Suburban Propane Partners (SPH) 8 Aug 24 2024 Q3 Earnings call transcript

Suburban Propane Partners, a leading provider of propane, fuel oil, and related services, recently released its third-quarter earnings report, highlighting the company's resilience in navigating unseasonably warm weather and its strategic investments in renewable energy.

Weather Challenges and Operational Excellence

The third quarter of fiscal 2024 saw significantly warmer-than-normal weather conditions, affecting customer demand for heating purposes. The average temperature for the quarter was 14% warmer than normal, leading to a decrease in retail propane gallons sold, which were 8.6% lower than the prior year. However, the company's operational excellence and efficient operating model helped mitigate the impact of the weather on earnings.

Renewable Natural Gas Operations

Suburban Propane's renewable natural gas (RNG) operations continued to show promise, with operational enhancements leading to increased feedstock intake and production levels. The company's Stanfield facility reached a daily peak injection level of 1,500 MMBtus in the quarter, and RNG injection averaged around 1,000 MMBtus per day. Despite facing challenges from lower prices for California LCFS credits and benchmark natural gas prices, revenues from tipping fees increased due to higher intake of food, beverage, and other waste feedstocks.

Strategic Investments

The company made strategic investments during the quarter, acquiring two small retail propane businesses in strategic markets and repaying $10.5 million of outstanding debt. It also continued to advance capital improvement plans for the installation of RNG upgrade equipment at its Columbus, Ohio facility and the construction of an anaerobic digester facility at Adirondack Farms in Upstate New York. These investments underscore the company's commitment to growing its core propane business and building out its renewable energy platform.

Financial Performance

Suburban Propane's adjusted EBITDA for the quarter was $27 million, a decrease from the prior year but in line with expectations. The company's total gross margin of $163.4 million for the quarter decreased by $7.8 million primarily due to lower volumes sold, partially offset by higher unit margins and increased contribution from RNG operations. Despite the challenges posed by the warm weather, the company remains focused on executing its strategic growth plans while maintaining a disciplined approach to capital deployment.

Outlook and Future Plans

Looking ahead, Suburban Propane remains optimistic about its long-term strategic goals, which include investing in the growth of its core propane business and building out its renewable energy platform. The company's commitment to fostering a sustainable energy future and its resilience in navigating weather-related challenges underscores its potential for continued growth and innovation in the energy sector. As the company moves into the final quarter of fiscal 2024, investors and stakeholders will be watching closely to see how it continues to adapt to market conditions and capitalize on opportunities for expansion.