Star Gas Partners ((SGU)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Star Gas Partners’ recent earnings call paints a picture of a company on a positive growth trajectory, buoyed by increased volumes in heating oil and propane, successful acquisitions, and improved service revenue. However, the call also highlighted challenges such as increased customer attrition and higher operating costs, which present areas of concern for the company.
Increase in Heating Oil and Propane Volume
The company reported a significant 12% year-over-year increase in heating oil and propane volume, amounting to a 29 million gallon rise. This growth was primarily driven by cooler temperatures and strategic acquisitions, showcasing the company’s ability to capitalize on market conditions.
Adjusted EBITDA Growth
Star Gas Partners achieved a remarkable 22.2% increase in adjusted EBITDA, reaching $136.4 million. This growth was fueled by both the base business and recent acquisitions, underscoring the company’s strong operational performance.
Successful Acquisition Strategy
The company completed four transactions during fiscal 2025, adding nearly 12 million gallons of heating oil and propane volume annually. With many additional opportunities under review, Star Gas Partners is poised to continue its growth through strategic acquisitions.
Service and Installation Revenue Growth
Service and installation revenues grew by nearly 10% over fiscal 2024, contributing to increased gross profit. This growth highlights the company’s focus on expanding its service offerings to enhance profitability.
Increased Net Customer Attrition
Net customer attrition rose modestly, influenced by a lower level of real estate activity and fewer new customer additions. This is an area the company will need to address to maintain its growth momentum.
Higher Operating and Financing Costs
The company faced increased operating expenses by $5 million in the fourth quarter, alongside higher acquisition-related financing costs, which impacted profitability. Managing these costs will be crucial for future financial performance.
Lower Free Cash Flow
Free cash flow was lower than expected in the fourth quarter due to working capital tied up in receivables and inventory. This highlights the need for efficient capital management to support ongoing operations and growth initiatives.
Forward-Looking Guidance
Looking ahead, Star Gas Partners is focused on enhancing shareholder value through strategic acquisitions, disciplined margin management, and investment in complementary service offerings. Despite a slight increase in net customer attrition, the company noted improvements in customer satisfaction metrics, which bodes well for future growth.
In summary, Star Gas Partners’ earnings call reflects a company on a positive growth path, driven by strategic acquisitions and increased service revenue. While challenges such as customer attrition and higher costs remain, the company’s commitment to enhancing shareholder value through disciplined management and strategic investments is clear.