Suburban Propane Partners ((SPH)) has held its Q2 earnings call. Read on for the main highlights of the call.
Suburban Propane Partners recently held its earnings call, revealing a positive sentiment driven by strong performance in the propane segment. The company reported significant volume increases and financial improvements, bolstered by strategic acquisitions and partnerships. However, challenges in the renewable natural gas segment and rising operating expenses were noted as areas of concern.
Increase in Propane Volumes
Propane volumes for the quarter saw a remarkable increase of 15.5% compared to the prior year’s second quarter. This marks the highest propane volume since 2018, achieved during January 2025, showcasing the company’s robust growth in this segment.
Adjusted EBITDA Growth
The company reported a substantial growth in adjusted EBITDA, which increased by $28 million or 19.1% compared to the prior year’s second quarter. This growth reflects the company’s successful strategies in enhancing its financial performance.
Successful Propane Acquisition
Suburban Propane’s integration of a newly acquired propane business in New Mexico and Arizona exceeded expectations. This acquisition is the largest single propane acquisition since 2012, highlighting the company’s strategic expansion efforts.
Improved Financial Metrics
The company’s financial health showed improvement with a consolidated leverage ratio decreasing to 4.54 times from 4.99 times at the end of the first quarter. Additionally, the distribution coverage remained strong at 2.17 times, indicating solid financial stability.
Launch of ATM Equity Sales Program
Suburban Propane launched an ATM equity sales program, successfully raising $8.8 million in net proceeds. These funds were utilized to repay outstanding debt under the revolver, demonstrating prudent financial management.
Partnership with NASCAR
In a strategic move to enhance brand visibility, Suburban Propane became the official propane partner of NASCAR. This partnership involves providing propane for new track dryers and other services at NASCAR events, aligning with sustainability initiatives.
Challenges in Renewable Natural Gas Segment
The renewable natural gas (RNG) segment faced challenges due to cold temperatures impacting production and lower prices for California LCFS credits and D3 RIN prices. These factors posed headwinds for the company’s RNG operations.
Regulatory Ambiguity on Production Tax Credits
The company experienced uncertainty due to ambiguity in the US Treasury Department’s proposed regulations on production tax credits, affecting RNG production and sales at the Stanfield facility.
Increased Operating Expenses
Operating and general administrative expenses rose by $14.9 million or 9.7% compared to the prior year’s second quarter. This increase was primarily attributed to higher payroll and benefit-related expenses.
Higher Net Interest Expense
Suburban Propane reported a 3.3% increase in net interest expense, driven by higher average outstanding borrowings under the revolving credit facility.
Forward-Looking Guidance
Looking ahead, Suburban Propane Partners is optimistic about its growth trajectory. The company reported a 15.5% increase in propane volumes, leading to a $28 million or 19.1% increase in adjusted EBITDA. Net income reached $136.9 million or $2.11 per common unit, compared to $110.3 million or $1.71 per common unit in the prior year. The company is advancing capital projects in Columbus, Ohio, and Upstate New York, while integrating a recent $53 million propane business acquisition. Despite challenges in the RNG segment, the company continues to enhance production and efficiency at its Stanfield facility.
In conclusion, Suburban Propane Partners’ earnings call reflected a positive sentiment with strong performance in the propane segment and strategic growth initiatives. While challenges in the renewable natural gas segment and increased operating expenses were noted, the company’s forward-looking guidance remains optimistic, highlighting ongoing projects and strategic partnerships.