Superior Plus Corp. (SPB) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Superior Plus 2021 First Quarter Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Rob Dorran, VP, IR and Treasurer. Thank you. Please go ahead, sir.

Thank you, Kara. Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2021 first quarter results. Our speakers on the call today will be Luc Desjardins, President and CEO; and Beth Summers, Executive VP and CFO. 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.

So thank you, Rob, and good morning, everyone. Thank you for joining us on the call. We hope everyone is safe and healthy. We will -- we are still dealing with various levels of COVID-19 restriction in our operating region in Canada and the U.S. and are proud of our team's commitment to safety and reliability, provided essential fuel and service to our customer. I would like to start with some highlights from the first quarter and recent weeks following the end of the quarter. On April 9, we successfully completed our transition to a pure-play energy distribution company with the sale of Specialty Chemicals, and we have already announced or completed 4 acquisitions in 2021 for the total consideration of $258 million. We are focused on growing our business and have set a goal to double the U.S. prepaid EBITDA in the next 5 years, we'll achieve that goal through acquisition, organic growth, continuous improvement initiatives in Canada, and we're also looking at acquisition, but the majority of the growth in that business will come demand recovery following COVID-19. That's for Canada. Organic growth and continuous improvement initiatives are also part of our play. We'll be rolling out our new 5-year strategic plan, the Superior way forward, on May 25, at a virtual Investor Day. I invite you all to attend this presentation as we will be laying the framework for the next 5 years in our financial and operational goals. In late January and early February, we announced 3 propane acquisitions for a total consideration of $45 million, adding 40 million liter, 19,000 customers in the Northeast U.S. and in Canada. On April 22, we announced we have entered into an agreement to acquire Freeman Gas for U.S. company and for $170 million in the Southeast USA. We also published our Inaugural Sustainability Report, recognizing the importance of sustainability and ESG principal and operation and business strategy. This report is just a start, and we look forward to sharing more details on what Superior is doing in relation to ESG as building a sustainable company and key to our future success and working with our stakeholders. Propane is expected to play an important role in energy transition and reducing greenhouse gas emission by displacing other fuels such as diesel, gasoline, and oil, preparing vehicle and remote power generation application. We also delivered strong financial and operating results for the first quarter with our strategic growth and operational initiatives on track with our plan. Our energy distribution businesses continued to demonstrate resiliency as we achieved record EBITDA from operation of $216.4 million in the first quarter. U.S. propane results increased significantly compared to the prior year quarter due to the higher sales volume related to acquisition and colder weather, partially offset by higher operating expense. U.S. propane EBITDA from operation 2021 is anticipated to be higher than 2020, primarily due to the impact of acquisition completed in 2020 and 2021. Weather consistent with the 5-year average benefits from the superior weight and seasonal workforce optimization initiative and realized synergy from acquisition. Canadian propane result for the first quarter were lower than the prior year quarter due to the decrease in average margin related to wholesale propane market fundamentals and a decrease in commercial volume-related to COVID-19. A decline in the oilfield and commercial business overall. Canadian propane EBITDA from operation in 2021 is anticipated to be lower than 2020, primarily due to the decrease in sales volume and average unit margin as well as a reduction in the CWS benefits from the government, partially offset by lower operating expense. Sales volume is expected to decrease due to the impact of COVID-19 and reduced activity, oil and gas and other segment in Western Canada related to that. In March and April, we enhanced our financial flexibility to the insurance of 2 unsecured notes and the extension of our credit facility. These refinancing initiatives will deliver approximately $50 million of annual interest savings and extend our debt maturity out to 2026 and on. We're optimistic some restriction will be lift in the second half of 2021, allowing our commercial customer to operate at higher capacity. However, we have resilient business, and we expect to generate strong free cash flow even in this challenging environment. I'll now turn the call over to Beth to discuss the financial results and more details.

Thank you, Luc, and good morning, everyone. Superior achieved first quarter adjusted EBITDA of $211.6 million, a $26.2 million or 14% increase over the prior year quarter, primarily due to higher EBITDA from operations from U.S. propane and realized gains on foreign exchange hedging contracts compared to a realized loss in the prior year quarter. This was partially offset by lower EBITDA from operations in Canadian propane distribution and higher corporate costs. Our consolidated net earnings from continuing operations of $75.4 million in the first quarter, increased $74.3 million over the first quarter of 2020. The primary driver was the strength of the U.S. propane distribution segment described earlier and the gains on derivatives and foreign currency translation of borrowings, partially offset by higher finance expense and income tax expense in the current quarter. Our consolidated adjusted operating cash flow before transaction and other costs for the first quarter was $185.3 million, a $28.9 million or 18% increase compared to the prior year quarter. This was primarily due to higher adjusted EBITDA and lower interest expense, partially offset by higher cash tax expenses. Turning now to the individual business results. U.S. propane EBITDA from operations was $140.1 million, an increase of $36.7 million or 35% from the prior year quarter, primarily due to the contribution from acquisitions completed in the last 12 months and colder weather. Residential sales volumes were 33% higher compared to the prior year quarter, primarily due to acquisitions and colder weather. Average weather, as measured by degree days, across the markets where U.S. propane operates was 7% colder than the prior year quarter and 4% warmer than the 5-year average. Commercial sales volumes were 27% higher compared to the prior year quarter, primarily due to acquisitions in colder weather, partially offset by a decrease in low-margin commercial distillate volume and the impact of COVID-19. Average margins were consistent with the prior year quarter as the impact from customer mix and sales and marketing initiatives were offset by the impact of the stronger Canadian dollar on U.S. denominated gross profit. Operating costs increased by 20% compared to the prior year quarter due to acquisitions, partially offset by workforce optimization initiatives, and realized synergies. Canadian propane EBITDA from operations of $76.3 million, decreased $10.3 million or 12% from the prior year quarter, primarily due to lower average margin related to weaker wholesale propane fundamentals and lower sales volumes related to the impact of COVID-19, a decline in oilfield activity in Western Canada and warmer weather. Residential sales volumes were 12% higher than the prior year quarter. This was primarily due to increased demand from COVID-19 related restrictions, keeping more people at home, and to a lesser extent, the impact of acquisitions completed during the current quarter. The increase was partially offset by warmer average weather compared to the prior year quarter. Average weather across Canada for the first quarter, as measured by degree days, was 3% warmer than the prior year and 4% warmer than the 5-year average. Commercial sales volumes were 9% lower than the prior year quarter, primarily due to the impact of COVID-19 on demand across the country, continued weaker economic conditions in Western Canada and to a lesser extent, the warmer weather. Wholesale propane volumes were 2% higher compared to the prior year quarter due to sales and marketing efforts to increase third-party spot-price wholesale propane sales. Average margins were 8% lower than the prior year quarter due to the weaker wholesale propane market fundamentals. Operating costs decreased by 6% compared to the prior year quarter due to the impact from the CWS benefit and cost-saving initiatives. Lastly, the corporate results and the adjusted EBITDA and leverage guidance. Corporate operating costs were $10.3 million, an increase of $9.7 million compared to the $0.6 million in the prior year quarter, primarily due to higher long-term incentive plan costs related to the share price appreciation in the first quarter. Interest costs decreased 14% compared to the prior year quarter due to the lower average debt levels and lower interest rates. Superior total net debt to adjusted EBITDA leverage ratio for the trailing 12 months ended March 31, 2021, including the specialty chemicals EBITDA from operations was 3.6x. The pro forma net debt to adjusted EBITDA leverage ratio, adjusted for the cash proceeds received from the sale of the Specialty Chemicals business and excluding the specialty chemicals EBITDA from operations was 2.9x, which is below the low end of Superior's long-term target of 3x to 3.5x. In the quarter, we redeemed the $350 million, 7% senior unsecured notes due July 15, 2026, with proceeds from a private placement of $600 million, 4.5%, senior unsecured notes issued at par and due March 15, 2029. Following the quarter end, we amended the syndicated credit facility and extended the maturity to May 8, 2026. There were no changes to the total commitments available under the credit facility, the accordion capacity or the financial covenants. In addition, we announced a CAD 500 million private placement of senior unsecured notes issued at 4.25%. The proceeds from the notes, along with borrowing under the credit facility and cash on hand, will be used to redeem the CAD 400 million, 5.25%, senior unsecured notes and CAD 370 million 5.125% senior unsecured notes. We further strengthened our balance sheet and debt maturity profile. So we're well positioned from a financing and liquidity perspective. Superior's outlook for 2021 remains unchanged with expected adjusted EBITDA guidance and the previously disclosed guidance range of $370 million to $410 million. Average weather for the remainder of 2021 is anticipated to be consistent with the 5-year average for the U.S. and Canada. We may reevaluate the 2021 adjusted EBITDA guidance when the acquisition of Freeman Gas closes. With that, I'll turn the call over to Q&A.

[Operator Instructions] Your first question comes from the line of David Newman.

Congratulations on some great moves here between the sale of Specialty Chemicals, some of the deals you're doing, and the balance sheet moves. So you seem to be very, very well set up. On the financial outlook, and you kind of alluded to it as well. You called out the rising Canadian dollars a headwind, but you're substantially hedged for the year. You've got Freeman in the fold now hopefully closes, as I'm sure it'll be fine. Other deals, synergies, cost savings, and et cetera. So if I look at it, it seems like you're going to well exceed your guidance, well exceed, but definitely exceed the top end of your current guidance. I assume you're keeping your power to drive from May 25.

Beth, do you want to take that?

Yes. I think how I would respond to that question, you missed a few things in there, David. But what I will say is on the FX side, you're correct, we are hedged. So if you look at the U.S. EBITDA from operations, it's impacted by the fluctuations in FX, but you see from our corporate or the hedge gain, but that's the offset to that impact because we're hedged for this year.

At $1.33, right?

That's correct. Yes. So from that perspective, absolutely, we see minimal impact on the change of the FX rate throughout the year, having an impact on our overall results. With respect to your comments on Freeman, we will reassess, as I mentioned, our guidance at the time when that closes. Historically, from a guidance perspective, we haven't built the forecast with respect to the acquisitions until they actually close. So at that point in time, we'll reassess and adjust accordingly at that time.

Should we assume half -- if it closes, should we assume half in 4Q, half of the $20 million?

Well, with respect to Freeman, what you have to recall for when we're likely closing Freeman, we'll have the bulk of Q2 and Q3 in the result. And they would be obviously the quarters that have a very small amount of EBITDA and actually some negative drag as you look throughout that period, consistent with residential type businesses. So Q4, it won't be half. It would be less than half, right in around a little bit less. Q1 is still your biggest quarter, right, Q1, Q4.

Yes. No, for sure.

Yes.

Now looking -- switching gears. Obviously, the Governor of Michigan, and we're now past the May 12 deadline here. And I think [indiscernible] hedge will prevail and the Feds have stepped in, but do you have a view on Line 5 and contingencies that you might have to deploy if that comes to pass?

Yes, I'll kick off that answer as well. So with respect to Line 5, we have been proactive and have been taking steps in advance. We have ensured that we have secure supply in the East. So in particular, Ontario, Quebec, and Atlantic would be impacted through the summer months. And so that's even if the [indiscernible] supply is disrupted, we're comfortable that we manage that. We've done that through increasing storage, through procuring secure supply, force majeure as well as moving railcar supplies to strategic locations. So on balance, we're comfortable from a security perspective. Past the summer, we'll continue to evaluate. We obviously want to balance supply security with the cost. So beyond that, we'll keep monitoring and if necessary, we'll secure further supply to the fall and the winter to manage that.

I'll add to that, David, and Beth, that when it comes to difficult time, when you think of the vortex years and years ago, you think of the railcar blockage, because of our big group and wholesale and storage everywhere, we can move liquid north, southeast, west. We have to understand that Line 5 is not good. But we do have a very big competitive advantage in times of crisis because all the competitors, when you think of East, Ontario, Quebec and maritime from a wholesale storage opportunity, bringing it from the south or situation in the southeast, we do have an edge on moving liquid and secure more liquid that were [ on 3 ] were not. Line 5 is a problem for everybody, but we're certainly, listen, I'm an optimistic. If this was to happen, but I'm not [indiscernible] the card. I want to take advantage of that to gain more customers and people that have -- if they live through those prices, small and midsized company competitor buying them if they want to say all of that because they try to make it difficult for them. They don't have a wholesale platform.

And just one more, just as part of that, and then I'll hand it over. If I recall, during rail blockade and other situations, you've actually been able to improve margins because of logistics. But is it -- will this kind of supply chain logistics, will it carry extra cost through the summer that you can offset through margin?

From a margin impact, I mean, there are some costs to be procuring, secure supply, and other items intact. That's all factored into our guidance and our forecast going forward. So it can be managed within the current guidance.

Your next question comes from the line of Ben Isaacson.

Luc, can you talk us through organic growth initiatives that you have right now? What kind of organic growth should we expect in 2021, 2022? And where does that come from?

Yes. And what you'll see at the May 25 investor presentation, is a lot of detail, which I kind of, pardon me saying, we're going to give our special approach to competitor one because everybody can read their Investor Day. But we will be very specific on the mechanics that we've put in place in marketing and sales by segmentation, by adding some value to the different segment of our customer base, by all the apps that we have for communication, for giving information, for be able to delivering on time, at the right time, and maximize our delivery system. So we do have a special -- very more, I would say, upscale, very modern approach to customers, and we're gaining customers. I think this past year in retail from new location was over 3%. So what we intend to do, May 25, give detailed specificity, how we go about that. Too long to explain on a call like that, but May 25, we will do that. We'll have people and senior leadership explaining all the mechanics, all the details of every way by segmentation, how we go to market. And net-net of all of that, we are very confident. We've always [indiscernible] going to grow 2% more than the industry. We've achieved that and more, and we will continue to do that. And big picture, it comes from an opportunity to not be in a very highly sophisticated industry and bringing best practice on best industry, how they go-to-market and how they reduce the accretion, which we cut in half and how you gain market and customers. So big picture, it's good. We expect to continue to have internal growth. And May 25, I guarantee you, you'll have all the specific details and time for question after to our specific leaders that makes that happen in marketing, sales, and operation as well.

Just 2 more quick ones. First is, can you -- now that your leverage has improved following the sale of the Chemicals business. Can you talk about your appetite for large acquisitions in the U.S., ones that are going to move the needle? Not just your appetite, but maybe also the opportunity set. Are there good opportunities out there? What does the multiples look like, et cetera?

Yes. Well, there's certainly more opportunity this year than we've seen in the past. I think the potential tax change reform in this stage is making people that thought they would sell their business in the next 2, 3 years to think through, hardly wind up now. And we've got more in call and opportunity than we've had ever in the past. Some are small, some are medium, Freeman I would call it medium size. And we're busy looking at different deals right now and there is many in the pipeline. From big, big deals, we always study the big deals opportunity. And we're very prudent on our rate of return and are buying around 9x, let's say, and deleveraging 2x. So we have synergies that are about 25% on every deal. Those 25% would apply a big deal as well. But the big deal are -- if you're talking about the big 3 players, there's nothing in the card that there are for sale or something could happen, but we certainly are alert to that, and we continue to analyze those file in case something of a big size comes to the market or becomes available. So nothing that we could really feel strong about in the big size, but small, medium, absolutely yes.

And then my last question for either you or Beth is, can you just give us an update on your self-help measures, including cost cutting? Where are you at right now? And where should we expect you to be by the end of the year?

Well, we've done a lot of cost-cutting last year, and we're seeing some benefit of that this year. During our investor presentation, we'll prepare our operating cost in Canada and U.S. as we digitalize, let's say, we have many projects and works to simplify, digitalize, and have less touch point people and paperwork to do the work. And that is -- those kind of projects are simplifying our work. And then as you multiply acquisition like the Freeman and others we did in Canada, end up with an overlap of routes. So if you have us and our competitor, trucks that pass each other to deliver within 100 mile, we cut that in 2 when we acquired them, say, now you're going to deliver more than 50 miles. So we're -- all of those, we will show the operating costs [indiscernible] in the next 5 years continuously to improve, and we intend to present real specific numbers at the Investor Day, how much operating cost reduction we expect in the next 5 years with all of our mechanic and our continuous improvement in that regard.

Your next question comes from the line of Steve Hansen.

Just a quick question on Freeman, just around the additional region a bit providing you into the south. If I think back several years now you described the strategy to grow down the East Coast, and this certainly helps bolster some density and reach down that area. Is there still additional density to be gathered in that eastern region? Or should we think about other markets or geographies of target focus here going forward?

Good question. Listen, the -- our market share are still -- we're now the same size as Freeman in the southeast. We're doubling up, and there'll be all the synergy we've always accomplished, 25% or so of improvement. And there's a ton more. And buying Freeman was a good play because the gentleman, Freeman, is very well-known in the industry, is best-of-class in the association, he has led many different projects in the association. And it's a big brand name and a good name for the industry to say, wow, Freeman sold to Superior, there are many, many other players around that region, there's a lot more to come. And we expect we could -- over the next 5 years, we could more than double in that southeast region.

That's great context. And just as a related question, I think Freeman, if I'm not mistaken, had some interesting ancillary businesses in and around the sale of propane based appliances, I want to say, fire places and propane heaters, et cetera. That's a fairly unique twist on Freeman, I suppose, but even in the context of the [ corporate ] enterprise. Is that something that you could have more broadly in the platform? Or is it very specific to that region and some of the relationships that gets you there?

Yes, very good point. And I'm genuinely impressed, you've got that. It's not a lot of EBITDA and not at all, like 5%, I think, of the total EBITDA, but it's a good marketing tool and the Southeast region only. So what happens is, people -- those particular location in front you have kind of a little retail store with a lot of products and the technician that can help those people and their cargo, those accessory product to install them. So it's a good marketing and sales. That's why they're gaining good sales growth, actually. They're like us. They're getting 3%-plus market growth every year. And it helps there. It's not something that works in the north or in California or other region. But in that region, we're glad to have that extra marketing tool. Now what they don't have that we could apply is a lot of our digital approach to different segment of customers, will apply that as well. But yes, it is a plus to have that only for that region.

And your final question comes from the line of Joel Jackson.

Obviously, it's early for 2022. But can we think about this -- you think about CWS and if FX was flat for -- indefinitely here on the CAD and the U.S. dollar and what growth in 2022 you would need from organic and acquisitions to offset lower CWS payments and the currency headwinds? Like have you thought about that, what you need to get to kind of offset?

Yes. A couple of things, and I'm sure Beth could probably add to that. The CAW are a lot less this year, as you saw. But are we losing more business than what we get. If you think of the commercial business and industrial in Canada, I'm talking about, a lot less -- and we're not getting CAW government grant in the state and its retail, and its -- there's not much issue with COVID in the retail business. But in Canada, absolutely. What we're getting from CAW is less than what it cost us to have all of those businesses either close or running half of their overall opportunity capacity. So not concerned the day CAW goes, let's say, by the quarter 4 this year, as early next year, we're back to 90% normal, I don't know, about 100% for a while. We're going to gain some business that we know the customer, we have the tank, and they're just using half of what they use or a lot less than that. That has cost us a lot of volume because we're very skewed commercial industrial in Canada. So when that goes away, it will be replaced with new business opening up. So I'm very -- I'm looking forward to that. It will pay more for us than getting government grant that doesn't cover all of our EBITDA when the business is humming. Organic growth, very, very -- to me, it's always been a top 3 to 5 big project. I believe in organic growth. It's the cheapest growth you can have. And we have the mechanic in place, always succeed a lot on the internal growth and at better margins. So it's not giving price away. And you'll see May 25 full details explaining all of the above.

Yes. And I think -- I'll just add on the FX. We do have our, as you'd be aware, our hedging program in place. So we do have $78 million of forward U.S. sales for 2022, which is roughly 40% of the flows that we'd be looking at, an EBITDA we'd be looking at. So again, and that's sitting at $1.33. So we are totally covered for that.

I have a couple more questions. So my understanding of CWS is it's basically a program that you won't fire inefficient or idle workers because the business is struggling from macro recovery or recovery. So if the business -- if paying volumes don't recover in Canada as much as you want and CWS payments go down, so are you -- do you have some flexibility to basically lay off temporarily or permanently some workers to help offset that? Maybe talk about that?

Absolutely. That's a good point. So we can adjust -- the fortunate part we have in the energy business, we didn't have in other segment, other business we had in the past. We have more flexible variable costs. So truck driver, technician, employees, call centers, if you have less business, you can move the needle on your costs. So if the business in 2022 doesn't come back fully for commercial and industrial business, we will adjust costs accordingly, absolutely.

Yes. I think something else to keep in mind with respect to wage subsidy, where the number on a TTM perspective is quite large. If you look to assumptions around what we would see in 2021, the reality is we had $5.2 million in Q1. For the remainder of the year, it's likely going to be something in around double that or in that $10 million range is likely what we would anticipate. Obviously, until we have the calculations and we go through the process, we don't know what the exact number would be, but that would be what we would be expecting. So again, just to give you a sense of the magnitude of the wage subsidy, what would be included in the 2021 year.

That was 10 left to go for the rest of the year after Q1, right, is that what you said?

Pardon?

You said 10 to go after Q1?

No, not to go in total.

In total.

Yes, I was going to mention that. It's the total this year.

Total this year.

And then thinking about cost inflation going on just everywhere. When you think of cost inflation in your business, you have -- how much that affects your margins and your per liter margins in an inflationary environment?

Yes. And I alluded to that or answered to that partly in another question that came. We beat inflation every year because of our operating continuous improvement project. So for us, not only we will beat inflation, we'll show you May 25 that we're going to reduce overall costs more than inflation. And that comes from continuous culture and of continuous improvement, of continuous investing in technology to take place of a lot of people and working and paperwork and so all of that is in our card. We've done it in the past and we will improve cost over and above inflation for the next 5 years. It's in the top 5 of our big priority, we always have that, and we have a project in place to beat inflation and more.

Maybe I'll ask one more question since I'm last. I know around this time, you do a lot of tuck-in acquisitions. I think there's conferences or trade shows you go to and you look at the different smaller players that want to be taken out, and there's a -- I think it's around May or June, I think there's a conference in Atlanta, I forgot the exact set up. But is this year with the U.S. reopening now is that season going to be a lot better than last year? Like is it going to be more tuck-ins, more acquisitions, more smaller deals this year than last year available to?

No, no. It's something that personally I -- I was thinking about that a lot recently. At this point, we cannot go to those big events and meet 15, 20 players. But because of the tax issue, I would think, in the states, number one, and people are more inclined to communicate with us, and we have dialogue. They know us from 10 years visiting and those association meeting every year and one in the West Coast, one in East Coast. And they're coming back. Atlanta, there's a big event that I will go to, and we will go to, some of our management in November. So we'll be there, and we'll line up tons of meetings for 3 or 4 days. The California is they're pushing it out. It was now to do in August, I guess it won't happen. It will be later. But because of all the leg work we've done with a lot of people over -- historically, in the last, let's say, 5, 7 years, more than 10, the connection, the relationship is there. Because of our acquisition, the industry looks at us and say, they're certainly one of the best buyer, and we have the best reputation from everything we bought, how we handle people, our net present score on customers were almost -- we're at 75%, 80% is best-of-class in the world. And we're really out there, and we are with customers and employees as well. So by having that culture of treating all the stakeholders, to give them a win and be best of class, the relationship and what, hundreds of thousands of people in the states that join us from this industry, the buzz is out there like Superior, great, they're first class. They're conferring what they're doing. They're doing what they're saying. And we have a real first brand name, I would say, to go to make acquisition. So there's no way we're not going to get a call. We've passed on more than we acquire if we don't like. There's a loyal aspect to it, that's more than 5%, 10%, we don't like that. We want propane. We pass some time on deal because of value. We don't want to pay, overpay, and we pass on deals. But we're -- I would say we're the #1 brand now very respected in the industry and calls are coming in. And you're absolutely right. I can't wait to go out there again and having all of those discussion, relationship. When file opens and we start traveling, I've told our M&A group and VP and other people, with Beth and Rob, we're going to do a lot of traveling to visit potential new investors in the state, being a pure-play, I think investor in the states are more interested than us. In the past, they always -- most of them would say, we don't like the fact you have 2 legs, we want to buy into one industry and I would say, 80%, 90% preferred energy. So we'll do tons of traveling in that regard, and we'll do the same and visiting company in propane industry to see if we could buy that.

Your next question comes from the line of Lance [indiscernible].

Hello, it's [ Elias ]. Just a couple of questions. If we step back to 2020 acquisitions, Luc, and you obviously made a lot of acquisitions. And late in the year, you had Rymes. Question I thought is, would it be fair to say that you didn't get the synergy capture that you would typically get in the first year and really I'm focusing in Q1 that you would normally get if you could have closed the acquisition earlier in 2020. Just trying to see if there's, I'll call it, a little more upside when we go into next year. Is that question clear?

It is clear. And you're absolutely right. When we acquired business in the winter time and quarter 1 comes after, we get 0 -- just about 0 synergy. We don't touch it. We're all about customer, right, we want to grow customer. We don't touch it. And then when the summer starts, we get going. So you're absolutely right. The synergy, we always say synergy come 18 months, a bigger deal, it might be 18 to 24. And the reason for that is we shut the door on moving things around in the 6 months where we're busy with customers. We don't want to do that. So it's not something we can address the month after we acquire a business. We wait for the summertime to apply our synergy and do the work. Absolutely right.

Great. I appreciate that clarity. My last question, maybe 2 questions. I'm going to focus a bit on capital. The first one, and I understand this might be a bit granular and if you don't want to talk to it, we can save it for Investor Day. I noticed that your efficiency and improvement capital year-over-year was down, and maybe I would have expected it to be a bit higher. Could you comment, is it micrometering the brick too much by looking at the quarter? And what kind of returns do you get on your efficiency capital? If you could comment on that.

Yes. Beth, do you want to start?

Yes, sure. So from a return perspective, I mean, we typically manage it using hurdle rates. So typically, it would be return in that mid teens. There's instances where if their IT system is better, it could be a little lower, in and around the 12% range. But that's how we would manage that and typically target those expenditures. From a year-over-year perspective, not knowing the exact numbers you're looking at, part of that reduction is potentially associated with the specialty chems business versus just the energy distribution business going forward. We are targeting roughly $40 million to $50 million in those -- we refer to them as the growth CapEx. Growth CapEx, and that's split somewhat evenly between Canada and the U.S., sort of $20 million to $25 million in each and then looking at for our Superior Gas Liquids are wholesale business in and around a $5 million range, and that's primarily software and terminal upgrade expenditures in the wholesale business.

I was actually referring to the MD&A table on Page 22, which I think it's continuing on. One last question off that table. Maintenance capital run rate looks like it's consistent at about $7.5 million a quarter. Can I potentially take that and annualize it to get a pretty good number?

Well, maybe I'll answer that in a different way. If you're looking at maintenance CapEx specific, from $45 million to $50 million per year.

That's good enough.

Yes. So maybe a little higher than annualizing your $7.5 million.

And your next question comes from the line of Patrick Kenny.

Just with drilling activity starting to come back here in Western Canada and I guess, assuming oil prices stay relatively flat through the back of the year. Curious, what do you see as being a reasonable recovery in propane volume, say, for the rest of 2021, relative to 2020, from your oil and gas customers? And also how far off would we still be from, say, normalized 2018 levels?

That's a tough question. You're absolutely right. We've started the last month some good volume for the first time in many years in the oil drilling market. So we're very pleased to see that coming back somewhat. When it comes to 2018, oh my God, I don't know, Rob or Beth, if you have an idea, it's probably half or less than what it was in 2018. And I'll let -- they're probably looking at numbers right now to answer you, but it's a lot less. And a little bit of tweaking now that's going up, and we're like, okay, this is good. We did not calculate what it means for the rest of the year yet. We're into forecast, redoing for the next 6 months. So we're looking at that. I don't have a number for you, but it's tweaking up, which is great news. Long, long time.

Yes. We can follow-up off-line or wait for the Investor Day for the revised outlook there. But maybe just switching gears, Luc, to M&B and their ownership looks to be now above Brookfield's level, at least on a fully diluted basis. And apologies if I missed it at the AGM, but is there a request from M&B for a Board seat at some point? And I guess, anything you can share on some recent conversations you've had with them with respect to staying below 20% ownership or remaining a passive investor going forward?

Yes. So they continue to be interested in acquiring stock. And the -- whatever they are today, let's say, 15%, 16%, they certainly want to get to 19.9%. We don't know our discussion, and we've talked to them and the CEO and the VP, M&A. And they selected us, what's interesting from hereon, they selected us saying, this is a good company with great management. They've been following us way before they started buying stock. And we want going to have a position in that company. And their position so far that we know is less than 20%. And that's what they say. So it's glad to have some good strong investor behind us. I'm sure if we -- one day, the more equity, we would want to think all of our shareholders to have a chance, but it's not for tomorrow, but they certainly would want to continue to have 19% or less than 20% if there was a demand for equity and time for a bigger deal, they would be there. And so it's [indiscernible]. So we're kind of in a good position. What we know we're telling you is, they are good people, very classic, very good on health and safety and worked hard to understand our company very well. They're very excited to take a position in the less than 20% of our stock. That's what we know for now.

And there are no further questions at this time.

No other question?

And there are no further questions.

Okay. So thank you for the question. They're always very good and makes us think through lots of detail before the call to be prepared for you. And after the -- thank you for listening on the call and supporting us through this difficult time. And again, I'd like to take management inventories. This has not been normal or easy, but we've succeeded. Quite impressed when we finish our year on guidance last year with very warm water in the Northeast and COVID taking a good part of our business away in commercial, industrial, and we finish on plan. Let me tell you where, I think we show resilience as a company. And I cannot emphasize more to all of you that if you want to know, a lot of detail that you've asked over the years that we were probably not giving to every details of our digital segmentation, operating excellence, how we do that, you're going to get the whole picture, May 25. It won't be -- it's the biggest, largest presentation we ever made. And if you're interested in our business, this is the best time to listen and understand. I think we'll cover lots of stuff that will satisfy your need on understanding the intricacy of how or sauce or magic sauce that is operating out there and why we're having that kind of success. So thank you, everyone, and looking forward to the May 25.

This concludes today's conference call. You may now disconnect.