UGI (UGI) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2023, the company reported adjusted diluted earnings per share (EPS) of $0.00, compared to$0.06 in the prior year [11] - Year-to-date adjusted diluted EPS stands at $2.81, with EBIT from reportable segments remaining consistent with the prior year [4][5] - The company recorded a pre-tax non-cash goodwill impairment charge of approximately$660 million, reflecting lower growth expectations post-acquisition [12] Business Line Data and Key Metrics Changes - AmeriGas saw flat performance year-over-year, with higher margins offsetting increased operating and administrative expenses [11] - UGI International's performance decreased by $0.01, with higher LPG margins offset by lower earnings from non-core energy marketing [11] - The utility segment's EBIT was lower than the previous year, primarily due to higher operating and administrative expenses [12] Market Data and Key Metrics Changes - The global LPG businesses are expected to see a decline in natural gas and power marketing volumes for fiscal 2024 by more than 65$200 million [5] - UGI continues to invest in regulated utilities, with approximately $400 million invested year-to-date in infrastructure replacement and betterment [6] - The company is shifting its focus towards fee-based structures in energy services to improve earnings reliability [28] Management's Comments on Operating Environment and Future Outlook - Management anticipates adjusted diluted EPS will be at the low end of the guidance range of$2.75 to $2.90 for the fiscal fourth quarter [6] - The company is emphasizing cost control measures to offset weather impacts and volume pressures experienced earlier in the year [6] - Management remains committed to a long-term growth rate of 6% to 10% despite recent challenges [35] Other Important Information - The company released its fifth annual ESG report, highlighting progress across key ESG initiatives [9] - UGI is actively monitoring energy conservation trends in response to energy security concerns and government mandates [9] Q&A Session Summary Question: Strategies for improving earnings quality - Management emphasized the need to carefully manage operating expenses and deploy capital thoughtfully in renewables and regulated utilities [20] Question: Potential M&A opportunities - Management is currently focused on improving the balance sheet and ensuring appropriate liquidity before considering M&A opportunities [20] Question: Earnings mix and volatility reduction - The company is working to reduce volatility by exiting the energy marketing business and shifting towards more stable earnings from natural gas [22][27] Question: Renewable investments and project updates - Management confirmed ongoing progress in RNG projects and expects small-scale facilities in the UK and Europe to be operational by the end of the year [24] Question: Balance sheet targets and leverage - The company aims to reduce AmeriGas' leverage ratio below 5 and increase liquidity at UGI Corp to the 3.5 to 4 range [31] Question: Impairment decision timing - The impairment was triggered by diminished growth expectations and increased interest rates, necessitating a reassessment of goodwill [33] Question: Long-term EPS growth cadence - Management reiterated a commitment to a long-term growth rate of 6% to 10%, with a focus on improving the balance sheet in the near term [35][36]