Suburban Propane’s Earnings Call Highlights Growth Amid Challenges

Suburban Propane Partners ((SPH)) has held its Q4 earnings call. Read on for the main highlights of the call.

Suburban Propane Partners recently held its earnings call for fiscal year 2025, revealing a generally positive sentiment despite some operational challenges. The company reported strong growth in propane volumes and adjusted EBITDA, alongside strategic acquisitions and improved financial leverage. However, difficulties in RNG operations due to production downtime and lower credit prices, as well as an impairment charge, were also highlighted.

Increase in Propane Volumes

Propane volumes for fiscal 2025 saw a significant increase of nearly 6% compared to the previous year. This growth was primarily driven by strong winter demand and strategic acquisitions, which bolstered the company’s market presence and operational capacity.

Growth in Adjusted EBITDA

Suburban Propane’s adjusted EBITDA rose by $28 million, or 11.2%, compared to the prior year. This increase was attributed to the robust propane volumes and effective margin management, underscoring the company’s strong financial performance.

Strategic Acquisitions

The company made strategic acquisitions of propane businesses in New Mexico, Arizona, and California, investing a total of $77 million. These acquisitions are expected to enhance Suburban Propane’s market presence and contribute to future growth.

RNG Operational Improvements

Suburban Propane implemented operational improvements at its Stanfield, Arizona facility and advanced projects in Columbus, Ohio, and Upstate New York. These efforts are aimed at boosting the company’s renewable energy operations and expanding its footprint in the RNG sector.

Leverage Ratio Improvement

The company’s leverage ratio improved from 4.76 times to 4.29 times, reflecting increased earnings and debt reduction. This improvement indicates a stronger financial position and enhanced ability to manage debt obligations.

Technology Modernization Initiative

Suburban Propane launched a multiyear initiative to modernize its operations through technology upgrades. This initiative aims to simplify operations and improve customer service, positioning the company for long-term success.

Challenges in RNG Operations

The company faced challenges in its RNG operations, with a 13% decrease in production due to downtime from operational improvement projects and external factors such as power outages. These challenges highlight the volatility and complexity of renewable energy operations.

Depressed RNG Credit Prices

Suburban Propane encountered headwinds from lower LCFS credits and federal D3 RINs prices, with a 25% decrease in average D3 RIN prices. This decline in credit prices has impacted the financial performance of the company’s RNG operations.

Impairment Charge

The company recorded a $6 million impairment charge to write down an investment in an early-stage energy technology company. This charge reflects the inherent risks associated with investing in emerging technologies.

Forward-Looking Guidance

Looking ahead, Suburban Propane plans to maintain capital spending for propane operations at $40-$45 million, while RNG project expenditures are expected to be between $30-$50 million in fiscal 2026. The company remains focused on strategic growth initiatives, including expanding its renewable energy operations and enhancing its market presence through acquisitions.

In summary, Suburban Propane Partners’ earnings call for fiscal year 2025 highlighted a successful year with strong growth in propane volumes and adjusted EBITDA. While the company faced challenges in its RNG operations and recorded an impairment charge, its strategic acquisitions and improved financial leverage position it well for future growth. Investors and stakeholders will be keen to see how the company navigates the evolving energy landscape and capitalizes on its strategic initiatives.