UGI (US:UGI)2022-08-04 15:00Financial Data and Key Metrics Changes - UGI reported adjusted EBIT of $100 million for Q3 2022, an increase from $98 million in the prior fiscal year [9] - Adjusted diluted EPS was $0.06 compared to $0.13 in fiscal 2021, largely due to $0.07 of tax benefits in the prior year [10] - The company expects to deliver results at the bottom end or slightly below the fiscal 2022 guidance range of $2.90 to $3 [10] Business Line Data and Key Metrics Changes - The utility segment achieved an EBIT of $40 million, a 60% increase from the prior year, driven by increased disc rates and strong customer growth [34] - AmeriGas reported a loss of $10 million compared to EBIT of $11 million in the prior year, impacted by inflation, labor shortages, and increased commodity costs [26] - UGI International's EBIT decreased to $26 million from $41 million, with retail volumes down 7% due to warmer weather [28] Market Data and Key Metrics Changes - The global LPG business faced challenges from warmer weather in Europe and rising cost inflation, but showed resilience in demand [15] - The energy marketing business experienced increased volatility in natural gas and power prices, leading to a year-to-date EBIT decrease of approximately $81 million [30] Company Strategy and Development Direction - UGI is focused on executing its renewables and rebalancing strategy, with commitments to fund projects converting dairy waste to RNG [16] - The company is exploring options for its energy marketing business, including potential sale or wind down of operations [38] - UGI aims for long-term financial targets of 6% to 10% EPS growth and 4% dividend growth, supported by a robust asset portfolio [39] Management's Comments on Operating Environment and Future Outlook - Management highlighted ongoing economic uncertainty due to inflation, commodity price volatility, and labor shortages, but expressed confidence in the resiliency of the business [11] - The company anticipates that macroeconomic pressures will continue to impact operations, but remains focused on growth and efficiency [39] Other Important Information - UGI's available liquidity at quarter-end was $2.1 billion, reflecting strong cash generation capabilities [35] - The Board declared a quarterly dividend of $0.36 per share, marking 138 consecutive years of dividend payments [35] Q&A Session Summary Question: Cost mitigation efforts for 2023 - Management confirmed ongoing efficiency improvements and cost mitigation efforts, including headcount reductions, which are expected to yield benefits in fiscal 2023 [45] Question: Impact of the Inflation Reduction Act - Management is reviewing the Inflation Reduction Act to understand its potential impacts and will provide updates in the coming months [46] Question: Energy supply challenges in Europe - Management acknowledged pressure on natural gas supply in Europe but noted that UGI is well-hedged and sees opportunities for LPG to play a larger role in the energy mix [56][58] Question: Customer growth sustainability in utilities - Management reported a 2% year-over-year increase in utility customers and identified approximately 250,000 potential customers within service range [60] Question: Recovery of energy marketing losses - Management expects to recover 20% of the $81 million energy marketing losses in Q4, driven by contract expirations and improved margin conditions [71] Question: Drivers behind impairment charge - The impairment charge was related to the Columbia midstream assets, attributed to lower than anticipated production of wet gas [79]