• Adjusted EBITDA: $75.3 million, flat compared to the prior year.
• Net Income: $38 million or $0.59 per common unit, compared to $40.4 million or $0.63 per common unit in the prior year.
• Retail Propane Gallons Sold: 105.7 million gallons, 0.8% lower than the prior year.
• Gross Margin: $222.5 million, decreased by $1 million or 0.5% compared to the prior year.
• Operating and G&A Expenses: $150 million, increased by $2.4 million or 1.6% compared to the prior year.
• Net Interest Expense: $19.6 million, increased by $1.4 million or 7.8% compared to the prior year.
• Capital Spending: $23.8 million, $12.7 million higher than the prior year.
• Distribution: $0.32 per common unit, annualized rate of $1.30 per common unit.
• Leverage Ratio: 4.99 times, within debt covenant requirement of 5.75 times.

• Warning! GuruFocus has detected 10 Warning Signs with SPH.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Adjusted EBITDA for the first quarter of fiscal 2025 was $75.3 million, remaining essentially flat compared to the prior year, indicating stability in financial performance.
• Strong demand in the Southeast operations, particularly after hurricanes, helped offset the impacts of unseasonably warm weather and a less active crop drying season.
• The company completed an acquisition of a well-run propane business in the Southwest, contributing positively to the quarter's performance.
• Suburban Propane Partners LP is advancing capital projects, including the construction of an anaerobic digester facility in New York and gas upgrade equipment in Ohio, expected to be completed by the end of the year.
• The company is earning production tax credits from its Stanfield facility, which will contribute to increased cash flow and financial flexibility.

Negative Points

• Retail propane gallons sold were 0.8% lower than the prior year due to lower heat-related demand from warm temperatures and reduced agricultural demand for crop drying.
• Average temperatures during the first quarter were 7% warmer than normal, negatively impacting propane demand.
• Operating and G&A expenses increased by 1.6% compared to the prior year, primarily due to higher payroll and benefit-related costs.
• Net interest expense increased by 7.8% due to higher average outstanding borrowings under the revolving credit facility.
• The company recorded impairment charges totaling $19.8 million for investments in Oberon Fuels and Independence Hydrogen, reflecting challenges in the clean energy startup landscape.

Q & A Highlights

Q: How is Suburban Propane handling the recent colder weather operationally, and what impact has it had on propane prices and unit margins? A: Michael Stivala, President and CEO, explained that the company is well-prepared for sustained cold weather, which has increased demand. The team is managing operations effectively despite challenging conditions like sleet and ice. Regarding pricing, colder weather typically leads to higher prices, and the company is actively managing selling prices to align with market changes. The propane market has seen some volatility, with prices ranging between $0.85 and $0.90 per gallon.

Q: Can you provide more details on the company's leverage and plans for addressing it, especially in light of growth investments? A: Michael Stivala noted that the company has ample liquidity and that the current leverage metric includes last year's challenging heating season. Investments in renewable natural gas projects, which are not yet generating earnings, have contributed to the leverage. As these projects come online, leverage is expected to decrease. The company is already earning production tax credits from its Stanfield facility, which will contribute to cash flow. Suburban Propane remains focused on strengthening the balance sheet and is committed to strategic growth.

Q: What is the status of the renewable natural gas projects and their expected impact on earnings? A: Michael Stivala stated that the renewable natural gas projects in upstate New York and Columbus are expected to come online towards the end of the year. These projects will start generating earnings, which will help reduce leverage. The company is also working on monetizing production tax credits, which will further enhance cash flow.

Q: How does Suburban Propane plan to balance capital deployment between growth and maintaining a strong balance sheet? A: Michael Stivala emphasized the company's balanced approach to capital deployment, which includes investing in growth while maintaining a strong balance sheet. The company has a reputation for being prudent with its balance sheet, allowing it to be strategic in its investments. Suburban Propane aims to continue this approach, using free cash flow and leverage to fund growth initiatives.

Q: Can you elaborate on the accounting charges related to investments in Oberon Fuels and Independence Hydrogen? A: Michael Stivala explained that the accounting charges were due to challenges in the broader clean energy startup landscape, not the performance of the companies. Suburban Propane maintains minority stakes in both companies and supports their business models. The write-down reflects difficulties in raising new capital and government policy uncertainties. Despite this, Suburban Propane remains committed to its strategic growth plans in renewable energy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.