Suburban Propane(US:SPH)2022-02-03 20:13Financial Data and Key Metrics Changes - The company reported an adjusted EBITDA increase of more than 8% compared to the prior year first quarter, reaching $86.5 million, which is an improvement of $6.5 million or 8.1% [6][11] - Net income for the first quarter was $55.4 million or $0.88 per common unit, compared to $33.4 million or $0.53 per common unit in the prior year [11] - Total gross margin for the first quarter increased by $15.6 million or 7.9% to $212.6 million, driven by effective selling price management and favorable commodity hedges [14] Business Line Data and Key Metrics Changes - Retail propane gallons sold were 105.3 million gallons, which is 5.7% lower than the prior year, impacted by unseasonably warm temperatures and lower agricultural demand [13] - Average wholesale prices for the first quarter were $1.25 per gallon, nearly 120% higher than the prior year first quarter [14] Market Data and Key Metrics Changes - U.S. propane inventories were reported at around 20% below the five-year average for that time of year, but improved as the quarter progressed due to solid production outpacing soft domestic demand [8] - Propane prices started to rise again, increasing more than 15% in just the past three weeks as colder temperatures returned [23] Company Strategy and Development Direction - The company is focused on greenfield expansions and acquisitions in strategic markets to enhance its service capability [32] - There is an ongoing effort to commercialize low-carbon renewable dimethyl ether, which will significantly reduce carbon intensity when blended with propane [25][27] - The company aims to build out a renewable energy platform and is actively seeking investment opportunities in new technologies [26][27] Management's Comments on Operating Environment and Future Outlook - Management noted that the heating season began with unseasonably warm weather, but colder temperatures are expected to drive increased heating demand [23] - The company remains well-positioned to respond to increasing customer demand while adhering to safety standards amid the ongoing pandemic [24] Other Important Information - The quarterly distribution was declared at $0.325 per common unit, equating to an annualized rate of $1.30 per common unit, with a strong distribution coverage of 2.6x [22] - The consolidated leverage ratio for the trailing 12-month period was 4.02x, reflecting a significant improvement from the prior year [19] Q&A Session Summary Question: Details on the acquisition of properties in new markets - The company is actively identifying strategic markets for expansion and has completed most of the spending for greenfield expansions, focusing now on marketing [32][33] Question: Inflationary effects on combined OpEx and SG&A - The company is experiencing inflationary impacts from driver shortages, increased compensation, and higher costs for materials and fuel, but has managed to maintain operational efficiency [35][36] Question: Target leverage and priorities between deleveraging and investments - The company aims to reduce its leverage metric to the mid-3x range and will use excess cash flow for investments in renewable technologies or to reduce debt [41][43] Question: Timing on refinancing 2027 notes - The company is actively considering refinancing options but has not disclosed specific timing [45]