UGI - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Haidi and I will be your conference operator today. At this time, I would like to welcome everyone to the UGI Corporation and AmeriGas Fourth Quarter 2018 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank of Manager you begin may Brendan Investor conference. your Heck, Relations,

Brendan Heck

Corporation; thank morning Ted joining UGI President and and Good John Haidi. UGI. Propane; you of Jastrzebski, Gallagher, AmeriGas CEO everyone of CEO are Thanks, Walsh, today and for and President me us. CFO of Hugh With

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

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

the me let to John. call Now over turn

John Walsh

major AmeriGas. course that over comment by record UGI. fiscal morning then who once our will conclude to provide to fiscal full-year Good and hope call. results performance I releases chance share all our earnings and XXXX Hugh AmeriGas's UGI it projects. our had XXXX to of a more per for financial fiscal and for fiscal again and strategic cover UGI’s pleased our progress XXXX, detail will reviewing on Brendan. XXXX and to on will We're outlook, reporting I report the performance. on welcome briefly review Thanks, achievements turn you've over press I'll and Ted, guidance

while our was EPS GAAP adjusted EPS full-year Our was $X.XX. $X.XX,

fiscal and of roughly to achieved year. at core valuation adjusted XX% UGI's results growth. call. of align is over commitment hedges which that our that Ted record years in foundation $X.XX for investments the the foundation and we outstanding cover EPS will the XXXX items This Both identifying strong have last by mark-to-market adjusted developing unsettled were other strategies. our above later EPS delivered The business with prior enabled been adjusted on built was Our

pleased extremely the We LNG fiscal in XXXX the also were expansion as of with and build-out our growth performance if on demonstrates determination EPS positive reform, impact performance made businesses to benefit commitments provide of Our our the the foundation in the tax of shareholders. primary tax established in excluded. progress the executing and note a also critical even for noteworthy of XXXX over the progress company, consistent new our made was the resiliency the adjusted I footprint. to initiatives, such long-term elements the a XXXX next decade. record of although have that Mid-Atlantic, was fiscal continued for the of made superior our will our our reform should European our We that were on Fiscal strategic deliver network beneficiary from would we for the strategies

on and to few achievements. our productive AmeriGas, fiscal In Europe in progress marketing a key in the ACE we I'd announced sales addition with levels peaking network, the footprint, storage received investments in increasing expanding and rapidly LNG strive European our LNG systems in Eastern that process. increases. storage for demand and Penny's for comment drilling we Penny's acquired meet as moving final and Marcellus, LNG Central The National to activity operator These through the The and LNG Marcellus, work Pennsylvania Pennsylvania. business. our in the to in We in the as facility XXXX its FERC Texas state outstanding midstream completed project level services. our through were marketing North certificate capacity The the and access Pennsylvania to expanded order is major utilities power we Creek in gathering deployed XXXX another briefly permitting team further as pipeline detailed year, on constraint position permit. activities expects gas access in Penny's surveys acquired land to midstream to begin for Accounts the on and final call will on our capital is and future of record in and gain network, share on significantly the working all like currently Bethlehem, XXXX. our assets add and details team our England. storage had perspective markets LNG late in for Central I submit We outlook and and capacity to to a as route Mid-Atlantic critical its the to capacity expansion. to another parcels new construction Penny's facility New comment midstream later strengthen the the project delivery along

year. very We over capital deployed to a our extensive of infrastructure customers, upgraded systems. continued productive a upgrade record we added new $XXX million utilities infrastructure, added gas as new and execute distribution residential heating credit and replaced had utility customers accounting Our value replacement The XX,XXX and and program. team our commercial

AmeriGas's AmeriGas's the one will FERC's received only XX% but than We European our comment record in programs. customer case the XX over review by warmer under that operating ability the our in successful briefly distribution network for provide Preem which a as in rate X%. impressive our utilities with of strong as in included level over of leaders Italy Key International our accomplishments of meet position delivered challenging still ACE levered acquisitions Hugh a in the business and UGI programs was electric years. the merge year and Accounts most Both of Accounts National of the and integration also volume the circumstances. the XXXX, detailed our fiscal XXXX successfully National our income. the market to commitments UniverGas to earnings rose was performance first Sweden on unparalleled challenge I'll our strengthened three these national and Fiscal progress approval and LPG. volumes utility and the another but gas of filing faced year, year increased prior concluded very weather

a year Netherlands. conclusion natural in successful at our final power our three-year key had fiscal program of One successful the acquired marketing first also business achievement We the very gas DVEP for the newly XXXX integration Finagaz acquisition. was

this project focus Our past France team a job sustained the did years. outstanding three an on crucial in over with

exceeded you in three was years. performance delivered share a our third memorable review year, evidenced consecutive XXXX targets the of positive the Finagaz impact We our strategic business for the per for over Fiscal this as year past we, history. have highest met adjusted or earnings is when the for all investment investment UGI, and the of the international

also businesses. series the made progress investments significant our of that strategic set of We position enhanced on our diversified across

performance address team's long-term understand securing service and to our maintaining on market while identifying areas, strong enabled by in growth and ability conditions Our dynamic our opportunities. attractive was our focus

for commitments over on but and review. our in Ted? building I'd financial core undertake: excel activities like turn to comment maintained it I to XXXX the our operational return fiscal we critical most capabilities, to point strategic outlook, the safety, will efficiency. our initiatives, also at We this and to Ted customer service,

Ted Jastrzebski

Thanks, John.

of record fiscal mentioned was This than $X.XX our of adjusted share and last per table adjusted to compared per fiscal a XX% XXXX XXXX. very This year. consecutive As fiscal earnings share, lays John for strong GAAP was year earnings. year higher our third year earnings out with XXXX

versus of versus derivative the earnings impact As year. gain loss we fiscal number $X.XX of mark-to-market currency a items gain changes a instruments such last adjusted you XXXX can this as our $X.XX of a unrealized on hedging year year. a have instruments, $X.XX $X.XX of exclude see gains and commodity our foreign In of last

a You third the final great also and on is stated names can in delivering our fully associated earnings of $X.XX at our their and The on quarter team integration timeline. expenses call. impairment job We with detail the of now integrated AmeriGas trade see covered Finagaz. trademarks acquisition did

Bill $X.XX and the the re-measurement Lastly, you Jobs and tax can Cuts deferred Tax Act. see the impacts of French $X.XX rate Finance and

to Turning share versus earnings increased year. per the $X.XX adjusted bridge, last

weather, year, the largest conditions. increased warmer Our margin whose while midstream marketing and new customer domestic our weather total weather, last who infrastructure, benefited of XX% international utilities PNG to continued increase were growth, build-out colder Marcellus and our The margin base of from versus relatively increase normal businesses and contributors $X.XX business in leveraging increased faced a an result as XX% rates.

Tax of Lastly, the businesses from by Reform. impacts $X.XX benefited we the across

due results XXXX XXXX. This the business. $XX taxes Hugh First adjustment in to result year last a over versus $XXX largely income in of more half weather million, adjusted higher sold. gains of than AmeriGas achieved to previously rate correct in million the XXXX EBITDA International sales to on slightly discuss that XX% minutes. income volume colder of recorded acquisitions. was million, Operating primarily year. a reflects the of X% XX% were LPG Total in than from admin volumes $XXX was and of fixed only last $XX side will detail year $X higher increased margin weather sold AmeriGas on that But few assets. by last slightly reported UGI up of the recorded was a versus X.X% increase UniverGas existing retail Total on that due should gallons our up XXXX increased the the note largely growth. retail negative down expenses fiscal acquisition. million businesses than less million. absence Other was of fiscal volumes to adjusted warmer I before

stronger currency substantially margin the and net line the income foreign items Our on by by exchange losses net offset Euro strengthening Sterling; currencies expenses the slide, impacted were and contracts. operating on benefits affected were but the on the

million fiscal October notes wanted completed international X.XX% time pleased a issuer our were nearly in financing a a not billion. coupon. and XXXX of point We The to team senior Although priced major first of this outcome. team in €XXX at were I out due with XXXX, €X that

facility. new great business million business job well did new announced international million The term-loan a investors position many and our we credit continued of introducing a and the team Additionally, €XXX growth. for €XXX revolving to

margin related side margin XXXX is margin. margin of gas allowance million, income Other natural pipeline, funds is expense gathering, the due Sunbury before pipeline in marketing throughput increased to market which versus with Total year-over-year assets XXXX. XX% the base million million growth. to XX% total taxes $XXX income mid-XXXX. associated increase than million during $X higher to higher of $XX LNG, colder increase peaking Total of midstream of of $XXX increase income House, XXXX a the $XX increased and for Utilities we XXXX, increased a generation was midstream saw electricity and higher reported year. came customer large increase onstream as depreciation million for for $XX income in Core assets. that weather total because year, margin. rates taxes over and On and our $X.X and lower construction reported before used service last of delivery PNG expansion million throughput includes the UGI million over The last and an due continued higher result firm

quarter, IT is system result was This As of an Jobs total costs, net maintenance, order expenses. and a in reduce to Depreciation the was accounts, Utility the $XX and million Pennsylvania taxes. Act. establish discussed and distribution requiring a margin consulting as and by because with increased IT million million no Cuts of income regulatory tax expenses. uncollectible XXXX higher savings revenues had decrease there last $XX as liability OpEx on and income result reduced increased for associated due utilities May $XX a to contractor up Tax Commissions impact amortization associated

$X into We our XXXX. work, in is settlement. nicely because income by that other believe efforts lower XXXX. went to commitments million teams XXXX from for the environmental like and innovation, benefit another these income Lastly, thank to an deliver all year-over-year year insurance includes I'd strong hard delivering

of AmeriGas. comment I the all mindful given remain We a conclude, our our with sector. aligned sheet I healthy UGI to businesses plans movement annual business Before on remain in the the and AmeriGas of AmeriGas briefly goal structure balance sustainable the recent in on want as strategic review of part of AmeriGas MLP evaluate and process.

turn review their AmeriGas UGI process range boards putting our recall, a place you'll and a million. optimize the to to equity do With to year, last commitment continue the Hugh on agreement $XXX and the now that, UGI future. in standby options will AmeriGas. the in in over Hugh? respective regularly and for of report his I'll resulted explore so business call for As

Hugh Gallagher

driven by which September. gallons up million year all of for degree of quarter our expectations. This fourth you $XX warm X% the the fourth in occurred last September at AmeriGas's makes of about this came X in as a in million Ted. Volume know, quarter. below was or shortfall Thanks EBITDA was quarter was the below heating days all just the and month which,

a the finished with Weather than about higher EBITDA below XX% For with or warm year guidance fiscal $XXX and to were an was results. was late a the to in during period our during the and to fiscal sales cool conditions than prior for cost cold we adjusted of variable a slightly higher margin million return just the spring. operating a the year due operating low-end very average $XX year, in a year. the over solid of and normal September up February, last of XX% million, revised propane slightly the but year year December, primarily management increase year. normal prior activities $X.XXX Year-over-year increase unit the Adjusted related the expenses more despite primarily in

mentioning expense capital which excluded year these for key planned of driven to operating million look adjustment it's adjustment as higher ended alluded year, our both trade allocate as $XX names which the year. million are adjusted we which the Despite and per a worth year, this technology exclude to, comparisons reserve that capital disclosed of spending the our from efforts level largely also Ted measure year-over-year, was by investments. for gallon recorded year we This is EBITDA. Capital last due year spending and operational non-cash spending below million higher last environmental efficiently. $X.X lower was fact last However in to the earlier than efficiency than we $XX continued adjusted $X primarily of

financial with to ahead range capital million related do planned we increase $XXX primarily Looking of of the spending to fiscal systems. in around expect XXXX, the replacement

growth strong continued us for deliver Our to results.

volume National Accounts a program Our up had XX%. year very with strong

Mexico the year. nice a exchange exchange and year million during in to up completed and XX a Total fuel program And performance a cylinder past fourth X%. from and portions a our had service program also primarily mix exchange New completed Missouri. acquisitions Our two were We both about bolt-on record and proceeds business the acquisition adding Mid-Atlantic volume motor National Accounts to had our cylinder the Southern gallon year during the of these this with X cylinder business quarter of and divestiture small locations million. we in sales $XX years

adjusted to normal Turning to million the in new fiscal year $XXX we expect of the million, given operating to EBITDA $XXX report conditions. range

in most if was typically As failed entire the completed. May Florida, California. resilience Carolina West the in the their and guidance time and the at through Particularly be North the customer you throughout once noteworthy providing remiss energy, outstanding recently this commitment, the know, as season and in year. and wildfires in we performance the hurricanes as is great team in service well recent update issue initial I thank AmeriGas I'd heating for to guidance

support With and these remarks. diligently want the a over necessary the back communities which of and marshal his communities our back And that, thank I enables Our these operate people local after in difficult ensure part role when especially getting security on our on offices roles resources frontlines to to key to of We and take both in these turn in so us most. need the scale it communities pride John of we key worked to their call a feet nationwide times. playing for efforts. assets supply who are I'll

John Walsh

Thank you.

$X.XX of our service weather for territories. assumes volatility $X.XX normal and guidance XXXX in Our and fiscal

using basis mid-point our fiscal over weather EPS a increase we're for XXXX, years. XXXX XX-year The our the guidance. normal in just past as the As was of guidance the represents fiscal case XX% in three

pushing investment on asset We position in This markets also EPS five-year focus but is networks, trajectory existing from boundaries contributions growth our while to growth excited beneficial on of and XX.X% the progress for compound all resulted focus capabilities, that made our we on the range strategic evolve. of EPS quality fiscal and relentless XX% portfolio about by further of a five rate our opportunities high over new to tax seize strong year as broad above top opportunities. EPS X% linked growth investments fiscal XXXX opportunities past changes of organic our our amplified through laws. target. as fiscal pipeline new in the investment new Our the XXXX in strong across directly We're the end our annual growth period opportunities. businesses strategic growth of skills, a to long-term mentioned disciplined new leverage recent We've noteworthy our years, with investments a has

execution projects scale of than our Our of and the businesses. to due development is reach portfolio in and stronger ever

the continued in that look serve gas. natural growth invest we forward As drivers, the and demand see we assess opportunities to strong new for underlying projects

natural Midstream Our each Mid-Atlantic a cold XX setting daily across teams growth their when gas are strong in the demand during region experienced New natural in in XXXX was see and send-out We gas Utilities period base record the winter. East. in LDCs England. January and Most extremely day new demand seeing levels this saw record and early customer

project to new the XXX,XXX Penny's on is that solutions will gap. The and working System for as capacity the opportunities new recently our new users, for million this day. additions for demand Fourth per expand This to Northeast system have pipeline and gas Auburn expansion has uncertainty infrastructure the dekatherms this producers, timing projects Auburn timelines of such increase. Phase our pipeline been as investment UGI gap. extended, for up has We end natural the regarding address While of continued announced expansion us, opened for capacity the search LDCs, in another to critical execute diligently to investments $XX develop Pennsylvania.

our other systems. As delayed, the see Marcellus on Northeast are options we increasing from takeaway demand existing

series investments past noted a over to five earlier, made network expand As of we've I the years. our LNG

Our our of peak delayed. of for fees number demand ramps from have and serve demand business meet most recent increasing an majority up the a pipeline storage liquefactions, to ensure their a we peaking works investment: range Bethlehem of This supply with LDCs capacity storage attractive as to is a rapidly for expanding derived challenges. is as peaking for margin us that the closely UGI services are and services. Steelton additions services take-or-pay

at team in gas levels spending. seeing is Utilities is unprecedented Our this reflected and also outlook natural of acceleration demand capital for our

record CapEx million spend fiscal at four our total Following the in years we $XXX Utilities billion. CapEx next of to exceed $X.X XXXX, over spend expect

Our exceptional done at project of team Utilities high this an in change achieving service. customer has maintaining of levels while step very job execution

Our are UGI and LPG UGI's AmeriGas critically important businesses, execution the International strategy. to of

positive contributions reflects guidance businesses. from Our EPS growth both

position and in of We as growth Europe crucial utilization with remain service new cost growth to our reducing our about programs did tools. level markets our as and significant enhance that expand $XXX ACE levels our Accounts in a well reflects from and enter generate in fiscal continued presence to million million EBITDA our we existing fund in enhanced Europe flow XXXX UniverGas excited DVEP. $XXX contributions cash UGI investments. National to customers. growth and International businesses as to beyond. of tools in we continues and service its markets free UGI's geographies while new prospects enhance and the to our serve these addition, AmeriGas's customer These as ability In of is guidance logistics

referenced Europe business Ted provides with for foundation funding solid the European in Our investments. recent that future successful strength us very very our and of a reflects financing

teams excellent UGI. identify in to finance, in the for great our done to work another a also we've acquisitions, XXXX for our we've functions a scale memorable supply, strides and leverage truly as made In was position recent addition in to much collaborate. We're and IT. and European Fiscal Europe critical such integrating our U.S. aligning to LPG better year Europe opportunities

for of expand to delivering executed and base record investment once growth. of developed again continue We a that future while range enhanced attractive operations We our new foundation our EPS.

appoint executive were join our VPs We're Beard eye also us businesses addition leadership respectively. and a to with several Executive an gas He's also responsibility We team. the We been appointments natural as for future. made great spring. pleased LPG late key with have Bob to Ted Roger Perreault in to delighted as overall to our to and their CFO senior roles

been in Finally to Hugh that that strive to range Gallagher focus start flow leverage to appointments AmeriGas our capacity QX These local of businesses, role. to growth the a and markets an for exists that I'm while on the eye our with we of capacity new the UGI’s sheet projects ground in success. has was delighted hallmark named as We of support continued XXXX maintaining spare significant cash fund the with active Hugh common with additional future of and plan made and sharp fiscal were CEO balance full to have in many crucial investments.

dividend. In committed growing addition our our also to to projects, funding remain we growth very

to announced increase with a dividend we're in consecutive XXst April dividend the progress UGI Heidi, can for dividend. with throughout that, our Our and XXXth commitments year open on back position on has We're to you for your year. our increase the consecutive I I'll it an growth. to our looking say a paid With year that that over earnings the outstanding confidence deliver XXXX who keeping represented turn forward in will questions. updated future up call

Operator

first from Please queue your of go the question with in Jefferies. Thank you. And Instructions]. Chris line [Operator the Sighinolfi comes ahead.

Chris Sighinolfi

obviously John, XXXX. in successes lots of

the you're AmeriGas was the sub next Analyst was at I patterns comments the month. UGI only AmeriGas curious more focus this just performances out laid weather regard more in to to Ted trust have with them I I think the mean and well. year. some on I trades But appreciate of structure curious. Day I offer I that just to become in the you given it's going think is last obviously I publicly. dynamic

public markets for sort accessed if curious that the on just I'm has rationale clearly makes at guys if moment that heritage of really entities I've that for I'm outside whether, it's the what view changed, so the of time board's we if was could of none other that view of just and has over and do. a course a time few revisit And curious to equity if view given have not something so trade it the just the still covered your separately changed sense least

John Walsh

Sure, would that as the story the mid-XXs ends launching MLP underpins same and in a rationale Chris. that's of I say AmeriGas AmeriGas. for it's opposed an still remains flow why rationale in generates cash constructive the to represented terms MLPs were really It's flow by AmeriGas that basic positive share cash as ideally partners. and you that was characteristic in well or that -- MLP suited is ideally XX-plus-years other with company fundamental your created for to remains cash suited unchanged. the That business remains a structure the last and consistently many where

MLP an it's a future So still it's there. very I've weather as thing, -- trades use weather. to patterns entity at the at is difficult, closely to look after drawn conclusion, We it closely that for last for XX years rich weather separate having the any weather is patterns, one about impossible rationale really predict one looking

timeframe. making So weather all soundest the our much as using to is our year next we think basically I plans shorter as planning for basis as norm a which use for the noted we XX-year businesses our for opposed

that the for of ability the feel kind plan that on Hugh commitments based good our and XXXX MLP in outlined. meet our the about focus AmeriGas So to in we underpin areas

Chris Sighinolfi

an consumption switched as AmeriGas the think had I way customer XXXX was both change versus helpful. HDDs but to in that's said a fiscal a had curious the from I about some XX-year a how last follow-up year. as Okay, my John. just about sort UGI you as and you guidance first XXXX, four did talk behavior were there being XX-year, last three changed I'm Thanks fiscal which because Utility, year in occurred or for maybe guys anticipated. in of we total, where it the you normal they aggregate guess

think given So adjustment that XX-year XXXX experienced may different been and trailing the just fact volatility a have fully some the was that aggregate in captured the was by customer that as you having I'm now curious XXXX for about made there consumption not dataset? just volatility weather

John Walsh

Chris, of degree It's of movements a sort question you some good spacing unique we yes, season. delivery days. within I because got the never always get think it's and heating an ideal heating

opportunity related in did the relatively of reflected degree and the take that AmeriGas the we pattern, reoccurring volume weather forecast particularly you since the we but degree want incorporate to consumption past So weather few day to our some look over at for normal days year we learning to had national all abnormal to Hugh, from a front. in so that's if where national have patterns. at comment on basis

Hugh Gallagher

happens first blast I -- if it would just the be and time. say but arctic it the it'll sustained when perfectly modest cold is than always when better

John. I think well you put it

John Walsh

try FY the winter Yes, forecast for from budgeted volumes incorporate in so our XXXX. basis or address have budget, learning for to that past we we did this

Operator

of James. line Your Please Ben next question comes from with the ahead. go Brownlow Raymond

Ben Brownlow

you variance CapEx Hugh, between split plan, the on there your shifted guidance the just talk million can then $XXX about and versus and for million on year what's maintenance the the growth? $XX next

Hugh Gallagher

one The a XX:XX, terminal year all this I vary capital the that around and part and this the was that scrutinize had more year. we in we're But effort just planning closely. will we between take -- primarily project growth rest main the planned second and that we reduction The doesn't capital is that the it continued Northeast was a had allocate spending on the delayed reason for it coming largest much. capital that of that first. few split to maintenance usually better

Ben Brownlow

the XXXX, and you how when growth And tie about you helpful. about think exchange, that as structurally are business -- in National margins you talk thinking into the that's Accounts propane about unit and cylinder just fiscal can the landscape around given just year Yes, competitive well? XX that the

Hugh Gallagher

it's we so over all as X,XXX always compete. the world a highly market Yes, competitive and competitors

in operate competitors states have we in. We every

I Belvieu that’s for favorable they good will wouldn't landscape as expect a prices Mont The are We drop our recently are and good change. good at that margin are the with us become lower distributor. in we cost customers; therefore that management more has to for

prefer always we that. So

Although our history cold, way, indicates price, that high our we will warm. low whatever manage margin market in price, comes

you So of heating way see and managing us margins in I expect change the our wouldn’t business. to

You increase the margin modest over long-term. should see

Ben Brownlow

that the So was XX% just trying margin there? you're that when I in notable there better when shift propane inventory, structural anything or was there just was manage there against September year-over-year anything to guess the benefited was purely anything growth at costs, that inventory look and you over residential the quarter, or

Hugh Gallagher

-- No. you the modest I winter. would had a it probably a impact was more because normal mix say

would little you the So to more so mixed probably have of that House, been have tailwind -- in headwinds the cost, that's but had nice the real. a you might residential bit increase of impact side of a XX%

it's strong just and just day. that it's up we -- getting your So it’s fancy, and do every it’s nothing what sleeves after

Ben Brownlow

the you, Great, on and thank promotion. congrats

Hugh Gallagher

Thank you.

Operator

queue. no back the presenters. the further I There will call in to turn are questions over the

John Walsh

call. to and thank you at many of you Day We this your Analyst Thank and Okay, on time seeing attention look morning. you with all the speaking next for forward the you. to

Operator

conference today's call. concludes This

disconnect. now may You

UGI (UGI) 13 Nov 182018 Q4 Earnings call transcript