Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Star Group LP (SGU, Financial) reported a significant reduction in adjusted EBITDA loss by nearly $19 million for the third quarter of fiscal 2024.
- The company increased its adjusted EBITDA by $13 million through the first nine months of fiscal 2024, despite warmer than normal temperatures.
- Star Group LP (SGU) entered into a definitive agreement to purchase a high-quality fuel dealer, expected to add 19 million gallons of heating oil annually.
- The company achieved a 25% increase in home heating oil and propane volume for the third quarter, driven by acquisitions and other factors.
- Product gross profit increased by $20 million or 37% due to higher volumes and improved per gallon margins.
Negative Points
- Star Group LP (SGU) posted a net loss of $11 million in the third quarter of fiscal 2024.
- Delivery, branch, and G&A expenses increased by $4.7 million year-over-year, partly due to acquisitions and rising insurance costs.
- The company's home heating oil and propane volume declined by 5.5 million gallons or 2% over the first nine months of fiscal 2024.
- The benefit from the weather hedge program decreased by $5 million year-over-year.
- Operating expenses increased by approximately $4 million due to recent acquisitions.
Q & A Highlights
Q: Can you provide more details on the recent acquisition and its expected impact on Star Group's operations?
A: Jeffrey Woosnam, President and CEO, explained that Star Group has entered into a definitive agreement to purchase a high-quality fuel dealer for approximately $35 million. This acquisition is expected to add around 19 million gallons of heating oil annually and is located within their existing operating footprint. The transaction is anticipated to close in the fourth quarter and represents their fifth acquisition in the current fiscal year.
Q: How did the weather conditions affect Star Group's performance in the third quarter?
A: Richard Ambury, CFO, noted that temperatures for the fiscal third quarter were equal to last year but 18% warmer than normal. Despite the mild heating season, the company managed to increase adjusted EBITDA by $13 million, showcasing their ability to adapt to varying weather conditions.
Q: What were the main drivers behind the increase in product gross profit for the third quarter?
A: Richard Ambury, CFO, stated that the product gross profit increased by $20 million or 37% to $75 million. This was due to an increase in home heating oil and propane volumes sold and higher per gallon margins.
Q: Could you elaborate on the changes in operating expenses and their impact on the financial results?
A: Richard Ambury, CFO, mentioned that delivery, branch, and G&A expenses increased by $4.7 million year-over-year. This was partly due to additional operating costs from acquisitions and rising insurance expenses. However, the company successfully managed these costs, mitigating the impact of inflationary pressures.
Q: What is the outlook for Star Group's weather hedge program for fiscal 2025?
A: Richard Ambury, CFO, explained that for fiscal 2025, the maximum the company can receive from the weather hedge is $15 million, with an annual payment obligation capped at $5 million if degree days exceed the payment threshold. If the same coverage had been in place in fiscal 2024, the company would have received an additional $7.5 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
