Thank you, Didi. Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2020 first quarter results.

Our speakers on the call today will be Luc Desjardins, President and CEO; and Beth Summers, Executive VP and CFO. Darren Hribar, Senior VP and Chief Legal Officer, will also be available to answer any questions during the question-and-answer period of today's call.

Today’s call is being webcast, and we encourage listeners to follow along with the supporting presentation, which is also available on our website. For this morning's call, Luc and Beth will begin with their prepared remarks and then we will open up the call for questions.

Before I turn the call to Luc, I'd like to remind you 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 first quarter MD&A posted on SEDAR and Superior's website yesterday for further details on forward-looking information and non-GAAP measures. I would encourage listeners to review the MD&A as it includes more detail on the financial information for the first quarter as we won't be going over each financial metric on today's call.

This will allow us to move more quickly into the question-and-answer period. I'll now turn the call over to Luc.

Well, thank you, Rob, and good morning, everyone. Thank you for joining the call.

I'd like to start the call today by saying we hope everyone and their families are safe, healthy and finding a way to manage through the unprecedented times. At Superior Plus, we have adapted our business practice with the health and safety of our employees, our customers, local communities and our first priority.

Our propane distribution and specialty chemical business are considered essential and critical services and infrastructure in all of the province territories, states in which we operate in the U.S. and in Canada and in Chile.

I'm so proud of the resilience of our commitment to the more than 4,000 employee at Superior Plus for their effort to continue serving our customer, their local communities throughout this pandemic. Our employees are working hard to ensure customers, home and business are aided, and you have the propane to keep your business going.

Organization vehicles are running as well. So we're servicing our customer very well.

And our specialty chemical business continued to provide the chemical to make essential product, including those products that can be used to combat the impact COVID-19 for sanitary, of course. This unprecedented health crisis has had a profound impact on our economy as a home, federal, state, provincial, local and municipal government have all instituted dramatic measures to help control the spread of COVID-19.

Our businesses are resilient to this impact, but not immune to the significant economy shutdown – slowdown, I should say. We have done a thorough review in both business of what the potential impact could be, and we expect our commercial and industrial segment, primarily in the Canadian propane distribution business, will likely be the most impacted by the recession slowdown of the economy.

And also the low price of oil, which is the oilfield, it's been going down for years, it's not much, other total sales that are related to the oilfield in Canada. Our specialty chemical business also expect lower demand from hydrochloric acid and sodium chlorite related to the reduction in oil and gas drilling in Canada and in the U.S.

In response to the anticipated impact of COVID-19 and as part of our ongoing cost saving initiatives, we took immediately action to protect our business and financial strength in an effort to position Superior to emerge from the situation even stronger. In 2020, we have reduced our planned capital expenditure by approximately $30 million, and we reduced our expense to adjust to the lower volume, especially in Canada, are going to tune of over $30 million, which covers all of our businesses.

We closed to $35 million total cost reduction on the EBITDA. We kept our adjusted EBITDA guidance range, consistent with the range provided in February, and we expect to finish 2020 in the middle to lower end of the range due to the impact of the warm winter in eastern U.S.

as well as the anticipated COVID-19 and the low price for all reduced drilling activity. Just to put everything in perspective, it was 17% warmer than northeast USA.

This is the sixth time in 130 years that is that warm. Our U.S.

President, the business was spent to our largest week. He's been in the business for 15 years, and he doesn't remember that warm.

This only happened six times over 130 years, so suppose the average weather will come back. And Canada was 10% warmer.

So it's been a major, major effect. And I think both of our businesses are resilient.

They're not getting affected large parts pull down to the economy. But the weather affects us, for sure.

Now when you think of the EBITDA and their guidance and you think of where we started in the warm winter many tens of millions of less EBITDA, and we've done some adjustment to finish the year on guidance. Our management team in every business has done a super job in adapting and adjusting to the warmer weather as well as the slowdown in the economy to enable Superior to maintain adjusted EBITDA guidance for 2020 and at the low end.

Very proud of the employees’ ability to respond quickly to unprecedented situation. We even look at 2021, and that would adjust, cost are getting adjusted even further to make sure that we have a good sustainable profitable business.

I'd like to begin with a couple of highlights in the first quarter. First quarter U.S.

propane team realized $3.9 million additional synergy related to NGL Propane acquisition and tuck-in acquisition. We have now realized over US$20 million of synergy and expect to finish at US$24 million run rate synergy related to the NGL Propane acquisition.

Put everything in perspective, NGL was a $90 million EBITDA business with our business model without more sales or more weather helping, we can improve the base case by $24 million. And I've said it many times, we can do that with our business model, done it across Canada, done it in the states.

And every acquisition we're looking at and have done, which is plenty, we improved the business 25%. We still expect to exit 2020 with US$24 million in run rate synergy related to NGL.

On January 9, 2020, we acquired an independent propane distributor in Southern California for a total of US$22.7 million. This was our second retail propane acquisition in California.

We see good opportunity to grow in that market. We also have many opportunities to grow through acquisition in Eastern U.S., and we still have a robust acquisition model, actually bigger than ever, due to our leverage level and our current need to preserve liquidity.

We will likely unfortunately do less tuck-in this year than we could do by an on shelf. Overall, we delivered good results considering the headwinds we were facing related to weather in the U.S.

propane distribution business and caustic soda, hydrochloric acid markets and specialty chemicals. The first quarter adjusted EBITDA was $219 million, $20.6 million, 5% lower than the prior year quarter, primarily due to the decrease in EBITDA from operations, of course, with some cost reduction a bit, but they're all coming through the rest of the year.

First quarter EBITDA from operation was $223.9 million, a $25.4 million or 10% decrease from prior year quarter, primarily due to the lower result of U.S. propane and specialty chemicals, partially offset by our results from our Canadian propane.

In the first quarter, the Canadian propane distribution results were higher partly due to improved wholesale propane market fundamentals and our ability to capitalize on those benefits, including effective price management and then a good environment for pricing propane, offset in part by lower sales volume due to reduction in the economy. Canadian propane distribution EBITDA from operations for 2020 is anticipated to be lower than 2019, primarily due to an expected decrease in sales volume, average unit margin partially offset by a decrease in operating expense.

The margins are holding quite well, even better, and the operating costs are going to go down. Sales volume are expected to decrease due to impact on COVID, which obviously economy slowdown and reduced activity in the oil and gas and other segment, Western Canada related to the low price of oil.

U.S. propane results were lower due to a decrease in volume related to the significantly warmer weather experienced in the first quarter, partially offset by an increase in average margin contribution from tuck-in acquisition and realized synergy of NGL Propane acquisition and the tuck-in acquisition completed in the last 12 months.

The U.S. propane EBITDA from operations for 2020 is anticipated to be lower than 2019, primarily due to the significant warmer weather experienced in the first quarter, partially offset by incremental contribution from tuck-in acquisitions completed in 2019 and January 2020.

The incremental synergy related to NGL acquisition and tuck-in acquisition. Specialty chemicals EBITDA from operation in the first quarter was lower than last year, but much better than we planned, primarily due to the decrease in chlor-alkali results.

Specialty chemical EBITDA from operation for 2020 is anticipated to be lower in 2019 due to an expected decrease in chlor-alkali gross profit, partially offset by a modest increase in sodium chlorate gross profit and increase in pricing of caustic, with also a modest decrease in operating expense. So on that, I will turn the presentation to Beth.

Thank you, Luc, and good morning, everyone. Our consolidated first quarter adjusted operating cash flows before transaction and other costs per share was $1.07 per share, which is $0.14 lower than the prior year quarter due to the decrease in adjusted EBITDA, increased interest expense and cash taxes.

Interest expense increased primarily due to the higher average debt levels related to the financing tuck-in acquisitions completed in 2019 and January 2020 using the credit facility. Now turning to the individual business results.

Canadian propane EBITDA from operations for the first quarter was $86.6 million, a $2.3 million increase, primarily due to higher adjusted gross profit and lower operating expenses. Adjusted gross profit increased compared to the prior year quarter, primarily due to the wholesale propane market fundamentals and Superior’s ability to capitalize on those benefits.

This was partially offset by lower sales volume. Average unit margins were $0.20 per liter compared to $0.159 per liter in the prior year quarter, primarily due to improved wholesale propane market fundamentals and margin management initiatives.

Total sales volumes were 729 million liters, a decrease of 193 million liters or 21%, primarily due to the impact of warmer weather, a reduction in butane sales, competitive pressures and reduced demand. Average weather across Canada, as measured by degree days, was 10% warmer than the prior year quarter and 4% warmer than the five-year average.

U.S. propane EBITDA from operations for the first quarter was $103.4 million, a decrease of $22 million compared to the prior year quarter.

This was primarily due to lower sales volumes, partially offset by higher average unit margins and realized synergies. Total sales volumes decreased 67 million liters or 14% primarily due to the impact of warmer weather, offset in part by incremental sales volumes from tuck-in acquisitions.

Average weather, as measured by degree days across the markets where Superior operates in the Eastern U.S., was 17% warmer than the prior year quarter and the five-year average. Average unit margins were $0.418 per liter compared to $0.403 per liter in the prior year quarter, primarily due to lower wholesale propane prices and effective management of pricing in a low commodity price environment.

Turning now to specialty chemicals. EBITDA from operations for the first quarter was $33.9 million, a $7.5 million decrease compared to the prior year quarter, primarily due to lower gross profit, partially offset by lower operating expenses.

Gross profit decreased $7.5 million due to lower chlor-alkali gross profit, reflecting the headwinds from oil and gas, partially offset by a higher sodium chlorate gross profit. Operating expenses decreased $2.7 million, primarily due to the impact of the gain on translation of U.S.

denominated working capital and lower incentive plan costs. Lastly, the corporate results and the adjusted EBITDA and leverage guidance.

Corporate costs were $0.6 million, a decrease of $5 million, compared to the prior year quarter. This was primarily due to the decrease in LTIP expense related to the share price declines.

Interest expense was $27.1 million, modestly higher than the prior year quarter, due to the increased average debt and the impact from the weaker Canadian dollar on the translation of U.S. denominated interest costs.

Debt was higher primarily due to the tuck-in acquisitions completed in 2019 and January 2020. In the first quarter, Superior had cash income tax expenses of $4.3 million.

This is an increase of $1.9 million due to the utilization of available tax pools and the impact of the weaker Canadian dollar on the translation of U.S. denominated taxes.

We're maintaining our 2020 adjusted EBITDA guidance in the range of $475 million to $515 million, but we expect to finish at the lower end of the range. Superior now expects to be at the lower end of the previously communicated guidance range, primarily due to the significantly warmer-than-average weather experienced in the first quarter as well as the anticipated impact from COVID-19 and the lower price of oil on our business and our customers.

Average weather as measured by degree days for the remainder of 2020 is anticipated to be consistent with the five-year average for Canada and the U.S. The low end of the range accounts for warmer-than-normal weather for the remainder of 2020, reduced economic activity in Western Canada, further weakness in North American caustic soda and hydrochloric acid markets and any anticipated volume decline related to COVID-19.

The high-end of the range accounts for colder-than-normal weather for the rest of 2020, wholesale propane market fundamentals similar to 2019, increased drilling activity in Western Canada and improved North American caustic soda and hydrochloric acid market. From a debt and leverage perspective, total debt to adjusted EBITDA leverage ratio for the trailing 12 months as at March 31, 2020, was 4x.

This compares to 3.7x at December 31, 2019. The increase in the leverage ratio from December 31, 2019 was primarily due to lower adjusted EBITDA and higher debt related to the impact of the weaker Canadian dollar on the translation of Superior's U.S.

denominated debt and tuck-in acquisitions completed in the past 12 months. We're also updating our total debt to adjusted EBITDA leverage range at December 31, 2020 to a range of 3.6x to 4x, compared to our previously communicated range of 3.4x to 3.8x.

This increase is due to lower results of U.S. propane and specialty chemicals in the first quarter and the expected impact from a weaker Canadian dollar on the translation of U.S.

denominated debt. Superior is well within its covenants under its credit facility agreement and unsecured note indentures.

Superior’ senior debt to credit facility EBITDA ratio was 4x as at March 31, 2020, and cannot exceed 5x. Superior also had available liquidity of $232 million under the credit facility as of March 31, 2020.

Further, we do not have any significant debt maturities until 2024, so we're well positioned from a financing and liquidity perspective. With that, I'd like to turn the call over for Q&A.

Good morning folks. Good results.

And obviously, one of the few to actually keep guidance, so congratulations. A couple of questions on propane prices and margins.

The basis differentials have obviously normalized from the recent highs. But my understanding is that you might have been in the throes of establishing your supply contracts for next winter at the end of March and early April, and the propane prices were fairly low at that point.

Any potential supply benefits that you could flag out of that, especially for your non-resi business and those that have fixed price term sales?

From the perspective – and I'll talk about the overall market fundamentals first. Typically, what you see is we have our new contracting years that start April 1.

And so what you will typically see is you get a better sense of what's going to happen with differentials and those market differentials going forward once you move into the new contracting year. So the differentials were strong in Q1.

They continued through. As we're looking at it going forward, April looks positive, but our initial view is that we would be back to sort of a five-year average-type differential numbers.

Now to your question on – from a lower propane price perspective, how that can impact us going forward. As we've discussed previously, for residential customers, in particular, there is some ability to capture some incremental margin as the propane prices are lower.

In addition to that, as you have fixed price-type contracts in place, as you can enter into contracts for fixed prices going forward and they're lower, you do have the ability to potentially capture, again, a little bit incremental margin if that customer price is still declining or being maintained on a year-over-year basis. So we would view in the lower propane pricing environment that we do have the ability to probably keep some of that incremental margin that we have experienced in the last, probably, year to 18 months because the propane prices have been relatively low over that period of time.

Does that capture your question?

No, that's great, Beth. I appreciate that.

And what about the actual supply? Obviously, we're not getting a lot of associated gas and NGL supplies are tightening.

Are – when you contract your supplies for the next winter, do you contract it – what's the supply guarantees that you get?

We will buy supply in – with the size of our portfolio and the variability in the volume that's used, what we will typically buy are pieces where there is volume, which is committed to us, and we'll usually have something like a plus or minus 10% ability to draw. If your question's getting at with some of the refineries, production levels being lower, et cetera, from our perspective, our view is, overall, fundamentally, we're comfortable we can get propane.

There's no lack or inability of supply. There is, however, potential in certain regional areas to have some additional challenges.

So we have looked in all – identified – say, an area like California. So in California right now, the refineries have slowed down.

So as a result, in order to get the propane, we've had to rail more propane into California to service our customers. So that is something which we're constantly looking at and what we will do to mitigate any potential risk to make sure we have security of supply for our customers, we will look forward and ensure that we have, I'm going to say, plan to use in place.

Eastern Canada and Newfoundland, there's been similar challenges, where, again, we've trucked more propane in than we normally would because that refinery isn't producing the levels of propane and historically did as well. So again, we...

Yes. No.

So 90% of our propane comes from natural gas. So as you see, the overall production slowing down, it's not affecting us or capacity to get propane going forward.

It's looking as good this year as the past. Your question on the market with the residential making a bit more margin, just for everybody on the phone, the relativity of that in Canada, we're about 25% residential.

In the States, 85% to 90% of our volume is residential.

Yes. No, for sure.

And just on the – you noted several times in the release competitive pressures in Canada. I can only assume that your major competitor in Western Canada is being a little bit more aggressive in non-resi, commercial, industrial and maybe even oil field to a degree.

Anything you guys can call out in terms of what you're seeing in the competitive landscape overall?

Yes. I think in the last year, we've had a bit more pressure with competition in Western Canada, not so much in the rest of Canada.

We've had good growth, except the oil field. Every other segment, we've had internal growth.

Same with the States, we took over NGL, and we built it to the tune of $24 million more EBITDA coming. And we're coming well on our game of marketing and sales that we put in place in our digital connection with customers is helping us a bit more now than the past because people are forced to do digital.

And once you do digital sales, it's very hard in our company that are – really don't – we don't have any of our apps of that approach, not even close. And once you connect, you drop attrition in half.

And you can engage customers that are looking for a top supplier that has – simplifying all the process, can do all the information and the pricing and the billing, all digital. So I think we have a bit of an edge that's probably going to show better going forward in that regard.

And from a competition out west, in the last few months, it slowed down a lot. I think our competitors followed our lead to say, let's not move too much of our technician to switch propane tanks when it really doesn't make a difference, one thing to the other.

Now we own our tank and somebody else conduct – come and field guys and everything. So there's less switching going on now because of the situation with the COVID-19.

Okay. And last one for me, Luc, Beth, you guys moved pretty quickly here on OpEx to reduce $35 million in cost reductions.

That was a great reaction, obviously and very quick. So anything you can call out what might be comprised in that number and how you managed to get it down fairly quickly amid COVID?

Sure. So first, I thank you for the comment because the 1 thing we've done over nine years is built a very outstanding business model that's the best in the industry by far.

And we've had tons of proof of that, including industry association statistics. And we're operator and we take action, so as soon as we see a slowdown or difficulty ahead of us, what are we doing about it?

And we're just – I think I've said it before in the call, I think if you have to say what's our real core competence with the management team – and we changed a lot of manager when we started, straggling the core competence of execution. We're good in digital and marketing and sales, which is not very big in this industry, including chemical for better marketing and sales.

And then we're – from a time – from an execution point of view, we just go at it. We just made that happen.

Once we decide something, we'll just do it. So when you want a breakdown of the $30 million cost savings, it's about $9 million to $10 million is Canadian Propane; so wage benefit, people $6 million to $7 million.

The lower traveling, which I think will last forever, we're going to do things differently going forward, about $1.5 million. And we did – so reduced costs also in the U.S.

business by about $13 million. Wage and benefit, reduced.

And then our pending distribution logistics business, we have a variable cost of 70% of our total cost. So the market goes up, we can scale up.

When the market goes down, we can scale down. Now I know most competitors don't do that, but that's where we can flex our cost structure more in the distribution business being a variable cost-type industry.

Not as easy in chemical because you have bricks and mortars that are your basics constantly. And your SG&A is 4% in our chemical.

We've seen competitors having doubled our cost of this journey. So we're – we have less opportunity.

But in chemical, ERCO, they're doing better than planned by a good number, not as good as last year. They reduced cost by $8 million.

So you have the three divisions. There's no secret caliber that doesn't get adjust and affect and moved to adapt to the new world.

And what we did is we look at 18 months down the road. And if we were going to see only a 3% decline in the states from an industry, from the statistics, from the history of top five competitor, we put 5%.

So for the next 18 months, we're going to have 5% less sales, less than half to that. In Canada, we're taking 7%, 8% less sales.

Over the next 18 months, I put – we put 10% in the forecast, that's – we're going out with 10%. I don't think we'll make it to 10% and 5%, but it doesn't matter, let's adjust to 10% and 5%.

And if we're wrong, we'll scale up.

Excellent, thanks for the answers. Great answer, enjoy the long weekend.

All the best.

Can you talk about your assumptions in the Specialty Chemicals business to arrive at the lower end of your EBITDA guidance range?

Our Chemical business is doing well this year versus planned, but not versus last year. And your question, you want to know how things are going by product.

So – and the chlorate is doing well. And we've had a hiccup with one customer, a big break in the plant with 6,000, 7,000 tons less volume.

And management just went at it right away, and we're going to do – that loss of sales, we're going to do it on the export because we are the player in America, the largest – sorry, and it's 57% of our EBITDA. It's really running well and when we can flex with exports.

So we had capacity we thought we're going to have that we didn't expect for the forecast. And that 5,000-plus tone, we've exported it now and pretty much the same margin.

When you look at chlorine, I think what saves us a bit on chlorine is the caustic price are going up. And we thought – we predicted less cost price.

Caustic price increase is happening now. Every time there's a slowdown, there's less supply of caustic from the Gulf Coast for PVC.

It takes a real producer like us to have more demand. And we – increased prices are happening as we speak.

I think we're going to have a good year in caustic. And then on chlorine – chloride, 5% of our volume, not so good.

Our oil field, Canada and U.S., not so good. And then on the chlorine side, we bought additional rail years ago that gives us a good volume that we can ship.

Well, I think some of our industry competitors might not have enough transportation capacity because when you make one product, you end up with the other. So you have to be able to ship chlorine to make caustic.

We were limited to a degree, but we have more transportation that we bought years ago that gives us a chance to play on that upswing of the caustic world.

Yes, Luc. And the one thing that I might add to your question, I think your question was asking what was happening in chemicals to push us towards guiding to the lower end.

Fundamentally, where we're still facing headwinds in our overall chemicals area, and as Luc said, not in chlorate but from a chlor-alkali perspective, while we don't provide specific guidance by division, directionally, chemicals has actually been producing better, and we would still anticipate it to be doing better than our original assumption. That being said, on a year-over-year basis, it would still be challenged based on those headwinds on chlor-alkali.

And one other thing that I will say is when you're looking at it, foreign exchange is also one of the items that is resulting into a more positive than it might otherwise.

And my follow-up question is, given where your leverage is right now, can you talk about your appetite for further tuck-ins in the U.S. where valuations have they started to come down?

Is the M&A market there frozen while COVID plays out? How much have you targeted for any tuck-ins this year?

Yes, you're kind of breaking my heart with that question because we have a list that's bigger than ever on opportunity, and we're looking at buying business after synergy. The top six of that we're looking at out of 2022, which, unfortunately, we'll do a lot less than that this year because we don't like the idea of passing four times debt to equity and some of the private business wouldn't bother me at all to see the sustainability of our business in tough times.

So – but it is what it is. So we don't want to go hard in for.

And because of that, we will slow down on acquisition. If we want our acquisition we're looking at, on average of all the top six, 26% to 27% ERR, including that we would pay 25% tax, and we know we're not going to pay lowest tax over many, many years to come.

So we're – we really can buy at the right price, and we can integrate them. We have the platform, the system, the people in place to just cast within a year to get the – them to our business model.

And unfortunately, we're going to slow down.

Thank you.

All right, good morning.

Good morning, Jacob.

Good morning.

A question here on the sustainability of margins in the energy services, in particular, what we saw in Canada in the quarter. Can this be maintained?

And I know you're talking a bit about margin management. What are you doing differently right now?

I'll start with the end market, and then Beth could cover the supply base, which is run under her leadership. On the end market, if you go back to nine years, every year, we're tweaking margin up.

It's like – this is our most utility business. You own the tank.

And if you don't play around and increase price 25%, the customers are not going anywhere. We really, really have top service.

We do survey with our customers and our employees, and we're at the top card [ph] of every support reports we get from the customer. And we're getting an e-mail now from employing customer that we even went up during this crisis, both we – both the survey we did recently is giving a bigger score because we're communicating and winning the game.

And so we're in a good position from those margins. And when you add the service and the connection and the digital that I've alluded to earlier, what happens is value-adding, too, to the customer.

So I won't name big customer name, but we're doing it to every customer. If you had [ph] a penny here and a penny there, nobody gets hurt.

And very hard once you're into a business model, like us, that has all of those services surrounding the end markets, they always say, we don't sell a commodity here. When I started, we're not here to sell commodity.

Forget propane, the commodity is not. It's all our service, the connection with customers, our quick response.

Nobody's – runs out of gas. And it gives us an edge.

So once you do the connection digital, you cut attrition because some people need a move and all that. You cut attrition in half.

So where – that's when we get 2% to 3% more growth in an industry than the competitor because at better margin. So we don't have to pay sometimes hard for people to relate to all your increased prices going to lose volume.

No. If you do it intelligently and you tweak it properly and you have put another view around the customer first, it's okay, it's fixed.

Yes. And I think, Jacob, what I'll add, if part of your specific question was looking at the margin for Q1, which was $0.20, typically, we will guide to that $0.14 to $0.17 in our overall on average margins.

For 2020, I think towards the higher end of the range would be a number that you should be thinking about, and that's partly being impacted by customer mix as well. So – and then that's just because a lot of the potential decreases in the volume are happening at wholesale type customers and the larger industrial and oil and gas customers, which generate lower margins.

So on an average basis; it will increase it sort of towards that top. But again, $0.14 to $0.17 is still a reasonable range to think about, but higher end of that range for 2020.

Okay. And then if we think about volumes on the industrial, commercial and oilfield side, can you just talk about what the shape of that has looked like?

Like was there a dramatic falloff in April and things are starting to improve in May? Or are they still dropping off?

Or how are you thinking about that right now?

Yes. We're – when we – first I'll say, when we put the forecast together, you go back amount of work and people looking at every segment of a division the various region.

We see a little bit more positive today. April and May is really looking good.

Cost structure has come down and volume is good. So you will have, and that's where the 10% Canada and 5% U.S.

The – when it comes to industrial, the less volume that business, of course, they do buy less propane. Some segment, house and commercial, a lot of commercial building, you have to – them anyway, not much change, good or bad timing kind of you slowdown on that.

But you do have some segment and some type of customer where you lose volume when the economy slows down. Our calculations show we're probably 6%, 7% in Canada reduction.

We went to 10% in adjusting our business costs accordingly and U.S. residential, 3%.

And we even had one of our Board, as you know, the ex-CEO of Amerigas, and he said, look, 2% is probably good. And we've been presidential and slow down the economy.

So we're putting let's not do this re time this year. We then do a big shopper, take care of it and move on.

Yes. I could give you just a little bit of a sense as well.

We would be expecting some of the pressure. And again, as Luc said, it's the commercial oilfield forklift type volumes, which we would have seen some of the reductions.

The way we're looking at it currently is if you think of Q2 sort of from where we originally thought we were going to be building an impact of maybe 15% to 20% in some of those areas. Q3 less, more like a 10%, and then as we get to Q4, less of an impact to 5% and again, that's partly because you get your heating again days as well.

But just to give you a little bit of a sense on how we're looking at that shaping.

Auto industry, which is a segment taxi reduced propane to a degree, all of those a bit affected big time. And that's where your forecast as before.

Okay. Thank you.

And then my last question here is just on maintenance on the specialty chemicals side. I think we've been hearing from some of your peers that there may be some potential issues as far as getting the workers lined up here for maintenance turnarounds.

Are there any major turnarounds being planned for this year? And is that the same experience you're having?

Well, I'll tell you, and I've said it before, then lots of [indiscernible] different big industry, Canada, U.S. and lots of change management with energy and to rebuild the business and position it well for growth after you fix it.

I have never met the management team at Professional Aerco. Are so on tuned with everything ahead of the game did not miss the beaten.

So they will always be preparing for everyone in the plan, a good product called the top of the industry in health and safety. We copied them for the rest of the business to improve the energy business, health and safety, and it’s part of our culture now.

But they really have – they're engineering that they know how to run stop better than I've seen them better than the company I know. So obviously preparing all the work, organized the protocol of people are not close to each other.

Our President was explaining to the Board this week in Saskatoon, we closed – for cost reduction and efficiency; we closed the Saskatoon chlorate plant. And we are, as you know, expanding on baking and low-cost plant and then low cost plant in the Southeast.

So to shift production to lower cost, flat and closer to the end market and this Saskatchewan, we have the chlor-alkali next door within the same building but far apart. So we've used the two control center to make people work in different places.

They're all telling on top of that. We're expecting no hiccups at all in the – plant.

It's reviewed regularly by the senior team. So nothing happening here that's a problem.

Okay. Thank you.

Yes. Good morning, guys.

Just an initial question, I may have missed it. But Luc, can you just comment or remind us on how quickly Ergo's contracts might adjust to benchmark price changes in caustic?

Is that a relatively swift adjustment process? Or is there a lag to it?

No. It's pretty fast.

We've predicted – quarter-to-quarter, we have predicted that it would be not going up so much, maybe by midyear this year, and we're getting a bit of help in that regard on caustic because the prices are going up every quarter.

Okay, helpful. And then maybe just a question on the tuck-in side.

I understand tuck-ins will be down this year. But you have moved into the retail side of California now.

You started in the wholesale market. Are there any unique advantages to being in the retail side in California that would be different from the retail dynamics we see elsewhere?

Yes. To that many times, we're – when we – let's say, we buy a business, 6.5 times or 7 times.

We make it 6.5, make it 7, and its news in California, and we don't have a big scale in California. With our business model, we'll bring 2% internal growth.

We have to do that everywhere. We'll bring operational effectiveness on the logistics, our business model logistics with our sensor, good to install understanding by the minute everywhere, every tank where they're at and how to fill them in the most efficient way.

So when we bring our business model, we came on multiple turn. So we'll go from 7% to 6%.

If we're – like we are bigger in this, eastern part of the states, that 7% becomes 5% because normally we put our business model and our way more efficient, we do consider to say, then we look at, oh, there's a lot of overlap, and they overlap, you take those cuts out and gain another turn. And I'll go to an extreme, the Canwest, the thing that you know very well up west; it was a $40 million business.

And there was a lot of overlap with us. Our main competitor in Western Canada, so $40 million became $60 million, so it's 50% improvement, not 25% why because there was so much overlap, we don't need to start it in two locations and the same 20 last circle.

So you're more than you buy in an area that you already have a position, you gain more through the synergies. California will give us less synergy, the first for [indiscernible] acquisition on this is a big one.

And then after that, just it will take like – and the reason we are in California, want to get big. We have a hiccup now on cash and all that stuff, literally doubled up and tripled up one day in the U.S.

because we have the business model, and we can improve everything we buy, going from 7, bringing back to 5, bringing back 7, bring back to 6, we do a ton of that. I will have the cash.

Yes. And I think in the California market, I'll just also flag some of the other unique things that we tend to see there that you may not see everywhere else.

And one is it does have strong agricultural margins as a result of that just market in general. If you want to think about it, it serves wineries, et cetera.

You also tend to have – interestingly, when you look at the usage on a year-over-year-over-year basis, it tends to be fairly consistent in that usage by the customers in California. So it is nice from that perspective.

And as Luc mentioned, it is a very large market as well. So certainly, from a longer-term perspective, there's a lot of to grow, as Luc was talking about.

Okay. Helpful.

And I don't know if it's relevant to if you could share, but of the top six entities that I think Luc referred to earlier, will we have a sense for how those are balanced between East Coast and West Coast?

One West Coast, five East Coast.

Okay. Thanks, guys.

Appreciate that.

Great. Thanks.

Good morning, everyone. First question relates to the deferral or the $30 million of CapEx and $30 million of OpEx reduction.

I was just wondering, how should we think about this? Like is the CapEx really a deferral of $30 million into 2021?

And for that $30 million of OpEx reduction, is this more of a short-term cost savings? Or would cost in 2021 be higher?

Or is some of this like a recurring cost-saving item? Can you just give a bit more comment there?

Yes. I'll start, and Beth will add to that.

So from an operating cost, they're reduced because the volume is going to be less, which slowed down the economy, so that's gone, not coming back unless the economy comes back and volume comes back. On the CapEx, a very good question.

Some are delayed CapEx, that's going to be postponed in time. The bigger one is B51 [ph].

The government gives us up to 2024 to go through everything. Every ten years, we have to do that and just do some adjustments and clean up and make sure that the equipment is really up to par.

We've done tons of that up to now. It costs us, let's say, $10 million a year, and I hope it goes away.

It will go away in 2024. So we have up to 2024 to do it.

So we said, okay, so we're closer to 3.8%. Why don't we just take a break here, we have time.

So we did that. That's coming back.

It will have to be done by 2024. Other CapEx is – our fleet has been renewed, as you know, where we don't like target eight, 10 years, 12 years old.

There's some truck about tail, you could last a year and it's good. And we modernize our fleet big time in the last five, six, seven years.

As you know, we never were sort of bringing the business to the next level of efficiency. And we need the investment, and we've done a ton of investment in that regard.

So we – well, our year – our truck like seven years average, we could go to eight and nobody died and it's not a big deal, so we're delaying trucks. Beth?

Yes. And what I will also say where Luc was talking, the majority of the expense savings are sort of one-time as a result of the reduction.

There is some that is linked to our Superior way initiatives as well as some on rescaling of the business. So we would anticipate, as we move into 2021, there are – there will be recurring or permanent cost savings in the range of $10 million to $11 million.

So we do see that there are some. They are all onetime, are all variable-based.

I might want to add something, too, Nelson, is that all investment that keeps us differentiating ourselves, making us better than the competition out there, sensor, digital, not stopping that. Somebody will have to – it'd be hard to – had we stopped to build our differentiation and our business model.

We're doing that. We're delaying stuff that we can delay and comfortable with.

Okay. Thanks for the color.

And then just moving on to the chlorate business, I know you mentioned that the business is doing well and demand is strong. I know one of your peers reduced their expectation in terms of chlorate volumes because of weak paper demand, but obviously, tissue demand is strong.

Could you comment on your expectation of the COVID impact, whether it's partly because you have a different mix of customers or whether you're seeing any weakness going forward?

Very good question, so, first of all, when I talk about marketing and sales of chemicals, so what are you doing? You're selling chemicals.

And years ago, early are shipped itergo [ph], we moved some customer base that were paper. We knew it's going away, about 7% of our sales.

We went down to look at customers that are doing bleaching for fluff and other products. There's some good growth there.

So let's move away fully but surely from those bigger customers. We still have some, 7% of our total.

So I think that mix is helping us, and it was planned in a strategic orientation of the last five-plus years. And don't forget also, we did a lot.

We have people that we have 50% market share in chlorate in Japan. With chlorate, you all know I spoke on the phone that you don't get imported chlorate.

The biggest cost of chlorate, two-third of the cost is energy and North America natural gas or electricity Quebec. Nobody in the world is going to come and play that game again, tough.

And we said, well, what about exporting? And we hired a couple of marketing salespeople that travel the world, last big expense [ph] and good market share in different parts of the world.

So we start our extra capacity. If there's a hiccup and you lose 10,000 tonnes.

Like we just did two months ago, let's export it. We have all those connections.

We make pretty much the same margin. It's just a little bit more costly to transport.

And we have that flexibility, and then we adjust.

Okay. That’s great color.

I’ll get back in the queue. Thank you.

Okay.

Yes. Good morning, everybody.

I hope everyone is keeping well. Just with regards to the lower electricity bill rates that you experienced in the quarter.

Now that the natural gas forward curve has moved up 25% or so over the past couple of months, would you expect to see upward pressure on your electricity rates for some of your plants into the back half of the year and into 2021? I guess is this factored into your revised guidance at least for 2020?

Yes, in our guidance. We say $1 million plus in costs.

Don't forget the electricity in Quebec, very low. And we have a new arrangement with Quebec, our biggest plant of chlorate there in Buckingham.

And we have a new arrangement; that we're not getting cost increase in electricity. Natural gas in the Southeast, very good and we don't see a problem there.

Vancouver, it's another area where you say, what does management do when you're in that kind of business? Vancouver, the price spiked for a couple of weeks or a month.

I'm trying to remember the time period. So what our management did say, we have capacity, we have some stock in the other plant.

Pricing just went up. We're not producing for a week.

I think it was pending. And then the price we adjusted other chemical chlorate that we had.

That's also a chlorate plant. That's a chlorate plant that exports to Japan.

And so we're kind of flexed again with what happened to the business. This is getting too high on cost in Vancouver, well, time out, let's slow down.

And let's produce some other plant and ship the product. Now they're back with low price, and we're back producing full time.

The Saskatoon, we closed last year, why? And the price of Saskatoon electricity goes up every year, more than the inflation, like double inflation.

What the heck? We can't do that for 10 years when 70% of your variable cost makes chlorate this electricity.

So we shutdown chlorate, and we're building it and poking at where we are the lowest cost electricity in America, maybe in the world. So in good shape, and that's what management does for living.

Yes. And just for clarity in your question on what we would be anticipating for the remainder of the year.

We don't anticipate that same level of mill rates for the remainder of the year. Our forecast would be looking to sort of increasing to where we thought we were thought we were initially going to be.

So fundamentally, it's not built in for the remainder of the year.

Okay, perfect. And then on the positive side, I guess, one of the silver linings here of this crisis is that it's forcing everyone to become more tech savvy.

Are you seeing any immediate benefits here from a customer service or operational efficiency perspective? I know you mentioned the $30 million of savings are mainly wages and travel expenses but also alluded to the Superior way platform.

I'm just curious what you're seeing in terms of accelerating some of the cost reductions related to the Superior way initiative and how that might play into the back half of 2020.

Very good point. Because with what's coming, that's why I think a successful company do.

What’s coming will give us a chance to say that we would – everybody getting heard so much everywhere in the world to do something better. So what's happening in the acquisition to pay less.

What's happening with our bricks and mortar equipment, what we have on sites, let's say, a 1,000 people work from home on their total employee base today. 1,040.

And where I'm shocked, honestly, I didn’t know that. I'm shocked our customer call centers are like, wow, we know we can – we have put a digital wear on our business and now it's like holy macro.

We have 1,000 people working from home. What are we missing?

We're having like – there's nothing up. So it’s like what do you do going forward?

For the rest of the year, we'll have a protocol to make sure that not everybody goes back to the building at the same time. And we might adjust working hours and working time, take a bit longer time when people have kids, so they can come back tomorrow.

We're good. We're working from home.

It's going well. We have a queue, which was very, very – we went to develop two best-of-class call centers.

And by doing that, we do it with equipment and technology. So now they're working it from home.

They measure their efficiency, the number call, how we're servicing customer. Our customer setup went up.

Our customer service number and promotion score went up. What the hell is going on here?

So we're beginning to – we don't need everything we have. And we just started that discussion.

I met with the President a week ago, so it's pretty new thing. Okay, let's start to think about – we're not going to do everything the same way in the year because we have a chance to think differently now.

Who would have told me that our customer call center could go home and we have the same service and it goes up. I will never call the extra.

I can tell you. So yes, there's coming cost from transportation cost.

ERCO reduced their cost by over $1 million of just people flying everywhere. And their President was saying, I don't think we need to go back to that.

Maybe it's out of plan meeting face to face. There will be ton of opportunity in acquisition and how we do our thing and the management and the number of buildings we have.

All of that will be reconsidered totally.

Okay, great. Thanks for that color, Luc.

And then just switching gears here, when you turn the DRIP back on earlier this year, obviously that was pre-crisis and – with a much higher stock price. So just curious, given the dilution here at these levels, what are the levers you might be able to pull just to achieve your deleveraging goals by their smaller non-core assets sales or otherwise again, just to mitigate the dilution on your payout ratio as much as possible?

I mean, I think from our perspective, we are looking at other areas. We do view that the DRIP provides cash retentions in the challenging environment.

And it does – there is some dilution, but it's not material dilution. So from our perspective at this point in time, we're comfortable with it in place, although we do acknowledge the fact that the share price is low.

Okay. And then on the flip side, Beth, I guess, you mentioned the FX tailwinds, you're obviously a good opportunity to lock in some pretty attractive rates.

Can you just confirm what percentage of your U.S. cash flow is hedged at this point for the remainder of 2020 and perhaps 2021?

And then what you'll be targeting in terms of a hedging percentage as you move through the back half of the year?

Yes. So for 2020, we have roughly 90% currently hedged.

So we do have our hedging policy and just to refer and certainly you can look to what we do have some disclosures within our MD&A on the hedging and the percentages, but that being said, so we're 90% in 2020, and then for 2021, we're currently sitting at roughly about 65%. So it certainly is something that we will look at within our typical parameters of hedging, which we have ranges as the years go out.

And we will certainly look to do that, we're in the Canadian dollars as weak as it is currently.

Okay, perfect. That's it for me keep well, everybody.

Thank you. Good luck, Pat.

Thank you.

Good morning and sort of echoing everyone's thoughts. I hope all of you are, well.

I've got a couple of questions that will sort of tie together onto the debt sort of forecasting sort of side. So first one is a bit of a follow-up from Patrick and I don't want a micrometer, but I noticed that we had about 300,000 shares issued in the DRIP with $2.7 million.

Can you clarify if that was for one month or two months of dividend rationale, as I just want to get a handle on the participation rate?

Yes, maybe the best way to answer that is from a participation rate perspective, on the first month we put the DRIP in, it was roughly 28% participation then for sort of March as we went through the largest partners that the first indication of the crisis is decreased to in the range of 16%. And then it did actually jump back up to about 28%.

So we kind of readjusted what our expectation was. We historically have seen about 30%, we're thinking it might end up being somewhere around 20% participation, but again, going forward, we'll have a better sense in another month or two.

Okay. And now I'm sort of taking that a bit further Beth, if I can to your forecast of debt-to-EBITDA, you've updated that to 3.6 to 4 times and you've given us EBITDA guidance.

So I guess, would it be fair to say if you can see debt holding relatively steady or maybe declining a little bit, trying to ignore the potential FX gyrations, would that be sort of fair?

Yes. Absent FX changes, yes, we’re still producing positive cash flow.

So that would be used to reduce debt from a cash flow perspective, but again yes, you have the FX impact.

Okay. And now I'll sort of move to Luc, as I guess I'm going to sort of push you a bit on the tuck-ins.

You have your top six – historically you've been buying in the – I think sort of the mid point range or maybe the sweet spot range where you might be $20 million to $30 million. To get to your debt number – can we think of anything being budgeted beyond what's occurred?

It's sort of from a planning perspective or not.

Yes. So there's really three buckets of acquisition.

I don't think we'll do six this year. I think there's two that are lined up that we'd like to do shortly, and then we'll see the rest of the year.

It's all up because of the debt. You're right.

And when it comes to small, there's a lineup of small, medium and larger one. So on the small one, first, I think it's important to know right now with what's going on out there for the next year or two – or a year anyway, of portfolio debt, and that ain’t going away.

It might be one or two that we lose because we're not – what I pay more or we're not looking at buying enough kind of companies that are for sales. But I do think, in general, they're going away.

They’re not going away, the market gets a bit tougher, 5% less sales in the States, 10% Canada. We’re going to be able to do deals, and I believe the deals are going to be a bit cheaper.

So I'm not pleased to do, let's say, four, five acquisitions this year versus 10 that we can do, and we can integrate and do their job. But it's not so bad because there'll be more pain for people who want to sell to say how many buyers out there, not that many.

How many are like us that knows everybody in the industry have come back a relationship? No one.

So we're at the table of everyone, and I can tell you from – since we started doing acquisition, the one we lose, we're the one walking away because they sold at the time we're going to have and want to pay [indiscernible]. So we're doing small, there's a medium ones.

And two of the medium one call me once a month this year because they should have called us last year. But now it can go out to do equity on these prices just freeze it.

So we're continuing the contact and the relationship to the tune that we can fly [indiscernible]. We'll continue that work, and we'll push it a bit.

It's not going away. And we'll get to a position on the – in time that we can start wrapping up roughly.

And the large one, we will need a major investor to come in because we don't want to be 4 times plus debt as a public company. And Beth, don’t you think you would add to that?

No. The only thing that I'll clarify, typically when we're looking at the range, we don't build in any future acquisitions, that being said for the smaller type act acquisitions, we will pro forma the EBITDA, so smaller transactions don't have a material impact on the leverage.

Just for particular clarify.

Okay. And this kind of ties into sort of acquisitions, but – and maybe COVID-19.

Have you seen any impact to your cash flow or AR related to customers and I know you're not formally a utility, but is there any relief if that's the case? And does that again play into the acquisitions for the smaller competitors?

We certainly have seen certainly with some of the smaller oil and gas customers sort of concerns around credit on some of the customers. That being said, we don't have – we – I don't have any examples of nonpayment, et cetera at this point in time.

What we have done has been very clear and allocated and been very targeted with our credit and collections, people to have them focus on those areas. And we are looking at various customers where we believe we need incremental collateral to reach out and address that.

I mean, the one thing to remember from a corporate perspective, that I'm talking about energy distribution right now. We have a very diversified portfolio, we don't have any concentration or extremely large customers.

So from that perspective, it's something we're looking at is something that we think we may have considered going forward. But currently right now, we're just focusing on some individual potential areas.

Great. That's it for me.

I'll stop at this point and I appreciate the color.

Thank you.

Good morning, Joel.

Hi, this is Bria Murphy on for Joel. Good morning.

Thanks for taking my questions. Most of my questions have been answered.

I just have one follow-up for Beth. You gave some guidance on typical Canadian propane margin ranges and what you expect for the year.

Can you do the same for U.S. propane?

Yes. So from a U.S.

perspective, the way to think about it is between $0.30 to $0.32 U.S. So again, that will get impacted by wherever the Canadian dollar is, but if the Canadian dollar was at basically – like a 1.4 or 1.4, then it'd be somewhere between $0.42 to $0.45, is the way to think about it.

And then for this year, do you expect it to be just in the midpoint of that range or the higher end?

I think from our perspective, again, depending on where the Canadian dollar is probably more so shifting towards the higher end based on where the propane prices are.

Okay, great. That's it for me.

Thank you.

Thank you. So, thank you for your questions.

It was really good to drill down and challenge us on many areas, which we appreciate as some time we learn also how to respond properly to our investors and analysts. Thank you for listening.

Supporting us through this difficult time is a great thing. We have a good dividend.

We have a start that's extremely low. So – and to start the quarter one, I think it's very clear, big picture, really warmer than 130 years, six time in the history.

So think of that as to what happens next year. Well, usually, average weather comes back, we'll get the amount at that time, and we restructure with lower cost.

I think we have a good upside down the road with that and all. We're continuing, of course, to do everything we can in the business.

And a little bit of wind behind us on that April, May, June, our biggest quarter, it's not a slower quarter, but it's really coming well. As you recall, people know.

Finally, we've got a little bit of cold weather in April and May that was not expected. So things are moving a little bit better than we anticipated when we put this forecast together.

So in a nutshell, thank you, all the best and we’ll talk to you in three months or all of you call Ron whenever you have something you want to know more. Thanks a lot

Thank you.