of good reasons to lock it down, and so where we have an open position of maybe 50% for 217 and even more open for 218, so I think we're just about there in terms of the currency. I know what I read.

There is some promise to think maybe in $1.71 or $1.72, but I think it's reasonable to expect that we'll continue with our policy of some hedging and locking it down.

So we would encourage everybody on the phone analysts is don't look -- look at it for '16 and '17, but if you take today's position we had and look at it in the next two years, you will see a much bigger amount in total like you would like to view individual to your home wherein I will do it for you as things amount change here and there, but it's a lot of EBITDA that is lesson for us sitting there that's coming in the next three years, and it's a big-big number.

So first question would be where the currency is, have you looked at maybe monetizing the hedge book and what you could get for it?

Yes, it would be extraordinary for you but Joel I can tell you that it was nice but maybe Jay or Wayne do you want to take that?

Mark-to-market on the FX book there is probably about 100 million negative. If you look at, set differently I mean it would require a cash settlement of roughly $100 million but to Luc’s point the left in EBITDA would be quite significant this year and next and certainly over and above the 15 to 20 that we talked about for next year 15 million to 20 million.

But that is the monetization then is the use of capital of 100 million and right now we have better places to invest our capital. But it is something we’re monitoring month-by-month.

It will be a one-time event so we don’t look good now with that but I guess that’s the too far of analyzing our company these days and so the one of the tough part and we do take the responsibility that chloralkali it is surprise less than quoted words people were never in those customers before, they’re now searching as they were to give it away and we’re assuming that won’t be forever plus inventories depleted. So tough situation we thought about it we analyzed it and we’re kind of want to do what’s fundamental right for the business operation versus financially not being able to show upfront all the value that’s lessened for us in that regard of foreign exchange.

Okay. And on the chlorate I mean after your commentary last Thursday or Friday, Thursday I think on the pulp mill maintenance I mean there has been some of that Canadian pulp producers that have reported it has been a lot of chatter about just sort of the staff of the mill maintenance.

Are you able to give more granularity about the mill maintenance you have given some comment with it a few customers like some of your larger customers because there has been a lot of chatter about your comments? Thanks.

Yes. So there really were some broader on the three big account I’ll ask Ed to give you the specialty of that.

We had a number of our customers I think it was a total five that ended up doing work related to recovery boilers and most of that involves typically about a three to four week outage when they tackle the recovery boilers. It’s something they do once every 10 to 20 years but we did see a number of our customers go through that.

We’ve also seen some customers have operational issues there was one announced actually last week where they had lost some equipment in their effluent treatment plant and they were down for seven days as we know for that. So it has been kind of a mixed bag but if we were to take the largest impact it would have been the extended outages due to recovery boiler work.

And the one thing that we’ve checked is when that happened can it happen again and the frequency that the ERCO team was able to fund with it is every 10 years. So we don’t expect there was a boiler to go down for average 10 years now.

And I have one more question which is you’ve given us some guidance that some summer in propane you expect lower margins per leader in the U.S. refined fuel business, historically the margins on that business have dropped in Q3 and come back up in Q4, would you expect similar behavior or would you expect both quarters to be down in what we’ve seen thus so far?

No, we give business as usual. No surprise on all the -- propane is more steady and better margin and continuing to improve in that regard.

On the oil side it is business as usual quarter three less demand and more people let’s call it a different supplier and then back to normal in quarter four.

Joel, just had a little bit of color there one of the things is because of the margins, there is a much bigger wholesale side of the business in U.S. Direct and in Superior propane and so you see much more seasonality in the margin.

So the way to think about it is quarter-over-quarter the improvements that you’ve been seeing I would anticipate, but compared to the prior year quarter so if Q3 was $0.09 and we’ve been averaging at [indiscernible] or more, it should be in that range, but using Q2 as a proxy for Q3 is not necessarily going to get you a good number because of the seasonality in the business.

Just a quick one on CPD and implementation of your [indiscernible] it sounds like it is tracking to plan I’m trying to get a sense for how the rollouts will or when the rollout will start to show the benefits or when do you see the benefits of the benefits from pricing benefits I guess rolling through? Should we expect to get early indication of that playing out in the next quarter sort of six to 12 months or is it well beyond that as the whole [indiscernible] at once I am just trying to get that roll pattern?

Just to reconfirm the team with Mary Jordan that -- and CFO and Mike, they’ve done it a few times in their career in the same industry, the same size in Dallas when I was part of a similarly implementation. So you could get -- we will get to immediate lifting because the management team is more professional to doing supply chain we issues as well and that team understand the pricing and supply chain there is no way to get the heavy lifting before the systems in place of 116 locations positive FTU how do you price each one and why in one region versus another we can confirm those and lift the level of the water if you want, in terms of the [indiscernible] always comes, they will some of that heavy lifting starting without system, I would say immediately in the second half this year more next year.

And by the time the system is in place which is probably in another 15 months from now then you get to the additional gain and you get to where you can be from maximizing supply chain and pricing intelligence.

And just to reconfirm the expense layout there I understand you've given the split between the capital and the expenses before, but if some goes through this year is backend waited if I am not mistaken?

Yes, expense 32 million this year and next year, closer to be 4 near year and then the capital, so Jay, you have the exact number?

Yes it is backend weighted, Steve, there was a bit of delay in getting some of the consulting help and what not in place, and so that's why the expenses haven't been ramp in Q2 as much as you might have thought.

So, out of 20 million there will be 6 to 7 on expense of rational capital.

I had a question here on the energy services side, we've seen efforts in propane being delivered basically for free and just wondering on a deliver basis and from what we've been reading and just want to understand how does that change the dynamics of your business?

No short-term not much, we saw 80% of our customers are big heavy volume industrial and commercial customers and we make our money on the added values, so whatever we pay for propane with the pass-through, there is a 20% more residential and some solid customers they still have to pass-through the whole reduction in price. But if it stays there long-term, no question for the Northeast USA or the Canadian business people that are still on oil will have a better benefit, closer benefit to move to propane, and light trucks in cities and light taxi drivers to transfer and spend a $3000 to $4000 to change their equipment to be able to go on propane and save 35% cost is.

As people see the propane price staying low, mid long-term it could create much more demand on some big scale volume auto being one and that takes time. We cannot see a year of propane being low and they change equipment.

You have to think that if they do change their equipment for many years and therefore they need to see that price low for many years to come. Our projection will decide shortage with a big-big winter one month and people stumble to get propane for that month.

Our predication is that it will be a lot of propane available for many years to come and that price if you see now might come up a bit, but it will end up being low overall for many years to come.

And how about as far as the East Western and the difference between retail and industrial commercial?

Yes, it's a good point, when you look at the net cost of the West and shipment to the East, the costs of the East have been higher, the differential and the gain that you make on shipping West to East is very minimal like one penny. So there was a bigger gap and more opportunity to go west to east when the price was higher actually, and now it's like flat everywhere just about.

And maybe just going back to the FX hedging on the chemical side of things, maybe just talk a little bit notionally what traction are you hedging out there and how this will change going forward and the -- and how the industry is moving because when you actually take a look at chloride pricing it has been actually quite efficient historically with the Canadian dollar?

Yes no that's a very good question as you know we have many plants in Canada also we talk about foreign exchange and I am sure all of you can do the math that it's maybe a bark and Wayne alluded to that earlier, but there is an advantage of our production going forward versus the U.S. producer.

So Ed, do you want to add to that?

Yes, certainly whenever we've seen periods of weak Canadian dollar relative to the U.S. we have seen Canadian operations running at higher operating rate than U.S., plants operating at a lower rates, so that tendency will reoccur as the dollar stays down or further drops.

As far as what you're actually hedging notion?

Right.

It should help us immediately but it doesn't of course because of the hedging, so it's just going to be pushed forward to '16 and '17 for anything for us in that regard to be really showing in the bottom line, starting in '16.

Sorry guys, just one quick follow-up. I was just thinking given the pricing environment at HCL and I know that the opportunity to [indiscernible] but is there any maintenance work that you want to pull forward on the facilities grant the use of [indiscernible] pulp rate but is there anything that you might want to pull forward from the wish list to spend some capital on now given the environment is weak, that might incur a little bit extra downtime in the short term or is that on course?

No, and I’ll ask Ed to give more color, but in the HCL we are really modern equipment and [indiscernible] get to top, top brand new. So we are a when the market comes we’re ready with that in the meanwhile, what’s we’ve seen is the pricing is not moving up but we’ve seen volume for quarter three moving up, it won’t help a lot in the EBITDA but volume is increasing our production in quarter three and quarters it will be higher and usually what comes after that is tweaking up price of [indiscernible] so maybe Ed you can give a little bit more.

Yes, certainly our capital program on the chloralkali side is still on track with where we had planned. The demand is such that we are selling more asset than we sold last year, pricing is certainly off we are not selling as much assets as we would like but pricing is off.

But we are needing to run all the burners they’re just running at lower rates. As Luc indicated we have moved up the burner rate over the last few weeks because of the some additional local demand.

So we are seeing some big improvement in volume. The market is beginning to come into balance.

So I think you had seen some of the burner operating rates I think is around 50% on the industry in average but we’ve seen some local improvements. We certainly need the alkali ahead of our plans.

We have KOH and caustic produced out of the Buckingham facility and we see strong demand for those products. So our goal is to continue to move the chlorine side of the molecule and support the alkali.

So I like to thank you everyone for participation. I can assure you that when you look at the picture for the rest of the year we adjust our numbers and we didn’t do that by thinking we’ll adjust again.

We did it as truly as we could to give you the more visibility and for the next six months and of course for 2016 chlorate will be extremely good and will be sold out and price will be helping too in our Canadian production compared to U.S. producer workout as well.

So pick up for us and I am really not pleased about some of the -- how things unfold on the chemical just thing this year and even if we knew ahead of time we would have known and we’re going to keep working at it, but chlorate looks good going forward foreign exchange is going to have a big time HCL now we will see what the world brings in land when we’re ready when that comes to add a lot of EBITDA to our business whenever that time comes so. Thank you everyone.