Despite a challenging quarter with decreased revenue and net earnings, Ferrellgas Partners LP (FGPR) made significant strides in cost reduction and strategic growth initiatives.
GuruFocus Research
2 days ago
Summary
- Revenue: Decreased by $71.6 million compared to the prior year period.
- Gross Profit: Decreased by 7% for the third fiscal quarter 2024 compared to the prior year period.
- Margin per Gallon: Increased by 4% compared to the prior year period.
- Operating Income per Gallon: Decreased by 10% compared to the prior year period.
- Net Earnings: $52.8 million for the third fiscal quarter 2024, down from $72.4 million in the prior year period.
- Operating Expense: Increased by 16% as a percent of total revenue for the third fiscal quarter.
- Adjusted EBITDA: Decreased by $21.6 million or 17% to $104 million compared to $125.6 million in the prior year quarter.
- Cash Distribution: $99.9 million paid on April 9, 2024, to Class B unitholders.
- Cash Balance: $73.6 million at the end of the third quarter.
- Blue Rhino EBITDA: Increased by 19% during the third fiscal quarter compared to the prior year period.
- Blue Rhino Capital Expense: Decreased by nearly $8 million this fiscal year.
- Logistics Cost Reduction: Reduced costs by over $1.2 million in fiscal 2024.
- Credit Processing Platform: On track for an estimated $1.2 million in annual cost reductions.
Release Date: June 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ferrellgas Partners LP (FGPR, Financial) successfully reduced fleet expenses by over 8% compared to the prior year.
- The company has made significant progress in growing its weather-agnostic customer base, particularly in Tank Exchange, Autogas, and Industrial Commercial segments.
- Blue Rhino's EBITDA increased by 19% during the third fiscal quarter, driven by higher consumer demand and strategic initiatives.
- The company has installed over 500 self-service kiosks for Blue Rhino, enhancing customer convenience and accessibility.
- Investments in technology, such as tank monitoring and telematics, have reduced costs and improved delivery efficiency, contributing to an estimated $1.2 million in annual cost reductions.
Negative Points
- Warm weather negatively impacted financial results, with heating degree days 15.7% warmer than normal and 9.8% warmer than the prior year quarter.
- Revenues decreased by $71.6 million due to a reduction in gallons sold, partially offset by a $52 million decrease in the cost of the product.
- Operating income per gallon decreased by 10% compared to the prior year period, primarily due to the decrease in gross profit.
- Operating expenses as a percent of total revenue increased by 16%, driven by higher personnel expenses and medical claims.
- Adjusted EBITDA decreased by $21.6 million or 17% to $104 million in the third fiscal quarter compared to the prior year quarter.
Q & A Highlights
Q: Can you explain the increase in operating expenses and what measures are being taken to mitigate them?
A: We are working on an enterprise-wide ERP system, which involves consultants and widespread training. Additionally, higher medical expenses this year are believed to be one-time occurrences. We have also implemented telematics technology to reduce fleet expenses. (Tamria Zertuche, CEO)
Q: What is the status of the non-maintenance CapEx and its investment returns?
A: Non-maintenance CapEx includes growth and M&A CapEx, which are based on business needs and opportunities. We have internal hurdle rates for these investments, though we do not disclose them publicly. (Michael Cole, CFO)
Q: When do you expect to file the 10-Q?
A: The 10-Q was filed last evening and will be available tomorrow morning. We received an automatic extension from the SEC. (Michael Cole, CFO)
Q: What are the plans for extending the revolver and refinancing the 2026 senior notes?
A: We are in discussions with banks about extending the revolver, which matures in March 2025. We are also evaluating the early refinancing of the 2026 senior notes, as current market conditions are more favorable. (Michael Cole, CFO)
Q: Can you provide an update on Blue Rhino's performance and initiatives?
A: Blue Rhino's EBITDA increased by 19% due to higher consumer demand. We have installed over 500 self-service kiosks and improved supply chain and inventory turns, reducing capital expenses by nearly $8 million this fiscal year. (Tamria Zertuche, CEO)
Q: How do you plan to manage liquidity given the current financial obligations?
A: Our liquidity includes a cash balance of $73 million and $180 million of availability under the revolver, totaling approximately $250 million. We believe this is sufficient to operate the business and address upcoming obligations. (Michael Cole, CFO)
Q: How does weather impact your business, and what steps are you taking to mitigate this?
A: We are focusing on weather-agnostic areas like tank exchange, autogas, and industrial commercial segments. Weather events like power outages create high demand for propane, and we are expanding our geographic footprint to reduce dependency on weather-affected regions. (Tamria Zertuche, CEO)
Q: What are your thoughts on restructuring the capital structure?
A: We are continuously evaluating options for restructuring our capital structure to reduce costs. Currently, there are no specific announcements, but we will take action when it makes sense. (Michael Cole, CFO)
Q: How do you evaluate the refinancing of bonds from an economic and qualitative perspective?
A: We consider both the economic impact, such as interest expense and call premiums, and qualitative aspects like derisking the company by removing refinancing risks. (Michael Cole, CFO)
Q: What is the amount required to retire the Class B shares?
A: The amount depends on the timing of the redemption and the distributions made to date. The Class B documents outline the IRR requirement, and the distributions have reduced the redemption value. (Michael Cole, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
