CA - Superior Plus Corp. (SUUIF) Q3 2023 Earnings Call Transcript
2023-11-11 13:18:01 ET
Superior Plus Corp. (SUUIF)
Q3 2023 Earnings Conference Call
November 8, 2023 10:00 ET
Company Participants
Adam Kornick - Investor Relations
Allan MacDonald - President and Chief Executive Officer
Grier Colter - Chief Financial Officer
Curtis Philippon - President, Certarus
Conference Call Participants
Gary Ho - Desjardins
Aaron MacNeil - TD Cowen
Steven Hansen - Raymond James
Nelson Ng - RBC Capital Markets
Ben Isaacson - Scotiabank
Robert Catellier - CIBC Capital Markets
Presentation
Operator
Good day and thank you for standing by. Welcome to the Superior Plus Third Quarter 2023 Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Kornick, Manager of Corporate Finance and Investor Relations. Please go ahead.
Adam Kornick
Thank you, Shannon. Good morning, everyone and welcome to Superior Plus’ conference call and webcast to review our 2023 third quarter results. On the call today are Allan MacDonald, President and CEO; Grier Colter, CFO; and Curtis Philippon, President of Certarus.
For this morning’s call, Allan and Grier will begin with their prepared remarks and then we will open up the call for questions. Listeners are reminded that some of the comments made today maybe 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 continuous disclosure documents available on SEDAR+ and Superior’s website for further details. Dollar amounts discussed on today’s call are expressed in Canadian dollars unless otherwise noted.
I’ll now turn the call over to Allan.
Allan MacDonald
Thanks, Adam. Good morning, everyone. Please bear with me. I had a bit of a cold today. I am very pleased to be meeting with you here today to discuss our results for Q3, which is traditionally a smaller quarter in financial terms, but a significant one this year as it’s our first full quarter, including Certarus following the close of the acquisition back in May. We are also welcoming some new members of the team this quarter, following our management changes that we announced in September.
As we continue to refine our strategy and 2024 operating objectives, we felt it was imperative to ensure that we have the right skills and experiences to lead the transformation of Superior Plus. I am very happy to have Grier Colter, our new CFO, joining me today with all of you. Now many of you know Grier by reputation, but his previous experience will be a huge asset for us as we work together to deliver a plant that will drive incremental growth and shareholder value here at Superior. Grier’s initial focus in the role will be to understand our opportunities to improve operating efficiencies and focus on capital allocation across the board. There is a lot of work to be done, but we have significant opportunities in both regards.
Today, we are also welcoming Kirsten Olsen, our new Chief Human Resource Officer, who joined in late October. At Superior, we are deliberate and focused when it comes to building a strong team and Kirsten will make a significant impact in terms of how we continue to attract, retain and develop world class talent. Now as we go into a busy winter season, I am very pleased with the strength of our management team. Grier and Kirsten are welcome additions to a strong leadership group with especially talented operational leaders at Superior Propane and Certarus.
Before I offer a few comments on the quarter and turn things over to Grier, I should reaffirm our priorities as I laid them out on our last call. We are continuing to be committed to driving shareholder value in our existing businesses. Superior has a world class set of assets and leadership teams at both operating divisions are committed to delivering incremental organic growth.
At Superior Propane, Andy and his team are focused on setting new standards of performance for what is arguably already one of the most successful propane companies in North America. They are continuing to innovate new ideas for building our customer base organically, optimizing our pricing structure and setting new industry standards for asset utilization and productivity. At Certarus, Curtis and his team are managing to meet the needs of their customers in a very, very busy period of expansion and growth. As they add new MSUs, they’re serving existing markets while also adding new customers, industry verticals and geographies, all while keeping a watchful eye on financial performance, cost and profitability.
Over the last 2 months, Grier had been meeting with investors and analysts to share our vision for the organization. We believe we have the right assets to become the foremost energy distribution company in North America and the transformation from a propane company to a multi-solution energy provider is behind us. Today, Superior is firmly established as one of the foremost companies leading the transformation of the energy sector. We are enabling efficient carbon reduction every day while ensuring safety of supply for our customers. In our meetings with investors, we have also been reaffirming our commitment to organic growth, maintaining our dividend, reducing leverage and effective and efficient capital allocation.
Before I turn the call over to Grier for an update on the financial results, I have a few comments of my own on the quarter. Although Q3 is seasonally the smallest quarter for Superior, I’m very pleased with the results. We saw a strong performance across each of our operating business units in Canada and the U.S. and improvements over Q3 of last year, especially in the U.S. propane distribution business where some cost savings initiatives helped improve profitability in the slower summer months. I was also pleased with the improvements of some key measures we’ve identified as priority measures, including EBITDA per share and our leverage ratio.
So with that, let me turn the call over to Grier for the third quarter results. Grier?
Grier Colter
Thank you, Allan, and good morning, everyone. I’d like to start by saying that my first couple of months here at Superior have confirmed the opportunity that I thought was here to grow this business and create value for our shareholders. We’ve got work to do, but we are starting with a very strong asset base and a rare organic growth engine in Certarus. As we execute on our operational plans and bring a renewed focus to capital allocation, I’m confident that the Superior story will become clearer to the market, and I’m excited to be part of it.
Moving into results for the quarter. Overall, Superior delivered a strong third quarter with adjusted EBITDA of $25.8 million. This represents an increase of $34.6 million compared to the prior year quarter, driven from the contribution from Certarus and higher adjusted EBITDA from the propane distribution businesses, partially offset by higher corporate costs.
Our third quarter net loss of $107.8 million compares to a net loss of $206.9 million in the prior year quarter. Similar to our growth in EBITDA year-over-year, the primary driver for the improvement here was higher gross profit. We also saw a better result on derivatives and foreign currency translation of borrowings compared to prior year, all partially offset by higher SG&A and higher finance expenses.
Turning now to the individual business results. Certarus achieved record adjusted EBITDA in the third quarter of $35.5 million, growing at approximately 19% over the prior year comparative. The growth was primarily driven by a larger MSU fleet versus prior year and better utilization of the MSUs.
We continue to add MSUs and expect to end the year with over 700 in the fleet, approximately 4x that of our nearest competitor. The U.S. propane business produced adjusted EBITDA for the third quarter of negative $5.8 million, which was an increase of $5.1 million compared to the prior year quarter. The business achieved higher average unit margins in the quarter, partially offset by lower sales volumes. The Canadian propane business produced $4.3 million of adjusted EBITDA in the third quarter, modestly higher than the prior year quarter. The increase was primarily due to higher average unit margins similar to the U.S. business, partially offset by lower sales volumes. And recall that weather variances are less impactful in the third quarter due to lack of heating demand.
Wholesale propane generated adjusted EBITDA of $1.5 million in the third quarter, a decrease of $3.6 million compared to the prior year, driven by higher freight and to a lesser extent, the impact of a weaker Canadian dollar on the translation of U.S.-denominated transactions. So overall, we are very pleased with the performance of our businesses in the quarter.
Turning to a corporate results, leverage and guidance. Corporate administration costs for the second quarter were $10.1 million, an increase of $3.9 million compared to the prior year quarter due to higher insurance costs and higher long-term incentive plan costs related to the change in share price in the prior year quarter. Superior realized gain on foreign exchange hedging contracts of $0.4 million, modestly higher than the loss in the prior year quarter as Superior’s average hedge rates were higher relative to the U.S. dollar rate in the current quarter.
Our leverage ratio for the trailing 12 months ended September 30 was 3.7x, which is significantly lower than 4.3x in the prior year. And while this number will move around somewhat from quarter-to-quarter due to seasonal nature of this business, our objective is to continue to improve this metric over time to ensure the company has the financial flexibility to run the business and take advantage of opportunities from a capital allocation standpoint. We are maintaining our 2023 pro forma adjusted EBITDA guidance range at $630 million to $670 million, which includes Certarus on a full year adjusted EBITDA basis in the range of $185 million to $195 million.
You’ll notice that we have introduced a new metric in our third quarter results, adjusted EBITDA per share which is consistent with our goal of providing simpler shareholder metrics. Adjusted EBITDA per share for the third quarter was $0.09 compared to negative $0.04 in the prior year quarter. We have also filed our notice of intention to commence an NCIB with the TSX, which will start on November 10 and provide us with another year of optionality to opportunistically execute on accretive share buybacks. And lastly, the Board has approved a quarterly dividend of $0.18 per share.
And with that, I’d like to turn the call over to Q&A.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from the line of Gary Ho with Desjardins. Your line is now open.
Gary Ho
Thanks. Good morning. Maybe just a follow-up on your comments here, we are just on the NCIB that was renewed. Just wondering your thought process on the repurchases, how active you’ll be just given the dividends that you have in the growth CapEx commitments?
Grier Colter
Gary, it’s a good question. I think at this point, what I would say more generally is we see a lot of value in the shares. We see it as a top capital allocation priority. To be fair, we’re still fine-tuning our capital plan for 2024. And as a result, it’s hard for us to give out specific numbers. But as I say, we look at this as a top priority. And if you look at that aside, investing in our business organically, which is also a top priority in managing our balance sheet and looking at leverage, those are also there with it. But to be fair, we just haven’t done all the work to figure out on the organic CapEx side, which obviously will have an impact on how much we would be able to buy back. So that’s what I’d say. But it’s up there as a top priority as maybe the summary.
Gary Ho
Okay. And then maybe just follow-on on that high level question for both Allan and yourself, if you look out to ‘24 just thoughts on updating the Street on any strategy shifts or changes in capital allocation priorities perhaps an investor event, any glimpse into kind of what you and Board are looking at?
Allan MacDonald
So, hi, Gary, it’s Allan. Short answer is no. There’s not going to be any changes in the strategic shifts. If I understand your question right, we’re going to be coming out with more detailed version of the strategy we’ve been talking to all of you about in late winter, post – most likely post February results. But our vision right now is very consistent with what we’ve been talking about. It’s driving organic growth, looking at operational effectiveness and propane, investing the capital we have, getting the balance sheet even more conservative. So no, you shouldn’t expect any abrupt changes. I can tell you categorically, we’re not planning any abrupt changes to that world could turn, obviously, if it does, will respond, but that’s where we’re at right now. Can you hear me okay, by the way, Gary?
Gary Ho
Just, okay. Yes. And then maybe just the last question for Curtis perhaps is on line. Maybe give us an outlook on the hub build-outs over the next 12 months, maybe geographically where you’re looking at maybe targeting any certain client segments?
Curtis Philippon
Sure. Hey, Gary, we are – I won’t give specific locations. We’ve got a couple of sites underway and under development right now. But strategically, the way we think about it is we target to add or increase capacity at existing sites about 4x in a year. And so we’re actively always out there looking at developing a number of different sites to sort of open up new markets. In particular, we’re looking at sort of on the East to West Coast of the U.S., there are some of the priorities right now. But we’ve got more to come on a future call on that.
Gary Ho
Okay, thanks very much, those are my questions.
Curtis Philippon
Thanks, Gary.
Operator
Thank you. Our next question comes from the line of Aaron MacNeil with TD Cowen. Your line is now open.
Aaron MacNeil
Good morning, and thanks for taking my questions. Allan, you sort of referenced it in the prepared remarks, but it looks like there’s been some pretty encouraging propane unit margin improvements in the quarter across all the propane segments. I’m just wondering if this is a function of some of the organizational effectiveness and price optimization efforts that you’ve spoken about in the past? And if it is, how long – far along are you on that initiative?
Allan MacDonald
I would say, Aaron, thanks for the question. You know what? I would talk that up to twofold. I think it’s a little bit of opportunism. And you always have to think about the margin, too, in the context of the mix between wholesale, consumer and industrial because that don’t those will create fluctuations. But careful – so primarily, a little bit of mix and just good fortune and the other pricing management, of course. But the other is, it’s very early days in terms of driving operational changes. These things take a lot of time because they’re really on the back of new capabilities. But some of the earlier signs that you see you’re having an impact is attention and focus on things like cost management being conservative around retaining high-value customers and being less aggressive in just acquiring volume and low-value customers. So I think you’re seeing an increase in discipline, which is having a contribution, but also some of the normal fluctuations in the business.
Aaron MacNeil
Understood. So I guess, not to put words in your mouth, but more to come on that front.
Allan MacDonald
Yes, look, I don’t want to promise massive volume. No massive margin changes. Think of it at the highest level in terms of overall growth because there’s some volume opportunities, too, that we’d like to pursue. So – but again, it’s early days.
Aaron MacNeil
Makes sense. Curtis, I just wanted to get your take on the large order of MSUs since you announced post Q2. Just could you give us a sense of your line of sight in terms of finding work for that equipment? And maybe also just how that equipment will make its way into the fleet over the next 12 months?
Curtis Philippon
Sure. Yes. So for everybody on the call, we announced that we placed a significant order of Hexagon for a new product line that they’ve launched affecting their Maximus trailer. So it’s a – what I expect will become the new standard of our fleet. It’s a larger volume trailer that we’ve got a lot of experience working with Hexagon on developing a great product. And so we’re pretty excited about that. And so we’ve got – by the end of next year, we’ll have roughly 150 of those Maximus units in the Seqirus fleet. So it’s pretty exciting to see that. We’ve actually just got the very first ones of that product type arriving into our operations here over the last couple of weeks. So excited to see that and the impact we’ll have on our efficiencies in the business. So that’s the significance of that. And part of the large scale of this order is – talks to the benefits I think for Certarus now being part of Superior that in our past, we were probably more asked to place or smaller orders and joining the team here now. There’s a view, let’s make sure we lock up a consistent steady supply of MSUs coming into the business and make it a little less chunky. And so you’ll see that the largest quarter replaced sort of coming in over next year, evenly over the year.
Aaron MacNeil
But presumably, visibility to work for that equipment as well?
Curtis Philippon
Absolutely. We’re struggling right now in a sold-out situation trying to keep customers happy and not turn down too many people, but we’re definitely – we’re in an oversold situation right now. There’s just tremendous demand for low carbon energy solutions across a whole bunch of different verticals. And so we’re having to make some tough decisions on where we go deploy equipment to try and satisfy that. So yes, the team is excited to get their hands on this equipment is definitely ready to go to work.
Aaron MacNeil
Makes sense. Thanks everyone. I will turn it back.
Allan MacDonald
Thanks, Aaron.
Operator
Thank you. Our next question comes from the line of Steven Hansen with Raymond James. Your line is now open.
Steven Hansen
Yes. Thanks for taking, guys. I’m going to piggyback off the last answer and just maybe ask about the pricing dynamics you see in the market right now being in a sold-out situation is obviously a positive position to be in, but I know that you’re still also looking to gain scale across the landscape. So how do you think about pricing in the current backdrop and perhaps into ‘24 as it stands today?
Allan MacDonald
Yes, I think it’s a good pricing environment for Certarus, right now. We received really strong demand. And then we often price against the alternative fuel, typically against diesel pricing. And so both from a strong demand perspective as well as looking forward, to see a real strong diesel price going forward as well. That provides an opportunity for us to offer a significant discount to customers but still generate a strong margin for Certarus.
Steven Hansen
Okay, helpful. Thank you. And just going back to your comments on the leverage ratio continuing to make improvements there. I mean, have you thought about where you think the optimal level is at this point? You referenced that you’ll expect it to continue to improve, bounce around a little bit, but improving as the trend. But again, how do you balance that relative to some of the other priorities you said, like where do you feel like the optimal level needs to be so you can pursue some of the other levers more aggressively?
Grier Colter
Yes. It’s Grier here. It’s a great question. I think – yes, I would say stay tuned. To be fair, we’re working through our 2024 plan, looking at the – what we want to do is make sure that we commit the right amount of capital to the propane business and to the Certarus business, and that is of paramount importance to us. And then with that maintain and improve on the strength in our balance sheet and also look at other capital allocation priorities like share buybacks. So nothing prescriptive. The merits of a lower leverage balance sheet are not lost on us. They’re very clear. But I think to come out with some type of prescriptive approach on the target and the time line at this stage would probably be a little bit premature. But just stay tuned on it because I think we’ll give you more as time goes on here.
Allan MacDonald
We have the challenge of having several very compelling capital allocation opportunities. So we’re just working through it.
Steven Hansen
Okay, guys, thanks.
Operator
Thank you. Our next question comes from the line of Nelson Ng with RBC Capital Markets. Your line is now open.
Nelson Ng
Thanks, and good morning, everyone. First question is for Curtis. On Certarus, can you just comment about the seasonality impacts and the utilization of trucks during Q3? I know you mentioned that you guys are sold out when there is a shortage of trucks. But can you just comment on the seasonality? Like obviously, Q1 and Q4 is the highest. I think that National Grid contract is quite profitable, but can you just provide a bit more color?
Curtis Philippon
Sure. Thanks, Nelson. Definitely, we have some seasonality in our business. So in Q2 and Q3, you see us do more road construction type work and there’s some renewable natural gas opportunities as well that we have – get a little bit more active on in those Q2 and Q3 months. In Q1 and Q4, we have some great utility work that we do as well as fairly significant heating heat-related opportunities in sort of the Northern U.S. and in Canada. So you always get this bit of unique dynamic on the tail end of Q3 and the early part of Q4 where you have a bit of a pivot in how the MSCs are deployed. And so you’re coming off of some of that road construction type work and going into some of these heat-related work. And the utility work. And so there’s a bit of a transition period through the back end of September or October as you’re getting into that. And so we’re starting to see the sort of true winter numbers starting to come at us, which is always our busiest time of the year. And you really see that in Q1 for us and that you get sort of a full quarter running at that peak rate.
Nelson Ng
Okay, thanks. And then in terms of – maybe it’s for Grier, but so growth CapEx, I think it was about $28 million in Q3. That’s up from $15 million last year. So I presume most of the increase, if not all, is that’s due to Certarus growth CapEx? And is – will Q4 look like Q3?
Grier Colter
I mean the CapEx will be, I think, certainly higher for Certarus in Q4. The MSU deliveries in Q3 were pretty low as a result of the ordering schedule and the way they’ll be produced. So you could expect the Certarus CapEx to be quite a lot higher in Q4. It will represent the majority of the growth CapEx in Q4.
Nelson Ng
Okay, got it. And then just one last question for Curtis. In terms of the MSUs deployed, are you seeing, I guess, in the last year and your expectation next year, are you seeing any specific areas or industries where you’re going to be allocating more MSUs going forward? Or do you think the mix will stay roughly the same?
Curtis Philippon
Yes. I think the mix for us has changed a bit over dilated. Historically, Certarus started with almost entirely an oil and gas customer base. And that continues to be a great part of our business that’s growing quite strongly. But we made a shift a few years back to say, we recognize the real importance of diversifying the business into a number of different verticals and just grow the overall opportunity set out there. And we’ve been sort of paying our dues growing these different industry verticals. And to the point now over the last 3 years, the majority of the capital that we’ve deployed has been going into these beyond the wellsite type applications. And so I think you’re seeing some really interesting growth opportunities.
But within oil and gas, a great business, we’re going to still see growth within that, but we’re also seeing some really impressive growth in the utility segment as there’s just a lot of infrastructure challenges right across North America. The utilities are struggling with, and we can help them bridge those gaps. We’re seeing a tremendous amount of growth on the renewable natural gas side of the business where there’s a lot of capital being deployed into renewable natural gas project development. And the bulk of those projects are not pipeline connected. And so they need a way to go actually get that gas to the pipeline and Certarus offers a great solution to do that. And so we’re starting to see more of those projects come online and that becomes a pretty significant deployment of MSUs for us.
And the biggest one potentially that I think we’re still really early on as we look at remote power generation as being just a tremendous growth lever for us that there’s a significant diesel remote power generation market out there today. And I expect over the next few years as you look at that, you’re going to see a migration of that overlay from diesel towards natural gas generation that I think that’s going to create a tremendous growth like we’re seeing some great projects out of that already today, but I think we’re just really early start to that. And so hence, the strategy to deploy – keep on growing all segments of this, but we’ve been consistently sort of putting more than half of our capital in these beyond the wellsite applications in the last few years.
Nelson Ng
Okay, thanks, Curtis. I’ll just squeeze one more question in. I might be for Allan or Grier, but the eight propane sites in Northern Ontario, I think the MD&A indicated that you’re expecting to divest those assets in Q4 of this year. Can you just provide a quick update as to where you are, is it just paperwork now and those sites will get sold?
Grier Colter
Yes. It’s Grier here. So, you can expect this to happen in the fourth quarter, and we will provide a bit more information on it. But yes, it’s – yes, I guess as you say, it’s paperwork. It’s kind of – it’s highly likely that this will happen at the levels that you see in the financials.
Nelson Ng
Great. Thanks.
Allan MacDonald
Thanks.
Operator
Thank you. Our next question comes from the line of Ben Isaacson with Scotiabank. Your line is now open.
Ben Isaacson
Thank you very much and good morning everyone. Two questions, first one for Allan. Allan, you said that you have been meeting with investors and analysts over the last couple of months, what are the key messages that you have received from the investment community? And in their perception, rightly or wrongly, what’s working and what’s not working?
Allan MacDonald
Great question. Hi Ben. It’s interesting. I think – so what we have been hearing is I would think two things resoundingly that investors are pleased that they see a company with a strong asset base and a runway or a pathway to a very – a very profitable and successful future because we have now got the ability to expand into an emerging market with energy transformation on the back of a cash generation engine at Superior, which I think arguably is quite well run in their view and a growth engine at Certarus. What’s – so I think what’s working is – well, the bones of this organization are really strong. I think that the investors – and we see this with our institutional investors. We have a very, very patient investor group, which probably reflects the volume and liquidity that we have on the trading volume on a day-to-day basis. But there is a bit of wait and see where this new organization in its current form, you got a new management team, a history of some strategic surprises. So, I think more than anything else, investors saying, hey, can you give us continuity. Can you continue to talk about this strategy. Can you deliver on your promises. Can you give us a level of consistency and transparency. And we are more than happy to come along in the journey with you. And I don’t know, Curtis and Grier they have been in these meetings too, but I got to tell you, they are very positive. And I hate to use the phrase wait and see because I think it’s much more positive than that. But I think our investors are looking for some time of continuity and consistency from us.
Ben Isaacson
That makes a lot of sense. Thank you for that. And then just second question, which is an operational one on Certarus, I am just looking at Page 17 of your MD&A, which is the Certarus results. And I see that your EBITDA went down to about $54,000 per MSU in Q3 versus about $74,000 since acquisition. And when I scroll up, I see that it’s really revenue that has declined per MSU, why is that? And how should we think about revenue per MSU going forward or in a steady-state type of environment? Thank you so much.
Allan MacDonald
Grier?
Grier Colter
I think the one thing to watch when you look at the revenue number is just know that we – by the nature of our contracts, we don’t take natural gas commodity risk exposure. And so the revenue number will go up and down at times depending on what the natural gas price is doing and how much gas prices are flowing through. And so Q3 last year had a significantly higher natural gas price that we are flowing through versus this year. But you will see that an actual sort of EBITDA per MMBtu delivered pretty consistent. And that’s – so we focus much more on what was the EBITDA generated per MSU in the fleet and per MMBtu delivered is what we focus in on versus the revenue numbers that can bounce around with the quantity price. From an EBITDA per MSU perspective sort of for the quarter, Q3 is a quieter quarter for Certarus, and so that is – there is some seasonality to this fee. The quarterly EBITDA per MS number has been stronger in our Q1, in particular, and Q4 as well.
Ben Isaacson
Have you talked about what the run rate should be on EBITDA per MSU over the course of the year?
Allan MacDonald
We do. Like we target that we – in very simple terms, the way we like to think about our business is that our MSUs have a DOT 15-year life, and we target to pay back our MSUs, our direct MSUs under 3 years. And so that’s how we would look at our business. So, the direct MSUs of a payback of under 3 years, there is some ancillary capital that goes around to be able to support the business, the tractors to pull the MSUs. You need the compression stations and the decompression units. And so if you fully load up all the other capital around that you need to support the MSUs, we target effectively a sub 5-year payback on capital that we deploy and get sort of effectively 10 years of free cash flow on those assets when you factor in up 15-year life. And so that’s how we look at the business. And so that means you end up with a sort of EBITDA generated per MSU, I believe we are in that $270,000 some range this year, and we are sort of somewhere in the mid-200s, the high 200s is where we have seen the number.
Ben Isaacson
Great. Thanks so much. Appreciate it.
Allan MacDonald
Thanks Ben.
Operator
Thank you. Our next question comes from the line of Robert Catellier with CIBC Capital Markets. Your line is now open.
Robert Catellier
Hey. Thanks for your comments so far this morning. Most of my questions are answered, so I am down to nitpicking here. So, can you give a little more clarity on to why you draw up the AOCF metric?
Grier Colter
Yes. Maybe I will take that one, Robert. It’s Grier. This really – I mean this is a very simple calculation. Super straightforward, you basically subtract two numbers. So, I think when I was having a look at it and just looking at all the extra disclosure in the press release, but more so in the MD&A, there was a ton of pages really that were there, primarily because of this metric, which as I say, is very easy to calculate. So, that was kind of the primary reason for it. It’s a non-industry standard metric. If you look at the competitive set, how we want to define that, I guess we could debate, but there is no one really that uses this metric. So, really those two reasons were the number one. The objective here is for us to be simpler in the way we report, make it easier for everybody to understand what it is that we are doing and what we are focused on and not hiding by anything. And as I say, you can clearly take these numbers off the face of the financials. The adjusted AOCF for this quarter was negative 19.4% if you compare that to the prior year, it was negative 32.9%.So, it is an improvement. And as I say, the interest and taxes number, you can pull it off the face of the statement. So yes, I mean it was a long-winded answer, but bottom line is for us to just get more streamlined and simple and make it easier for everyone to understand what it is we are trying to do.
Robert Catellier
Okay. And just one more detailed question here. There is commentary in the MD&A about some the solid customer attrition. Can you just give a description of what’s happening there?
Allan MacDonald
Well, this is just – let me offer a comment to Rob, and then Grier will pull in. We get the remnants of some small distillate business that is obviously declining at a faster rate than the propane business and really is non-core to us. And it’s really a hangover from a past life, if you will. It’s non-core, we are managing it very, very carefully, obviously. But for us, it’s a business that we will see an exit to at some point and be opportunistic in terms of the journey from here to there and making sure we don’t invest any more in it, but also maximize the value. So, for us, really, it’s a very, very small part of the business, but no great surprise. It’s in steady decline. I don’t know, Grier, if you want to add anything to that?
Grier Colter
I thought you probably said it was. Yes, it’s a business that declines faster than declines in the other – like Certarus obviously, is a great growth business. I think the propane business is more like a – we will see what we can do with it, but it’s more of a flattish type business. The distillate business is a decline business. And as Allan said, it’s a small percentage of the business, I mean it might represent Rob, just I think, around 10% or something – it’s up the U.S. business. So, it’s not huge, but yes, that’s what it is. It’s just a – it’s a different market dynamic for that business, so obviously, not an area of focus for us as we look forward.
Robert Catellier
Alright. So, it’s just a secular decline in that specific product then?
Grier Colter
That’s right.
Allan MacDonald
Yes, exactly. You don’t fight it because it’s market driven. Sorry. Go ahead.
Robert Catellier
Final question for you, Allan, I wonder if you had any updates in terms of your plans of aligning incentives with your targets. I am thinking in terms of stock ownership requirements and any other incentives that might help you just lining activities with your ultimate goal of bringing more out of existing assets.
Allan MacDonald
Sorry, you are talking about executive compensation?
Robert Catellier
Yes, just how you are lining all the incentives across the organization, particularly stock ownership at the executive level.
Allan MacDonald
Yes. Okay. Well, a couple of updates here. Kirsten is joining us two weeks ago with where we have already kicked off a review of our executive compensation. And the – not generally speaking in terms of its competitiveness, but it’s alignment to the aspirations to drive significant shareholder value by appreciation of the share person. And which is not a simple thing when you talk about a high-yield stock like ours, as our kind of liquidity and trading volume. So, we are in the middle innings of that review. Additionally, we have also made a decision in the last couple of weeks that Certarus as a private company had a history of share ownership that was really deep. And it was a point of pride, but also, I think one of the differentiators that made the team at Certarus just so engaged in doing the right thing for the customers and for the company all the time. Bringing that kind of a comp structure in a public company isn’t easy, and it requires a lot of adjustments in terms of how we think about comp. But over the last few weeks, we have made the decision and announced it internally. But we are actually going to maintain share ownership as part of incentive for the entire team at Certarus that was part of that program, which would be sort of the top two-thirds of the organization, if you will. So, we are really committed to making sure that everybody that works in Superior has every opportunity to be a participant in shareholder value creation. It is our number one and one could argue our only objective is long-term shareholder value creation. These are the owners of the company, and we need to deliver for them. We want our employees to be part of that community, whether it’s through share ownership programs or through share-based incentives. And we want our executives to be remunerated based on the success that they deliver for our shareholders. So, we are really committed to this. You are seeing it at the operating level. You will see it at the executive level, but likely not until the management information circular next year. Does that answer your question?
Robert Catellier
Yes, it does. Thank you. Thanks.
Allan MacDonald
Alright. Thanks for the questions.
Operator
Thank you. And I’m showing no further questions at this time. I would like to hand the call back over to Allan MacDonald for closing remarks.
Allan MacDonald
Well, thanks everyone. Look, it’s always a pleasure to talk to you all, whether it would be on this quarterly call or in our meetings in the intervening weeks. I can’t thank you enough for your interest in the organization, for your questions and for your feedback. I want you to know that we have got thousands of people here at Superior who are showing up to work every day, really excited about the opportunities in front of us. The team at Certarus and the team at the propane division have been working really well together. We are excited about the future, and we are just really, really pleased to be able to tell you this story. We think that Q3 is a real turning point and successful one for us for a whole bunch of reasons, operationally and strategically. And we are looking forward to Q4 and speaking to you all again in February. So, thank you very, very much.
Operator
This concludes today’s conference call. Thank you for participating. You may now disconnect.
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Superior Plus Corp. (SUUIF) Q3 2023 Earnings Call Transcript