UGI (UGI) 2 May 242024 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the UGI Corporation Q2 2024 Earnings Conference Call.[Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Tameka Morris, Senior Director of Investor Relations. Please go ahead.

Good morning, everyone. our second joining earnings for you fiscal quarter XXXX call. Thank Interim today Beard, CEO; are me President COO. Mario Bob With and Longhi, and CFO; Sean O'Brien,

On quarter before update with a a discuss today's financial concluding will session. business our the the and strategic for results question-and-answer call, we on provide

risks you are for our significantly let duty Please could only. uncertainties of reasonable today extensive earnings or revise as affect and different today's release our read to date include because that believes certain to that update to we begin, our that most management be from Before forward-looking and results recent factors to differ may expectations. statements no annual Actual report events forward-looking of an me remind difficult results. or assume are comments statements, which We that of reflect list predict. circumstances

financial to available We certain using will of non-GAAP presentation. measures are Reconciliations describe GAAP measures our also within comparable measures. these our business the

Now I'm to Mario. the turn pleased over call to

and morning, strategic on financial everyone. commenting to by and begin quarter second UGI's before you, good providing a results Thank update. I'd broader like Tameka, year-to-date

adjusted XX% quarter prior a the businesses. the These gas earnings, natural UGI in natural year. the was income XXXX people, by delivered dedication fiscal a quarter, driven per our our businesses portfolio the second of which record resilience had largely of second was of share This and $X.XX, adjusted a reporting over year. strong increase gas reflects $X.XX earnings prior performance over the increase and net

fiscal in robust of are adjusted to in fiscal EPS a range resulted $X.XX $X. enterprise, the expenses. the first our to With across guidance we XXXX $XX a control this performance cost effective administrative implemented million year, track within reduction year-over-year and also deliver of in operating on the half We and

to dividends, to value paying pleased demonstrating XXXth year are returning We to mark commitment our shareholders. also the of consecutively

on to financial now update. the I commentary provide will performance will but pivot strategic broader the further Sean shortly,

of As including the sale, at we announced and The scenarios, review on focused primarily financial the strategic different that potential with process joint launched August venture was together businesses, AmeriGas LPG considered we of a advisers, XXXX. end spin of AmeriGas. yesterday, we completed extensive, and our the was

Although we with conducted all focus multiple and market, the in process should opportunities current Board a parties, decided AmeriGas. shareholder strategic due open on operational the and diligence a The to value. the financial to remains plan Board restructuring for company improvement that maximize

assessment months, with operational the greater have scrutinize opportunities conjunction reassessed few the the of work we This shareholder strategy, businesses how earnings allocate and we based whether and evaluated efficiencies enable our quality over capital. the prudently was review, reliable strength we growth, create past capital. to to prioritize achieve operating by earnings on Also, to are objective and to in change sustainable way improving allocate the value our in our sheet there balance

high-performing, that As grow repositioned accomplish capital optimize customer-centered market-leading objectives. execution, effective on operate through our located and execution these control must our move earnings firmly a strong cost and will organization, sustainably strategy we and capitalize We believe disciplined as strategically forward, we assets we results-driven where disciplined our of positions, deployment.

regulatory clear opportunities of regulated environments growth-oriented have provide is runway top-tier business, on equity. investment have portfolio: we utilities It us our long to business attractive that a an that return and constructive operating

and that to propane LNG & Midstream pipeline quarter facilities, gathering second Our business in the growth, business systems the Marketing storage, sustain peaking earnings enable gas assets as natural results. holds and evidenced

optimizing their the levels excellence. are to deliver of further strong to businesses to we committed operational continue businesses gas natural these holding higher performance, While results,

market-leading select markets, the our benefits market-leading have in competitive of Turning market. a margins UGI loyalty ability distribution that propane business position. retail in We highly the achieve U.S., At and must attractive business. to better positions cash generation. in a position differently strong in LPG which AmeriGas free to realize and we flow has supports to International, global brand Similarly, the strong run that and

And so shortly, Bob that you the will basic approach accomplish to walk objective. through

and with the the further intent predominantly Ultimately, we opportunities become Moving future. stability that of the at shift portfolio operational in to an our forward, turn continued around investment, And to plan we intend growth and growth. through will the we efficiencies. pursue overview business global to more LPG specifically our footprint streamline natural achieve and create to organic to more business share AmeriGas, gas will

strategic now sheet. And to three, are: and X drive opportunities and stabilize these one, enhance achieve and efficiencies; growth; portfolio AmeriGas; to our the review, balance from culminating actions earnings pursue that actions and the optimize takes me reliable two, four, to strengthen strategic operational

several footprint. Looking our well customer at across countries the We U.S. XX as operate as in and segments. Europe in

continue particularly will portfolio, explore underperforming segments. and the or strategic to the we LPG businesses, for the in less Within customer areas options

LPG we of As cash which an receiving example, businesses to anticipate an into in April, service net we proceeds approximately of approximately Switzerland, our million. in X,XXX agreement $XX entered divest customers, and

the Next, over past and months, our few balance shared to sheet. intention permanently have reduce the we strengthen costs

evidenced team both Those various taken our in the actions well and a further We shortly. year-to-date areas, and million past in will made financing will in efforts as by reduction provide $XX debt have insight continue, as operating clear the expenses progress decline as year.

stabilize AmeriGas. who plan will this Bob, and I the was call lead will in to review. hand integrally involved strategic He now action the take optimize implementing the to in

Thanks, Mario, morning, and everyone. good

have has our strategic placed our covenants. in customer attrition that over are the model. higher years challenges encountered AmeriGas the significant rates better you service operational frame impacted weaknesses our several on us and resulted review in debt standards, operating past helped aware, pressure As The

detail formulate to effective doing address comprehensive that plan challenges them was of to more are level you've over more necessary heard us committed on to we're clarity time, needs several to for shortcomings. it. identified While done, be new what and review action us strategic and We discuss those a gained and these the not of a

be Our service satisfaction, excellence. on overall improving overall will performance in operational our customer reliability and focus

are enables this model our addressing journey, our of to challenges. to simpler effectively focused streamlined a us that initiate we and evolving have more model, operational We needs anticipate committed To these the creating and address more customers.

of with success are there associated our key While business. financial indicators measure the many of improvements, the be operational these ultimate measuring results will the continued

this permanent the that cost trajectory completed do have these not business. were measures actions measures cost our line ensure structure support In pursuing with aligned number overarching our actively reduction we're capabilities. compromise To A earnings late of April with XXXX. to goal, we initiated efficiency the objective, operational that in remains of this

we our and to sheet, on AmeriGas' made the footprint speak opportunities actions shared, Mario to capital currently will core Next, progress address Sean Also of additional segments. working that open to our balance which as and be structure in taken and are streamline customer adjust importance, will we've remain constrained. near focus is the we to term.

and contributor of performance that we Overall, XXXX. execution anticipate with values, and stability begin strategy to its diligent see will new a resume our operating renewed commitment to cash AmeriGas being a by in to UGI our fiscal operating

to the hand call Sean. over I'll now And

morning. good and Bob, Thanks,

outlook provide the the quarter for I First, my on comments performance the UGI. for before will midterm turning to

electric adjusted $X.XX higher second mentioned, West XXXX in for the the segment to $X.XX as to the quarter, well utility rates comparison of higher implemented were The diluted $X.XX, prior Virginia delivered Mario in as year was both largely EPS UGI gas year. and rates As up during in due fiscal period. Pennsylvania fiscal that

this the predominantly $X.XX, the from activities credits offset unit lower down higher from noncore tax and higher UGI margins earnings up and and effect was from was gas and natural Midstream International & to on limitations margins business due interest taxes attributable of down income to resulting by expenses. $X.XX Marketing was as projects. operating energy realized higher LPG marketing RNG on the $X.XX, business, deductibility. investment was administrative AmeriGas completed lower partially marketing

faced the AmeriGas. Corporate the up were tax at Lastly, Other offsetting where was realized, of & tax $X.XX, effects headwind benefits

variability was segment-level While to rate expected lower year. the than expense, prior tax tax effective UGI's be slightly there in annual is

and and key million will than volumes from The the year. year commercial the its being an for segment, the reportable over of business the in customer DISC total incremental customer modest rates, prior year. each Utilities the X% next fiscal the heating million added as saw continues Turning $XXX to continued increase electric $XX benefits second for quarter, for prior program was the period. through residential you utility gas to $XX base as EBIT slide. X,XXX new margins base a due and well when higher to walk compared I growth. market more the expand quarter the million customers At core segment now the colder We in during than with drivers to up increase prior quarter. realized weather

and There at invested expense. basis, investment with Operating $XXX On million expense primarily contract lower replacing was increased aging with were the expense in largely as benefit costs distribution the year, expenses and also the year-to-date and uncollectible in employee regulated labor administrative account the by depreciation prior roughly offset amortization a we higher comparable system. were continued utilities, infrastructure.

of margins million gas activities, reported million a as over $XXX marketing up as $X down natural and peaking and capacity and due salary year. well $XX lower effects Total were including & increase Midstream margin million, Marketing to prior the Next, management administrative million $XX EBIT Operating margins. expenses. higher maintenance the was of on benefits from expenses

down noncore LPG of gas comparable was gas business. warmer by energy to foreign offset higher $XX million, $XXX by marketing auto basis. effect year, sold. EBIT the translation lower and by million. was UGI was the LPG volumes and Total conversions to driven At effect International, $X to was the were exit offset a amounting as natural the partially volumes approximately weather higher million LPG on year-over-year $X margin prior up unit margins we This currencies, of million, stronger margin as

were translation due offset currencies. down maintenance costs, personnel foreign Operating partially effects the of the to million lower $XX stronger and and administrative expenses by

AmeriGas. prior expenses. at reductions EBIT comparable margin and administrative as Lastly were year, in reduced with by operating total offset was

a the a There and with retail volumes national slight For warmer over in exchange which, to X% loss, lower volumes segment. quarter, in with reduction increase accounts weather prior customer the when reduction usage we cylinder in modest railroad led customer coupled was a the saw in year.

margin LPG markets, $X leading of a prior million lower lower by were volumes offset down administrative and effects unit total the Operating partially by were things, higher reflecting The million, vehicle $X and reduction among other partially higher advertising expenses, expenses compensation to offset in when compared to expenses. year.

our revolving $X.X quarter, At the had and borrowing liquidity Moving available cash facilities. of available UGI on credit end cash of the to and liquidity. inclusive of capacity equivalents billion,

$XX and During the on at the executed ended the bond million beginning of metrics. on the business on Since fiscal at by million, period absolute AmeriGas, more repurchases we open quarter, the $XXX $XXX buffer we to market million XXXX, provide of have debt and executing hand. reduced cash objective strengthen approximately of our AmeriGas credit approximately with

During and between $XXX $XXX goal free the fiscal both by of to contribution. another back using generated parental debt $XXX cash million our million, to reduce of is AmeriGas to half flow million $XXX XXXX, million from

improvements AmeriGas. compliance undrawn, As operational Bob actions, the This covenants. work that, to stabilize optimize business to while to the through revolver debt we is address To covenant enable options the restricted will without mentioned, pursue action support he will pressures. those the spearheading planned quarterly has and

I our at of let the As that financial onset. briefly me shared objectives pivot Mario core you our remind to outlook,

Our will we balance earnings the how strengthen allocate and and earnings reliable creation. be sheet in the which quality facilitate our deliver business objectives improve sustainable to value shareholder growth, are capital, of disciplined

our fiscal Starting with XXXX guidance.

operating LPG warmer margins at the businesses margins U.S., For offset $X.XX of natural EPS, enterprise. reduced at year-to-date, UGI These weather gas volumes Propane. and the expenses rates the at and the and utilities, unit margins UGI the International AmeriGas administrative activities benefits higher and of by in effects increased fiscal increased delivered has LPG led by regulated adjusted marketing base lower the total in partially across from were

of the range to $X.XX Based we pleased half start adjusted fiscal with back strong year. year, EPS of earnings $X. our to the are for the business XXXX the guidance holding and We on cyclical of the are our nature projection the

rate. rate slide XXXX. years, period, strategy EPS Now XXXX targeted are rebuilding Fiscal well that billion X% summarizes X%-plus to we utilities, we will targeting during remaining throughout growth and which and of that capital organic UGI across X% growth XXXX targets will fiscal growth of A the as investing approximately primary was to this as between financial $X.X the Over EPS driver a is our to where that several execute facilitate continue billion approximately outlined. the growth of investment previously period. anticipate base $X.X at be We the portfolio. XXXX regulated planned

outlook As include achieve will I'll during UGI incremental that not leverage address shortly, debt, ratio anticipate the plan does the period. its we and targeted

previously, efficiencies operating we is As shared focused costs. team increasing our and our lowering on

on are targeted permanent We cost base the of fiscal million track XXXX, $XXX year. as $XX deliver savings using fiscal XXXX to by the million the end to of

total to actions to a million We when are into year. executed deliver prior savings those $XX have fiscal year-to-date and required OpEx the sight have nonlabor on of to targets, achieve in intended labor we've fiscal line these basis, already to reduction projected these contributed On XXXX. already measures that the the compared and actions for

allocation. to Turning capital

apply to and benefit invest shareholders, We that strengthen prioritize will potential sheet we improve and highest which continue where will returns the with framework, shareholders, customers. balance financial returns in to flexibility areas a will our also to actions our the disciplined

as long track through the on to to fiscal XXXX, of paying UGI On a our slides, X this we record I'll framework. dividends. next has adhere comment outlook

next As that focus we to still as balance we over and ratio X fiscal Between stay flat we will we a balance on AmeriGas, expect sheet the that the stabilizing close while our history. achieving strengthening committed and XX%. XXXX remain to XXXX, payout dividends preserving priorities years,

our XXXX, targeted move growth dividend as to Now fiscal anticipate we over term. returning rate X% to long the we

debt Slide funded additional flow while fiscal from the through fully 'XX, do any our aligns for through plan UGI. needs as you shared deployment not XX by equity XXXX we operations, with absolute cash which previously. The walks that targeted anticipate will to we reducing priorities cash be for plan

approximately regulated utilities, deploy our $X.X to XX% the ample invested where capital. growth of be businesses, we in have addition, will roughly expenditures, billion gas In capital natural in in our predominantly opportunities

that, the with to hand I'll And back call Mario. over

Sean. Thanks,

diligent fundamentals value I As build want that conviction will execution I momentum close, of growth balanced strong of our a and to creation. to emphasize enable UGI the

that and financial are actions the We to commitments achieve the outlined. necessary that have embarked on taking journey have we

cash X% growth. the have strong maintain investments in the regulated capacity businesses fiscal will leverage which to target rate this free between plus provide We we XXXX Xx. utilities, to in to the to X% and flow-generating in from With businesses, benefit EPS XXXX, particularly gas base the natural and financial expected LPG rate X% . These deliver a return businesses. model, growth X.X and ratio are between

flat preserve the fiscal years, our synonymous which also the over brand amount will dividend, We past with has XXX been our commitment through keeping the XXXX. to

XXXX. to Our a X% long-term dividend rate return intent growth fiscal in to of is

and line thank open back support I the for call continued to turn you interest I'll of And your UGI. our for now operator the questions. to

Securities. Jeffrey [Operator first the comes Mizuho line Instructions] Our Christopher of question from of

million $XXX debt around with reduction starting the just of AmeriGas. Maybe at

much at intervention? curious involved generated of what something cash be doing AmeriGas internally the approach How with to accomplishing that. more will flows is external kind versus Just

is that. hit historically. We contributed year. year. back somewhere $XXX I AmeriGas around took about take I'll $XX This million, million out million Sean. $XX Maybe can of you last that last

QX. in As we OMR to million we and $XX the year, with AmeriGas repurchases that we take all through That did foremost, this almost first out cash. able look were at was

from AmeriGas. So that $XX came million

million from that look get for. $XXX our another reduction, to looking and Corp. continue total to $XXX of balance improve then that And that should we maybe see the we another year cash As we're maybe of providing sheet, you million million to the the AmeriGas debt and to to goal half back $XXX

to mind, keep as sheet. AmeriGas million achieve we'll we this, balance taken have the thing off over $XXX all in One of debt

a answer proud we're corporate So $XXX from at to coming your you're coming pretty injection. of looking AmeriGas directly and from that. million million so about question, $XXX or cash But another

that, just clarify to just would with hand? on Or from is asset involved that maybe Corp., the sales Or... And be you've the it. Got that cash mentioned? coming that

the of above. all Yes,

utilized more cash a raised million corporate Mario had that be the fungibility. sale. -- So as mentioned, or $XX optimally optimizing Obviously, we But we also we're also can structure. from asset

remarks you Mario and opportunities the to portfolio the if look we're sales. through that cash think at continuing listen I made, asset to some to generate potential

the good above. on all the down. And to an that of So cash will already is news coming of executed we've $XX million asset almost sale contribute that

options that? into this far then fee of And Any on Got one adjust as insights early just kind maybe revolver you as AmeriGas, it. Great. at as to mentioned. last

Yes.

I think couple things. a of

stabilize a want buy heard We plan to to time. out get able optimize to some You and lay Mario AmeriGas. be and to Bob

as removing gives gives on So under corporate time we the instrument without pressure replacing pressure. heavily that not quarterly having us at are well. want execute covenant basically a importantly, probably on quarterly us that with another on but some we pretty quarterly puts that does work us that as through looking the and have revolver more AmeriGas things this turnaround and to we time to It

So path. that down started we have

have we've that been but We could hopeful strategies on working you abreast, for while. we'll I'm that a some keep little successful. be we And

last 'XX? Anything kind I midpoint just thinking that if rate. just and about Are as X% X% be from of far one, Should Sean, of of particular as we you as squeeze CAGR at the to growth the looking in 'XX guidance? to like Maybe, one could kind base?

Yes.

to 'XX I of to 'XX, most mean that. it's a Chris. is think yes it I

balance in way period a being X% capital. to we're very of period of disciplined repair. in think to I think a We're the X% with is about sheet that

company. we bit. bit, quite side businesses period. little On I We think, one growing a comfortable. the it a range fence, have that why for down from the that feel of that's is So But came historical

base X% growth. rate You've got

performing well. gas nat got really You

So trying 'XX we've it we it -- but do got of in a to think 'XX. to midpoint as is there,

help Congratulations on all the the the announcement and process. throughout

line Paul question the Fremont next from of Instructions] Our of comes [Operator Ladenburg.

I & the Marketing. guess my question Midstream to relates

So sort like you and of through like? the of is would if can total margin us -- Midstream comparator the Marketing just and up it the walk sort what just chart $XX million, be is million look if was what would look what $XX would

is Paul, of Yes, this couple A things. Sean.

basis our at think values the that driver, pretty a the allude, increase. looking some think, pipelines I we and we've -- you're got The contract we as on the spreads tried is on biggest saw I gas good to we've drivers, capacity big basis. differentials on

were those of take we drove So that a able value. advantage to significant portion of And those contracts, contracts. capacity the

I is we have think piece the other storage to a consider business.

this we that black was you lost contracts, at the storage on and year, year, of timing based If the look in business the last money.

one of drivers as well. the that's bigger So

a across the I be coming company. you well. had down. sitting focus had drivers didn't the that. And modest highlight on see as this OpEx earnings Midstream are that 'XX to Those in million. biggest know that the and You a but it, would about ask of other $XX We you loss business X There's big goal that costs a the contributed pretty operating year.

answers business. what the hopefully, in is Energy your drivers Services So the that of are those but question, happening

I still Okay. not I'm guess understanding.

Marketing quarter-over-quarter from you by Midstream itself, was So exclude up picture? the if

from Midstream was If you exclude picture, yes. up quarter-over-quarter, the Marketing

And much? by how

It's side of of to the be a the was Marketing much gain equation. going the the -- majority

than to going So $XX less be it's million.

in one margins I storage changes the experience peers you storage then experience significant a margins? during seem your quarter. And any guess, Okay. significant Did uplift in of to

No.

had gains, was As the them gains but fact in storage I the positive. on business saw I we storage. wouldn't delta last mentioned, that call big losses year. outsized the we some We were

it storage solid perspective, gains. a So a from I say outsized wouldn't but was quarter

sort doing question the strong focus it of to upfront of balance repair of considered guess, issuing base I last time going sheet sheet growth that to you doing it's of sort then, as And of repair. the you take balance rate to opposed sort essentially equity, the and over very with rebasing sort time? on and Have possibility

many, scenarios, Paul. Yes. We've considered many

equation on going mentioned definitely equity, taking sheet. think remarks, written did of have lot currently, balance I deploy careful doing in steps capital. that very the I announce are we've the to a we to on at don't of but equity we reductions. where We're cost being growth a moment, hold that the dividend going believe in We we're to the improve the flat. our lot we're We're

So we're generate lastly, some to we're at looking doing optimization -- cash. and portfolio

the So not improve we those to are the the now, avenues equation. using have not put debt we're moment. in at on, the Right sheet balance equity do

this to remarks. am Mario now I back it to no like I would Longhi time. at showing questions further for turn closing

thank look to we're want participate taking call, time next conversation forward everyone in this to I for we have. the and to the us to with going

day. So I good wish everyone a

you All participation for your right. This so concludes the today's conference. in program, thank

You may now disconnect.