- Chemical company, Superior Plus (TSX:SPB) believes recent warm weather is more likely to impact its Q1 2020 results than COVID-19
- Much of the company’s revenue comes from propane sales, which suffer when warm weather reduces demand for gas heaters
- As warmer conditions have occurred over the past months, Superior expects its first quarter to show negative impacts
- Despite these statements, the company is currently reviewing its capital expenditure program, with regard to the ongoing COVID-19 crisis
- Superior Plus (SPB) is up 5.17 per cent, with shares trading for $7.51 and a market cap of $1.32 billion
Petrochemical distributor Superior Plus (TSX:SPB) stated that warmer weather is more likely to affect its Q1 2020 results than COVID-19.
Company President and CEO, Luc Desjardins, made this statement in a lengthy address to shareholders, regarding the ongoing COVID-19 pandemic.
“In our past experience, weather has had more of an impact on Superior’s Energy Distribution business, compared to broader economic conditions. This was shown by Superior’s performance during the past recessionary period in 2008 and 2009,” he said.
One of the company’s primary revenue sources is propane production and distribution. Weather has always impacted propane producers, as its most common application is in gas heaters.
As temperatures rise, demand for propane falls, and vice versa. These differences can be dramatic. For example, the company’s 2019 earnings guidance had a large spread, between C$490 million and $530 million. This $40 million difference is to account for possible weather changes over the year.
Luc added that recent daily temperatures have been higher in Superior’s operating regions, when compared to a five-year average. This suggests that the company’s incoming Q1 2020 figures are likely to be lower.
As the company supplies chemicals to essential industry services, it does not expect to be affected by mandated self-isolation measures. With that in mind, Superior stated that it does not expect any major operational disruption in the coming months.
However, this does not mean the company expects to escape the COVID-19 crisis unscathed. The company’s previously announced 2020 capital spending budget is currently under review, and could decrease based on COVID-19’s ongoing economic impacts.
Superior Plus (SPB) is up 5.17 per cent, with shares trading for $7.51 at 10:52am EST