Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Suburban Propane Partners LP (SPH, Financial) managed to mitigate the impact of warmer weather on earnings by effectively managing selling prices and leveraging an efficient operating model.
- The company reported growth in its counter-seasonal customer base, which helped offset the decline in heat-related demand.
- Operational enhancements in renewable natural gas (RNG) operations led to increased feedstock intake and production levels, contributing positively to revenue opportunities.
- Suburban Propane Partners LP (SPH) utilized excess cash flow to acquire two small retail propane businesses in strategic markets, enhancing its market presence.
- The company maintained a healthy distribution coverage of 1.91 times for the trailing 12 months, indicating strong financial health and sustainability.
Negative Points
- The fiscal 2024 third quarter experienced significantly warmer weather, leading to an 8.6% decrease in overall volumes compared to the prior year.
- Adjusted EBITDA for the third quarter decreased by $6 million from the prior year, reflecting the impact of reduced heat-related demand.
- Retail propane gallons sold were 8.6% lower than the prior year, primarily due to warmer weather across most operating areas.
- Revenues from the Stanfield RNG facility were adversely impacted by lower prices for California LCFS credits and lower benchmark natural gas prices.
- The company's net loss for the third quarter was $8 million, or $0.12 per common unit, compared to a net loss of $1.5 million, or $0.02 per common unit, in the prior year.
Q & A Highlights
Q: How did the warmer weather impact Suburban Propane's third-quarter results?
A: Mike Stivala, CEO, explained that the significantly warmer weather negatively impacted customer demand for heating purposes, resulting in an 8.6% decrease in overall volumes compared to the prior year. Despite this, the company managed to mitigate the impact on earnings through effective pricing strategies and operational efficiencies.
Q: Can you provide more details on the performance of the Renewable Natural Gas (RNG) operations?
A: Mike Stivala, CEO, noted that the RNG operations saw increased feedstock intake and production levels, with a peak daily injection level of 1,500 MMBtus. However, revenues were affected by lower prices for California LCFS credits and benchmark natural gas prices, although higher D3 RIN values provided some benefit.
Q: What strategic investments did Suburban Propane make during the third quarter?
A: Mike Stivala, CEO, mentioned that the company acquired two small retail propane businesses in Florida and Nevada for nearly $13 million and repaid $10.5 million of outstanding debt. They also continued capital improvements for RNG upgrade equipment and the construction of an anaerobic digester facility.
Q: How did the propane unit margins perform in the third quarter?
A: Mike Kuglin, CFO, reported that propane unit margins increased by $0.07 per gallon, or 3.8%, compared to the prior year, despite lower volumes sold due to warmer weather.
Q: What is the outlook for capital spending on RNG projects?
A: Mike Kuglin, CFO, stated that capital spending for RNG projects is expected to range between $10 million to $20 million in fiscal 2024 and between $35 million to $45 million in fiscal 2025, with propane operations' annual CapEx consistent with historical levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
