Suburban Propane's Q1 2025: Weather, Leverage, and the Future of Renewable Natural Gas
Thursday, Feb 6, 2025 2:34 pm ET
1min read These are the key contradictions discussed in Suburban Propane Partners, L.P.'s latest 2025 Q1 earnings call, specifically including: Weather Impact and Operational Capacity, Leverage and Capital Stack Strategies, and Renewable Natural Gas (RNG) Market Demand:
Financial Performance and Market Conditions:
- Suburban Propane Partners reported adjusted EBITDA of $75.3 million for Q1 fiscal 2025, essentially flat to the prior year first quarter, despite challenging conditions including widespread unseasonably warm weather and lower agricultural demand.
- The stability in earnings was attributed to strong demand in the Southeast operations following hurricanes Helene and Milton, as well as incremental volumes from a strategic propane acquisition in the Southwest.
Commodity Prices and Operational Management:
- Average wholesale propane prices for the Q1 fiscal 2025 increased by 15% compared to the prior year, with prices rising to $0.95 per gallon in January.
- The company's operations managed selling prices effectively in the higher commodity price environment, leveraging their efficient operating model to help manage costs.
Renewable Energy Investments and Growth Plans:
- Suburban Propane is advancing capital projects to construct anaerobic digester facilities in Upstate New York and upgrade gas equipment in Columbus, Ohio.
- These investments are part of the company's long-term strategic growth plans to foster the growth of its core propane business and diversify into renewable energy platforms.
Distribution and Leverage Ratio:
- The company declared a quarterly distribution of $0.325 per common unit, with an annualized rate of $1.30, maintaining strong distribution coverage of 1.87 times.
- While leverage is slightly elevated at 4.99 times, it remains within debt covenant requirements, and the company anticipates leverage reduction as growth projects reach run rate capacity with the monetization of production tax credits.
Financial Performance and Market Conditions:
- Suburban Propane Partners reported adjusted EBITDA of $75.3 million for Q1 fiscal 2025, essentially flat to the prior year first quarter, despite challenging conditions including widespread unseasonably warm weather and lower agricultural demand.
- The stability in earnings was attributed to strong demand in the Southeast operations following hurricanes Helene and Milton, as well as incremental volumes from a strategic propane acquisition in the Southwest.
Commodity Prices and Operational Management:
- Average wholesale propane prices for the Q1 fiscal 2025 increased by 15% compared to the prior year, with prices rising to $0.95 per gallon in January.
- The company's operations managed selling prices effectively in the higher commodity price environment, leveraging their efficient operating model to help manage costs.
Renewable Energy Investments and Growth Plans:
- Suburban Propane is advancing capital projects to construct anaerobic digester facilities in Upstate New York and upgrade gas equipment in Columbus, Ohio.
- These investments are part of the company's long-term strategic growth plans to foster the growth of its core propane business and diversify into renewable energy platforms.
Distribution and Leverage Ratio:
- The company declared a quarterly distribution of $0.325 per common unit, with an annualized rate of $1.30, maintaining strong distribution coverage of 1.87 times.
- While leverage is slightly elevated at 4.99 times, it remains within debt covenant requirements, and the company anticipates leverage reduction as growth projects reach run rate capacity with the monetization of production tax credits.
