Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Year-over-year growth across all key profitability metrics in Q2.
- Strong results in both wholesale and GDSO segments.
- Significant expansion of wholesale segment footprint through strategic acquisitions.
- Healthy retail fuel margins and successful merchandising initiatives in convenience markets.
- Quarterly cash distribution increased by 6.7% over the prior year.
Negative Points
- Operating expenses increased by $19.6 million due to terminal acquisitions.
- SG&A expenses rose by $5.6 million, driven by long-term incentive compensation, wages, benefits, and professional fees.
- Interest expense increased by $13.7 million due to new senior notes and higher average balances on credit facilities.
- Commercial segment product margin decreased by $0.6 million due to less favorable market conditions.
- Certain products in the wholesale segment were negatively impacted by the timing of mark-to-market valuations in the first quarter.
Q & A Highlights
Q: Can you explain more about the opportunities to invest in the newly acquired terminals?
A: (Eric Slifka, President and CEO) M&A remains active in both terminaling and retail businesses. We see opportunities to maximize value from our newly acquired terminals through operational improvements and investments, such as enhancing rail capacity and building out unit train capacity.
Q: Have the increased merchandising efforts been implemented across all stores, and will this continue to benefit future quarters?
A: (Mark Romaine, COO) Yes, these efforts are spread across the entire portfolio and are ongoing. We continuously optimize our merchandising plans, SKUs, and pricing, and introduce new items to adapt to market changes, which will continue to benefit us.
Q: Any updates on the JV in Houston and potential for more sites?
A: (Gregory Hanson, CFO) We are encouraged by the JV, which opens up the large Texas market for us. We hope to grow this joint venture further as the retail M&A market remains active, and we are exploring all opportunities to expand in that geography.
Q: Can you elaborate on the strategic acquisitions and their impact on your storage capacity?
A: (Eric Slifka, President and CEO) Over the past nine months, we invested over $500 million to acquire 29 terminals, doubling our storage capacity to 21.4 million barrels. These acquisitions expand our geographic reach and provide numerous opportunities for optimization.
Q: What drove the increase in product margin for the GDSO segment?
A: (Gregory Hanson, CFO) The GDSO product margin increased by $22.4 million, primarily due to higher fuel margins and successful merchandising initiatives. Fuel margins increased by $0.05 per gallon year-over-year.
Q: How did the wholesale segment perform in Q2 2024?
A: (Gregory Hanson, CFO) The wholesale segment's product margin increased by $32.2 million, driven by the acquisition of Motiva terminals and favorable market conditions in gasoline and distillates.
Q: What are the expected capital expenditures for the full year 2024?
A: (Gregory Hanson, CFO) We expect maintenance capital expenditures to be between $50 million and $60 million, and expansion capital expenditures to be between $60 million and $70 million, primarily for investments in our gasoline station and terminal businesses.
Q: How is the company's balance sheet positioned as of June 30?
A: (Gregory Hanson, CFO) Our balance sheet remains strong with leverage at 3.48 times funded debt to EBITDA and ample excess capacity in our credit facilities. We had $281.2 million in borrowings on our working capital revolving credit facility and $200 million on the revolving credit facility.
Q: What is the impact of redeeming the Series A preferred units?
A: (Gregory Hanson, CFO) The redemption of Series A preferred units was immediately accretive to distributable cash flow and is expected to be approximately $0.09 accretive per unit annually at current interest rates.
Q: What are the company's strategic growth objectives for the second half of 2024?
A: (Eric Slifka, President and CEO) We aim to build on our positive momentum from the first half of 2024 by continuing to execute our strategic growth objectives and deliver value for our unitholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
