UGI Corporation (NYSE: NYSE:UGI), a leading distributor and marketer of energy products and services, has reported a robust financial performance for fiscal Q3 2024. The company's adjusted earnings per share (EPS) showed a notable increase to $0.06, up from $0.00 in the previous year. This improvement is part of UGI's continuous strategic efforts to enhance cost savings and fortify its balance sheet. With a year-to-date adjusted diluted EPS of $3.22, UGI is experiencing one of its strongest financial periods to date.
Key Takeaways
- UGI Corporation's adjusted EPS rose to $0.06 in fiscal Q3 2024, from $0.00 in the prior year.
- The company's available liquidity stands at $1.9 billion.
- Adjusted earnings per share for natural gas businesses increased by 23%.
- UGI International reported a 43% rise in adjusted earnings per share.
- A total of $510 million in capital expenditures was deployed, primarily in regulated utilities and midstream segments.
- Approximately 10,000 new residential heating and commercial customers were added.
- The company is on track to deliver its fiscal 2024 adjusted EPS guidance of $2.70 to $3.00.
Company Outlook
- UGI Corporation is confident in meeting its fiscal 2024 adjusted EPS guidance range of $2.70 to $3.00.
- The company remains committed to concentrating on its natural gas businesses.
- Recovery efforts are underway for the Norgau terminal in France, with expected insurance coverage to address facility damage.
Bearish Highlights
- There are no specific bearish highlights mentioned in the summary provided.
Bullish Highlights
- UGI's strategic initiatives, including asset sales and cost savings, are expected to yield significant financial benefits.
- The company's focus on natural gas businesses is yielding a substantial increase in adjusted earnings per share.
Misses
- The summary does not indicate any misses or shortfalls in UGI Corporation's fiscal Q3 2024 performance.
Q&A Highlights
- Interim President and CEO Mario Longhi emphasized the company's ongoing efforts to optimize its portfolio and seek growth opportunities.
- CFO Sean O'Brien outlined the strategic focus on running natural gas businesses, stabilizing AmeriGas, and managing international operations.
- O'Brien also mentioned that 85% of the company's capital deployment would continue to be directed towards natural gas businesses.
UGI Corporation's fiscal Q3 2024 has been marked by strategic successes, including a reduction in absolute debt, asset sales, and a focus on environmental, social, and governance (ESG) achievements. The company's proactive measures in portfolio optimization and cost savings are reflected in the promising financial metrics and the optimistic future outlook. As UGI continues to navigate the energy sector with a strategic focus on natural gas, stakeholders may anticipate sustained growth and financial stability in the coming periods.
Full transcript - UGI (UGI) Q3 2024:
Conference Operator: Good day and thank you for standing by. Welcome to the UGI Corporation Q3 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tamika Morris, Senior Director of Investor Relations.
Please go ahead.
Tamika Morris, Senior Director of Investor Relations, UGI Corporation: Good morning, everyone. Thank you for joining our fiscal 2024 Q3 earnings call. With me today are Mario Longhi, Interim President and CEO Sean O'Brien, CFO and Bob Beard, COO. On today's call, we will provide a business update and discuss our financial results before concluding with a question and answer session. Before we begin, let me remind you that our comments today include certain forward looking statements, which management believes to be reasonable as of today's date only.
Actual results may differ significantly because of risks and uncertainties that are difficult to predict. Please read our earnings release and our most recent annual report for an extensive list of factors that could affect results. We assume no duty to update or revise forward looking statements to reflect events or circumstances that are different from expectations. We will also describe our business using certain non GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available within our presentation.
And with that, I'll turn the call over to Mario.
Mario Longhi, Interim President and CEO, UGI Corporation: Thank you, Tamika, and good morning, everyone. CGI delivered solid results for the fiscal Q3, reporting adjusted earnings per share of $0.06 in comparison to $0.00 in the prior year. Our team has continued to make steady progress in executing on our key strategic priorities, including our focus on driving sustainable cost savings across the business, which is reflected in the results for the quarter. In alignment with our objective to strengthen the balance sheet, particularly at AmeriGas and the corporate level, we executed several critical financing transactions during the quarter. These transactions, some of which Sean will further discuss, have enhanced our overall liquidity, begun to address upcoming maturities and supported AmeriGas in its journey to stabilize operations.
At the end of the quarter, UGI had available liquidity of $1,900,000,000 inclusive of cash and cash equivalents and available borrowing capacity on our revolving credit facilities. Next (LON:NXT), we continue to explore opportunities to optimize our portfolio across the entire business. This quarter, UGI Energy Services entered into a stock purchase agreement to divest of Hunlock Creek, a 169 Megawatt Natural Gas Fire Facility located in Pennsylvania. And we completed the sale of the LPG business in Switzerland. For the fiscal year, we anticipate raising approximately $80,000,000 of cash proceeds from divestitures or using reducing absolute debt across the entity.
Lastly, I want to highlight that in July, we released our 6th annual ESG report entitled Managing Climate Risks and Opportunities, which provides an update on the progress made on our key ESG commitments. Of note, we were pleased to report that we achieved 50% reduction in scope 1 emissions, well positioning the company to meet its commitment of delivering a 55 percent reduction by the end of fiscal 2025. Similarly, we achieved our goal of a 25% improvement in spend with diverse Tier 1 and Tier 2 suppliers, 2 years ahead of schedule. On a year to date basis, despite several headwinds facing the business, UGI delivered 1 of the strongest year to date financial performances in its history, reporting adjusted diluted EPS of $3.22 Year to date, our weather resilient and growth oriented natural gas businesses achieved a 23% increase in adjusted earnings per share and continued to maintain a strong balance sheet. UGI International delivered a 43% increase in adjusted earnings per share when compared to the prior year and generated approximately $140,000,000 in free cash flow.
At AmeriGas, we continue to execute on our objectives to stabilize and optimize the business. And this includes reducing costs and eliminating inefficiencies. Across the enterprise, the actions taken to optimize our cost profile and create greater efficiencies have begun to provide a meaningful contribution to our financial performance, and we expect to achieve the targeted $70,000,000 to $100,000,000 in permanent cost savings by the end of fiscal 2025. With this backdrop and based on our assumptions for the Q4, we are on track to deliver on our fiscal 2024 adjusted EPS guidance range of $2.70 to $3 Also of note, while we are employing strong capital discipline, we continue to invest a substantial amount of capital in our natural gas businesses. Year to date, UGI deployed approximately $510,000,000 of capital expenditure with 77% allocated to both the regulated utilities for infrastructure replacement and betterment in the midstream and marketing segment.
The utility segment continues to be an area of organic growth and we are pleased with the addition of roughly 10,000 residential heating and commercial customers on a year to date basis. I want to thank our dedicated employees who work hard every day to execute on our strategy and deliver these stellar results. And with that, I'll hand the call over to Sean to discuss the financial results for the quarter.
Sean O'Brien, CFO, UGI Corporation: Thanks, Mario, and good morning. First, I will provide my comments on the performance for the quarter before turning to the outlook for the rest of this fiscal year. As Mario mentioned, for the fiscal 2024 Q3, UGI delivered adjusted diluted EPS of $0.06 in comparison to $0.00 in the prior year period. The utility segment was up $0.01 largely due to higher gas and electric base rates and results for the Midstream and Marketing segment were flat to prior year. UGI International reported an increase of $0.13 largely stemming from higher LPG unit margins and lower operating and administrative expenses.
AmeriGas was flat as lower EBIT was offset by favorable income taxes. Similar to the prior quarter, the impact at Corp and other was related to taxes, offsetting the effects of the tax benefit at AmeriGas. Before I walk through the key drivers for each reportable segment, I also wanted to note excluded from adjusted net income was a $45,000,000 non cash impairment related to the Hung Lung Creek asset. As Mario mentioned, we entered into an agreement to sell that asset, generating cash that is being used to pay down debt and improve our credit metrics. In addition, we recorded a $25,000,000 non cash impairment associated with the write off of our investment related to a renewable dimethyl ether pilot plant.
This action aligns with our previously communicated intent to curtail investment in renewables, limiting spend to the $500,000,000 of committed capital. Now moving to the review of each segment performance versus the prior year period. At the Utilities segment, EBIT was $39,000,000 for the 3rd quarter, up $5,000,000 over the prior year period. An $8,000,000 increase in total margin was partially offset by increased depreciation and amortization expense associated with continued investment in our distribution system. The core market volume was flat as customer growth was offset by weather that was 17% warmer than the prior year.
The utilities realized an increase in total margins largely due to higher gas and electric base rates, incremental benefits from the DISC program as well as continued customer growth. Next, Midstream and Marketing reported EBITDA of 43 dollars a $2,000,000 increase over the prior year period, reflecting among other things, a $1,000,000 reduction in operating and administrative expenses. At UGI International, EBIT was $57,000,000 up $35,000,000 on a year over year basis. LPG volumes declined by 4% to the prior year, primarily attributable to the effect of warmer weather and lower growth in natural gas to LPG conversions. Total (EPA:TTEF) margin was up $18,000,000 driven by higher LPG unit margins and increased margin associated with the exit of the non core energy marketing business.
These increases were partially offset by the effect of lower LPG volumes. On operating and administrative expenses, we realized a $19,000,000 reduction due to lower personnel and maintenance costs. Lastly, at AmeriGas, EBIT was down $19,000,000 on a year over year basis as lower total margin was partially offset by reduced operating and administrative expenses. Warmer weather and continued customer loss led to a 13% reduction in retail volumes over the prior year. The effect of lower volumes and lower LPG unit margins led to a $35,000,000,000 reduction in total margin when compared to the prior year.
Operating and administrative expenses were down $17,000,000 reflecting among other things, lower compensation and advertising expenses. Pivoting to the full year outlook, as Mario shared, we've delivered one of the strongest year to date financial performances. Across our reportable segments, we delivered a $54,000,000 reduction in operating and administrative expenses as we look to drive sustainable operational efficiencies, right size the organization and strengthen our overall cost profile. The natural gas businesses are up $0.43 year over year from higher base rates, benefits from the weather normalization rider, which partially offset the effect of warmer weather and increased capacity management margin. The global LPG businesses are down $0.02 on a year to date basis as lower operating and administrative expenses, increased LPG margins at UGI International and higher margins due to the continued exit of the non core European Energy Marketing business have been fully offset by the effect of lower volumes at AmeriGas.
As we turn to the fiscal 2024 Q4, I want to remind you that we typically give back some earnings in this quarter due to the seasonal nature of the business. Outside of the normal earnings cadence, we anticipate that business will continue to benefit from the cost reduction efforts and the wind down of the European Marketing operations. These benefits will be more than offset by lower LPG volumes and reduced gain from asset sales at AmeriGas and lower earnings for the Midstream and Marketing business when compared to the prior year. Lastly, I want to point out that we are addressing damage to the jetty at Norgau, one of our supply terminals in France. Repairs to this facility in which UGI has a 61 percent ownership interest are expected to take up to 18 months.
And we anticipate that the capital expenditure will be covered by our insurance policy. The impact in the fiscal year is forecasted to be a material $0.01 to 0 point 0 $2 But at this point, we anticipate that the impact of fiscal 2025 could be as much as $0.05 to $0.08 We continue to work through modifications to our supply and logistics plan
Paul A. Zimbardo, Analyst, Jefferies: and we
Sean O'Brien, CFO, UGI Corporation: will provide more information on our year end earnings call. Turning to the balance sheet update. We completed several key financing activities this quarter, which align with the priorities that we shared with you earlier in the year. Most notably, in June, UGI issued $700,000,000 of 5% convertible senior notes due in 2028. The net proceeds were used to repay a portion of borrowings under the UGI Corporation credit facility to make cash contribution to AmeriGas Propane and for general corporate purposes.
Next, we repurchased $475,000,000 of the 20.25 senior notes at AmeriGas using cash on hand, $315,000,000 in parental contribution and other sources of liquidity. With these actions, UGI's Q3 leverage ratio was 3.9 times, within our target range of 3.5 times to 4 times. Most importantly, AmeriGas leverage was 4.9 times. Lastly, on August 2, AmeriGas entered into a new 5 year senior secured asset based lending revolver, which has a credit line of $200,000,000 Concurrent with the execution of the new revolver, AmeriGas terminated the prior facility and with it eliminated the debt to EBITDA covenant ratio. I am incredibly proud of the company's execution on strengthening the balance sheet.
Since the beginning of fiscal 2023, we have reduced absolute debt by approximately $300,000,000 and executed important financings to support the business. We are maintaining cost and capital discipline as we create greater financial flexibility and capacity within our balance sheet. And with that, I'll hand it over to Mario. Thanks, Sean. Before
Mario Longhi, Interim President and CEO, UGI Corporation: we open the line for Q and A, I want to acknowledge that Bob Beard has elected to retire from his role as COO at the end of this calendar year. Over Bob's 30 plus years since our highly regarded executive in the utilities and natural gas sector, including his 16 year career with UGI. He has made many meaningful contributions to the company. Among them, one that needs to be highlighted is the development of strong and talented leaders in the natural gas line of business. As Bob will remain in his COO role through the end of the year, we will have a seamless transition to the existing leadership team.
I am also grateful that Bob will continue to act as an advisor to the Board and the company for a period of 1 year post retirement to assure strong support to our natural gas business. In closing, I am confident that with diligent focus and execution of the key strategic priorities, UGI will continue to create sustainable value for its shareholders. Our priorities and the long term commitments that we have made are clear. We continue to explore opportunities to drive further portfolio optimization and growth, prioritize stabilizing and optimizing AmeriGas propane, seek to create operational efficiencies and establish an optimal cost structure and drive balance sheet improvement. I'll now turn the call back to our operator to open the line for questions.
Conference Operator: Thank you. At this time, we will conduct the question Our first question comes from Gabriel Moreen of Mizuho (NYSE:MFG). Your line is now open.
Gabriel Moreen, Analyst, Mizuho: Hey, good morning, everyone. Maybe I can start off with the last comments on the dock damage in France. I'm just curious, 1, the EPS impact, if you're confident about recovering the damage costs from insurance, why that's going to hit EPS or is it going to be just a timing thing? And then also the larger implications around supply and margins and your degree of confidence that you can maintain margins, I guess you have to scramble a little bit for supply.
Mario Longhi, Interim President and CEO, UGI Corporation: Good morning and thanks for the question. The coverage from insurance is going to address the amount of capital required to rebuild it. As we speak, the alternative logistics plans are in place. Our customers are not suffering from that. And we just shared with you some of the expected potential impact to the operational side of the business as we get into the next year.
That was just to give you a frame of reference. So we're going to be validating some of those numbers as we get further into the analysis.
Gabriel Moreen, Analyst, Mizuho: Thanks, Mario. And then maybe if I can shift to an update at AmeriGas and how you feel broader picture things are progressing on your initiatives there, particularly with the facilities having been swapped out and I guess being unburdened by a debt to EBITDA covenant there. Does that change your approach in terms of how you think about investing in that business going forward? And I guess the metrics you're looking at as you head into the winter heating season here?
Mario Longhi, Interim President and CEO, UGI Corporation: No. We're just as a matter of fact is a big positive when it comes to ability to focus. The strategy that we laid out to address the ability inside of AmeriGas that remains at firm. The clarity around some of the root causes of issues we have be it with new algorithms to define the best way for optimizing and get more efficient all of logistics as well as a bigger proximity to the customers where we're moving the organization towards a pod concept, which will create much greater interaction between local supporters of the customer base rather than having a distant support to that very same customer base. So there is a lot of work that's going into that direction.
The plans and the strategic approach is not changing. It's just going to allow a better focus as we take this burden from over us. Great.
Gabriel Moreen, Analyst, Mizuho: And then last one for me, if I could. You got the power plant sale under agreement. You've divested some smaller a smaller property in UGI International. Can you just talk about where things stand maybe prospectively for any additional asset sales as you
Sean O'Brien, CFO, UGI Corporation: look across the portfolio?
Mario Longhi, Interim President and CEO, UGI Corporation: Yes. The portfolio analysis is a live element of what we are doing. There is quite a bit of understanding of where value lies and where opportunities lie for improvement on this portfolio for us to be able to focus on the more value adding elements of the organization. So more to come on that, but there is a lot of good work being put in place that continues, okay?
Gabriel Moreen, Analyst, Mizuho: Great. Thanks very much.
Mario Longhi, Interim President and CEO, UGI Corporation: Pleasure.
Conference Operator: Our next caller is from Paul A. Zimbardo of Jefferies. Your line is now open.
Paul A. Zimbardo, Analyst, Jefferies: Hi, good morning team. Thank you. Good morning. Good morning. I had a 2 part question on CapEx.
Just noticing declines pretty much across the board, but particularly the utilities looks like it's down about 25%, dollars 100,000,000 year to date.
Sean O'Brien, CFO, UGI Corporation: If you could discuss like
Paul A. Zimbardo, Analyst, Jefferies: what the driver is there? And also looking at the LPG businesses, International AmeriGas, like notably down as well, If we should think about those as kind of like the new run rates for the LPG businesses and just some color on what's happening at the utilities?
Conference Operator: Thanks.
Sean O'Brien, CFO, UGI Corporation: Yes, Paul, this is Sean. I can handle that. I think on the LPG side of the equation, we've been very clear that we're going to limit some of the capital. Obviously, we've got maintenance capital both internationally and domestically. We're not pulling back on that.
But in terms of the growth side of the equation, our strategy is to focus on running those businesses, stabilizing AmeriGas, running international. So that step down change that you're seeing this year in the LPG businesses will continue. We have that forecasted out through the next few years and that is our intent. On the nat gas side, two drivers there. We're finishing up some of the renewable projects in our midstream business.
I think we're about $380,000,000 into a $500,000,000 spend. As Mario mentioned, we've curtailed that back at one point the company was committing a little bit over $1,000,000,000 but we're finishing these projects that are in service that will probably be about $400,000,000 this year, maybe $100,000,000 next year. So you'll see that sort of pull back in the midstream side. And then on the utility, there's a little bit of ebb and flow, but we're still heavily investing in those rate base programs to replace cast iron and bare steel. This year we're down just a little bit.
Part of that is we are focusing on the balance sheet. Obviously, Mario talked about some divestitures. We're trying to get the balance sheet in order, but you'll still continue to see a very good chunk of capital going into the rate base. We're going to honor our commitments there over the next few years. There will be a little bit of seasonality.
I think you could see that uptick maybe a little bit in 2026 and 2027, but we still have a fair amount of capital. We'll give you guidance later on in the Q4 call around 25. But our goal is to keep that going. The other key metric I think to keep in mind is about 85 percent of the capital that we're still deploying will be into the nat gas businesses. We've been clear on that.
That's where we want to continue to grow the company.
Paul A. Zimbardo, Analyst, Jefferies: Okay, great. Thank you for the color across the board. And then the last one I have is just on the leverage metrics, nice to see the improvement through June 30. Just as we fast forward to a year from now, do you think that those stay the same levels, increase or decrease for UGI Corp and AmeriGas?
Sean O'Brien, CFO, UGI Corporation: The goal is to decrease both of them. Q3, look, we're very pleased to see 3.9% and Corp at 4.9% at AmeriGas. Q3 typically is our lowest quarter, but that's why but they're definitely below where we were Q3 of last year. So I think that's real progress. I mentioned the absolute debt of the company, very excited, is below $7,000,000,000 That's a big move, down $300,000,000 The absolute debt at AmeriGas is below $2,000,000,000 It wasn't that long ago that AmeriGas was holding about $2,700,000,000 $2,800,000,000 So some big milestones.
I think you're thinking about it right, Paul. I think the balance sheet stays in focus through fiscal 2025. I think we continue hopefully to make some progress on that side of the equation. So the short answer is we want to continue to see improvement. Remember our ranges at corp were 3 5 to 4.
So we're still at the top end of that range, but within the range. And the same thing with AmeriGas, 4, 5 to 5 and we're at the top end of that range as well. So good progress, but still a little more to do.
Paul A. Zimbardo, Analyst, Jefferies: Okay, great. Now thank you all and congratulations to Bob on the retirement. Thanks everyone.
Mario Longhi, Interim President and CEO, UGI Corporation: Thanks, Bob. Appreciate that. Thank you.
Conference Operator: Thank you. And one moment, please. I'm showing no further questions at this time. I would now like to turn it back to Interim President and CEO, Mario Longhi.
Mario Longhi, Interim President and CEO, UGI Corporation: Well, I appreciate you being with us today for the session. And I just want to wish you a great rest of summer and look forward to seeing you in November for the year end call. All the best to you. Thanks again.
Conference Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.