RBC at a glance. Rated sector perform. Target $16.00February 17, 2022 Superior Plus Corp. First Glance: In line Q4/21, but 2022 guidance is a bit light Impact: Modestly negative Our view: Although the Q4/21 results were in line with expectations, we believe the shares of SPB may trade modestly lower due to management's slightly weaker-than-expected 2022 EBITDA guidance. The conference call will be held on February 18 at 10:30AM ET (1-844-389-8661).
First impression In line Q4/21 results. The company’s Q4/21 Adjusted EBITDA of $142 million wasin line with our estimate and consensus of $143million. Relative to our forecast, the main variance was due to modestly lower EBITDA from operations, offset by lower-than-expected corporate costs, as the share price decline during the quarterresulted in lowerlong-term incentive plan costs. Management also noted that the net financial impact from the December 2021 cyber security incident (ransomware) that temporarily disabled certain IT systems will not exceed $1.5 million. The Q4/21 ACFFO/ share of $0.53 was higher than our estimate of $0.49 due to an income tax recovery.
Kamps acquisition delayed until Q2/22. In 2021 SPB completed seven acquisitions with a total enterprise value of $326 million, and management expects to close the pending $299 million acquisition of Kamps Propane in Q2/22 (previous guidance was for Q1/22 following the second request for additional information from the U.S Federal Trade Commission). In 2022, management expects to complete $200-300 million (vs. our forecast of $300 million) of additional acquisitions.
2022 guidance came in a bit light. Management released its 2022 Adjusted EBITDA guidance of $410–450 million, which assumes the Kamps acquisition closes in Q2/22, and does not include contributions from any further acquisitions. After factoring in the one quarter delay in the Kamps acquisition ($17-20 million), and the potential contribution from M&A (~$15 million), we estimate that the mid-point of management's 2022 guidance will be ~3% shy of consensus ($479 million) and 5% shy of our forecast ($487 million).
Comfortable with more leverage. Management has increased their targeted Total Net Debt / EBITDA ratio to 3.5-4.0x (from 3.0-3.5x) while executing an accelerated acquisition strategy. With the sale of the Specialty Chemicals division, the pure-play propane company has a more predictable cash flow profile (subject to weather), and management is firmly committed to maintaining its BB credit rating. The company ended 2021 with a leverage ratio of 3.9x, excluding the pending $299 million Kamps acquisition.
Conference call: Friday, February 18, at 10:30AM ET. The dial-in number is 1-844-389-8661. We expect investors to focus on additional details regarding the 2022 guidance, the M&A pipeline including the delay in the Kamps acquisition, and the M&A funding plan.