Star Gas Partners ((SGU)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Star Gas Partners presented a mixed sentiment, highlighting both commendable achievements and notable challenges. The company successfully integrated acquisitions, leading to growth in volume and net income year-to-date. However, the third quarter was marked by decreased volumes, increased expenses, and a net loss, primarily attributed to unfavorable weather conditions and acquisition-related costs.
Positive Adjusted EBITDA from Acquisitions
The integration of recent acquisitions has positively impacted Star Gas Partners’ financials, with adjusted EBITDA showing a significant contribution to both the quarter and the year-to-date period. This indicates that the acquired companies are performing well and have been successfully integrated into the company’s operations.
Year-to-Date Volume Growth
Star Gas Partners reported a substantial increase in home heating oil and propane volume, which rose by 28 million gallons or 12% to a total of 263 million gallons for the first nine months. This growth was driven by colder temperatures and strategic acquisitions, highlighting the company’s ability to capitalize on market opportunities.
Increased Gross Profit Year-to-Date
The company achieved a $55 million or 13% increase in product gross profit, reaching $480 million. This improvement was due to higher volumes and increased per gallon margins, with significant progress in the service and installation business.
Significant Net Income Increase Year-to-Date
Star Gas Partners saw a $32 million increase in net income year-to-date compared to the previous year, fueled by higher adjusted EBITDA and effective acquisition strategies. This underscores the company’s robust financial performance over the period.
Third Quarter Volume Decrease
Despite the positive year-to-date results, the third quarter saw a decline in home heating oil and propane volume by 1.5 million gallons or 3.8%, mainly due to warmer weather and net customer attrition, posing challenges for the company.
Increased Expenses Due to Acquisitions
The acquisitions led to a $4.3 million increase in delivery, branch, and general and administrative expenses year-over-year. These additional operating costs were primarily associated with the integration of new acquisitions.
Third Quarter Net Loss
Star Gas Partners recorded a net loss of $16.6 million for the third quarter, which was $5.6 million higher than the previous year. This was largely due to increased adjusted EBITDA loss and acquisition-related expenses.
Weather Impact on Financials
The third quarter was 20% warmer than normal, significantly affecting the company’s volume and margins. This adverse weather condition was a key factor in the financial challenges faced during the quarter.
Forward-Looking Guidance
Looking ahead, Star Gas Partners anticipates continued challenges with home heating oil and propane volumes, which decreased by 1.5 million gallons or 3.8% to 36 million gallons in the third quarter, primarily due to warmer weather and net customer attrition. Despite these hurdles, the company achieved a $14 million gross profit from service and installation, a $600,000 increase over the previous year. The company remains focused on leveraging its acquisitions to drive future growth.
In conclusion, the earnings call for Star Gas Partners highlighted a mixed performance with significant achievements in acquisition integration and year-to-date growth. However, the third quarter presented challenges due to external factors like weather conditions and acquisition costs. The company remains optimistic about leveraging its acquisitions for future growth, despite the current hurdles.