MDU Resources (US:MDU)2023-02-10 00:27Financial Data and Key Metrics Changes - The company reported 2022 earnings of $367.5 million or $1.81 per share, compared to $378.1 million or $1.87 per share in 2021, with adjusted earnings of $380.2 million or $1.87 per share in '22 [40] - The electric utility segment's earnings increased to $57.1 million from $51.9 million in 2022, driven by higher retail sales revenue and a 2.2% increase in retail sales volumes [31] - Construction services achieved record revenues of $2.7 billion and earnings of $124.8 million, up from $2.05 billion and $109.4 million in 2021, with EBITDA increasing by 14.7% year-over-year [32] - The construction materials business reported record revenues of $2.53 billion, up from $2.23 billion in 2021, although earnings decreased to $116.2 million from $129.8 million [33] Business Line Data and Key Metrics Changes - The pipeline business earned $35.3 million in 2022, down from $40.9 million in 2021, impacted by higher interest expenses and lower project margins, but benefited from increased transportation revenues due to the North Bakken Expansion project [41] - The natural gas utility segment's earnings decreased to $45.2 million from $51.6 million, despite a 13.7% increase in retail sales volumes due to colder weather [65] - Electrical and mechanical services revenues increased by 50%, driven by commercial and renewable projects, although margins decreased due to higher operating costs [66] Market Data and Key Metrics Changes - The company reported a construction backlog of over $3.1 billion, up 46.5% from 2021, with Knife River's backlog increasing by 32% to $935.4 million [44][47] - The utility segment experienced a rate base growth of approximately 7.8% and customer growth of about 1.6% [69] - The company anticipates filing four additional rate cases in 2023, aiming for continued regulatory recovery [57] Company Strategy and Development Direction - The company is focused on creating two pure-play publicly traded companies and expects to complete the spin-off of Knife River in the second quarter of 2023 [48] - The company plans to invest $2.5 billion in capital within its regulated energy delivery business over the next five years [73] - The strategic initiatives include enhancing operational efficiencies and responding to infrastructure demands driven by federal funding [47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities in regulated energy delivery projects and the overall business momentum heading into 2023 [21] - The company noted improvements in supply chain issues but acknowledged ongoing challenges that could impact schedules and labor productivity [18] - Management highlighted the importance of timely rate recovery and the potential for improved returns as new rates are implemented [82] Other Important Information - The company has been proactive in purchasing fixed forward fuel contracts to mitigate inflation impacts [26] - The construction services business is well-positioned with a skilled workforce of over 8,900 employees [46] - The company is experiencing strong demand for utility-related transmission and distribution work, particularly in the Midwest and West regions [12] Q&A Session All Questions and Answers Question: What was the T&D weakness last year attributed to? - Management indicated that the T&D weakness was due to a struggling project and a lack of storm work compared to previous years [4] Question: What is the status of hedging for petroleum-related products in 2023? - Management stated that they aim to provide guidance in line with industry standards and are focused on maintaining strong operational performance [6] Question: How is the backlog in T&D compared to E&M? - The backlog in T&D is lower than in E&M, but management sees strong opportunities and is negotiating updated pricing with utilities [11] Question: What are the expectations for margins in 2023? - Management indicated that margins are expected to be higher year-over-year, driven by pricing increases and operational efficiencies [96] Question: What impact is the housing market having on Knife River's guidance? - Management noted that while there is a slowdown in the housing market, it is not expected to significantly impact earnings due to a strong backlog in public works [19]