Suburban Propane(US:SPH)2022-05-05 16:38Financial Data and Key Metrics Changes - The company reported a net income of $142.8 million or $2.26 per common unit for Q2 2022, compared to $126.3 million or $2.10 per common unit in the prior year, reflecting a significant increase [12] - Adjusted EBITDA for Q2 2022 was $172.5 million, which improved by $0.5 million compared to the prior year [13] - Total gross margin for Q2 2022 was $316.1 million, an increase of $12 million or 4% compared to the prior year [16] Business Line Data and Key Metrics Changes - Retail propane gallons sold in Q2 2022 were 159.2 million gallons, which was 5.8% lower than the prior year due to elevated customer tank levels and warmer weather [13][14] - Combined operating and G&A expenses for Q2 2022 were $143 million, an increase of $12.4 million or 9.5% compared to the prior year, primarily due to higher payroll and inflationary pressures [17] Market Data and Key Metrics Changes - Average wholesale propane prices for Q2 2022 were $1.31 per gallon, which is 45% higher than the prior year and 5% higher than Q1 2022 [15] - The average temperatures for Q2 2022 were 7% warmer than normal, impacting heat-related demand [14] Company Strategy and Development Direction - The company is focusing on building a renewable energy platform and has made strategic investments, including a 25% equity stake in Independence Hydrogen and additional capital for Oberon Fuels [8][9] - A new subsidiary, Suburban Renewals, has been formed to support investments in renewable energy businesses and assets [10] Management's Comments on Operating Environment and Future Outlook - Management highlighted the challenges posed by high commodity prices, inflation, and customer conservation efforts, but expressed confidence in the company's ability to manage margins and expenses [6][20] - The company aims to balance strategic investments with debt reduction, targeting a leverage ratio in the mid-3x range [21] Other Important Information - The quarterly distribution declared was $0.325 per common unit, equating to an annualized rate of $1.30 per common unit [19] - The company repaid $41.9 million of borrowings during the quarter, reducing total debt outstanding [18] Q&A Session Summary Question: Could you talk a little bit more about margin management? - Management discussed the challenges of managing prices in a competitive market and emphasized their effective risk management strategies to insulate the business from price volatility [24][25] Question: Can you expand on the impact of customer conservation? - Management noted that customer conservation has been observed when prices exceed $1.50, estimating that a couple of percentage points of the volume decline were due to conservation efforts [27][30] Question: What is the board's view on distribution increases going forward? - Management indicated a balanced approach to capital allocation, focusing on renewable platform investments while also considering distribution increases as opportunities arise [33][35]