UGI - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the UGI Corporation First Quarter Fiscal Year 2020 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. And after the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Alanna Zahora, Investor Relations Manager. ahead. go Please

Alanna Zahora

and morning, With Good UGI thank for Natural you Rob of and Thanks, UGI. today everyone, are us. Gas; of President me Executive of Walsh, Ted joining President Beard, CEO Kenzie. Vice and John Jastrzebski, Corporation; CFO

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

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

Now, let call John. to over me turn the

John Walsh

and QX, businesses good high results. chance hope a I you’ve Alanna, press that of and each very call. our a had welcome review a strong reporting posted to first all UGI our release performing quarter at with our to Thanks, level. morning,

did a superior teams long-term strong set outstanding performance. will this an the executing Our for foundation job of while that performance, delivering of provide key initiatives

structure subsidiary. gas full also in our back and those a a rates our first number with It UGI noteworthy the was AmeriGas quarter reasons. first combined newly with quarter full went the our fold in as with was acquired This quarter was as effect rate October. quarter a asset first for for the wholly-owned new utility, It into the CMG network of

quarter’s our past track over work We out business. line and Those been and of customer will their committed Perreault detailed as significant are days, programs on be delivering across programs LPG results developing progress the deliver XX rolled initial at over service the Roger also the programs described on on months. savings call, restructuring next these we’ve that last plans major to remain made the XX and levels. hard enhance planned

key to provide wrap then the strategic an performance QX on and initiatives. in will our Ted, of review up quarter. our Natural system, activities gas who’ll UGI’s progress over overview provide with on you Executive update it our Gas, turn I’ll including businesses, and the an with Bob Beard, on I’ll our natural VP, in CMG comments financial

$X, Our while QX our EPS $X.XX. EPS was QX adjusted was GAAP

was point $X.XX over been achieved cover in later. fiscal – Our mark-to-market adjusted items, unsettled the adjusted adjusted the of other XXXX QX EPS Both which Ted XX% of prior exceeded significantly quarters high EPS adjusted of QX QX of for hedges above valuation XXXX. for and our have $X.XX, fiscal and EPS will

Europe noted very in strong weather and was reflected I of major performance a a four this business all contributing of This a way. in earlier, our the the in diversified challenge. As with strength was a when businesses, quarter units bit earnings Mid-Atlantic performance

impact services. energy adjusted of margin capacity delivered EPS our Despite activities, margin. those were we for opportunities teams highest the by French no Our incremental strike ever the were there at wide a managing challenges, and general QX

optimize maintaining to our restructuring while all as on operating of positive executing, customers. job exceptional an programs did we levels margin of impact our the and teams our saw managed service Our supply high chain to expenses,

with had Midstream impact The is first I’d over team. major call the the like positive full a successful in systems to progress Columbia in comment Before to on achieved quarter I the developments with several We of key Ted, turn areas QX. financial very and with acquired CMG up performance fee-based major the will evident new CMG’s is to being growth referring Appalachia. Adjusted driver. assets contributions the QX UGI we going EBIT nearly Also, be revenues Midstream forward, XX% Marketing. as in the of the and

Our heating projects. continuing while Utility range execute replacement quarter, broad infrastructure and our reinforcement over had customers of adding to X,XXX busy new another

long-term infrastructure The remain and program on Our customer schedule. the the will replacement future, combined remains we for focus serve our growth invest expanding in customer base. on replacement infrastructure foreseeable to as infrastructure

to in CapEx million exceed expect We for the XXXX. $XXX fiscal utilities

AmeriGas to had drive continues versus adjusted Cylinder growth and distribution programs. programs. continue below look were X%. two up Accounts in for QX prior National Cylinder with leverage weather our was almost slightly EBIT XXXX a volumes with exceptional to just very year these Exchange opportunities solid Exchange National We’ll our to U.S. increased QX fiscal and AmeriGas Accounts to despite that excel volumes infrastructure XX% successful warmer.

strong resulting had expenses from quarter. XXXX, costs was International grain transformation strong program Adjusted an fiscal warmer UGI We Europe. benefited higher in substantially up margin extremely lower and volumes, weather. performance from enabled QX EBIT first operating despite lower propane butane over that our and drying

I’ll on to like the on Ted Ted? turn over point but initiatives, it to financial strategic at I’d comment review. return to later this call our for the

Ted Jastrzebski

John. Thanks,

mentioned, EPS of $X.XX, delivered adjusted a results. we XX% fiscal XXXX John increase As versus

significant a the two completion EBIT excellence start delivered focus their million million reportable was our busy compared strong Our of and returned fourth fiscal to segment’s to the last $XXX quarter transactions, After a operational teams $XXX on year. year. with

adjusted fiscal per This table out share fiscal earnings lays XXXX. XXXX to for our compared GAAP and

a a $X.XX $X.XX impact fiscal year, XXXX. see, a in we the hedging derivative loss instruments $X.XX changes $X.XX Last gain had of As of this number you loss as a adjusted the exclude our compared to such instruments, of of year a in quarter loss currency on foreign can year. items commodity of first mark-to-market earnings this versus

business and in of momentarily. associated we quarter, we transformation Lastly, last you see LPG can update initiatives adjusted out that $X.XX discussed with detail we’ll our expenses

our the reiterate AmeriGas of Before to impacts I get year-on-year take the bridge. the the how into seasonality numbers, business to a on wanted moment I earnings.

the quarters compared performance the shifts company’s to over performance AmeriGas historical with QX in then As half to lower quarters. the earnings first only two from first balanced XX%, earn XXX% buy-in half. timing second now than a of This earnings in is historically. outsized the roughly the We of expect presentation, in you the recall the our

to the slide. Returning Okay.

year. base start versus adjusted to incremental but in XXXX. off compared our a AmeriGas warm are improvement. recent International rates full at attributable new margin August. the that the merger fiscal increase biggest AmeriGas $X.XX UGI drivers margin a at year, the management improvement was results of our largely We from $X.XX was the faced quarter Appalachia, of from were We CMG, UGI good AmeriGas benefited at year of delivered Utility the $X.XX, merger consolidation last fiscal weather to the year-over-year investments. conditions We first now last The to in The and EPS following completed of

the adjustments, One to from offset our merger in tax we last were added year both AmeriGas by increased the at In the corporate. benefited that quarter, France tax final complete point, debt as primarily we largely acquisition. higher rates onetime and interest expense versus CMG

year, AmeriGas were the normal, critical in flat to The the the to by which of higher up and largely is versus was December. as cold year down was lower warmer million, but weather of margins. roughly quarter. last prior offset start, result, AmeriGas were as warmed year. than $XXX the versus unit a Turning off volumes reported versus margin month a got X% December also Total slightly business. quarter EBIT volumes last flat

gain call, to million, increased year a higher versus about increased result OpEx the of period real underway and prior due businesses. our of lease spoke $X principally Roger expenses and vehicle last the business excess estate. sale on initiatives at our the insurance transformation general income On LPG other the

permanent the AmeriGas reminder, LPG XXXX. that the expect first realized related AmeriGas We end of of a expenses, business. out the $X.XX to comes $XXX operational we earnings be by million to quarter As identified from this to called a business expense majority efficiencies the transformation in over adjustment of fiscal

benefited in UGI roughly $XXX results and energy recovery from of certificates. to increase conservation face margin with International period, total margin million an team driven strong year volumes compared management. another prices weather. margin prior propane in XXXX. Total focus lower crop the delivered that strong was associated significantly costs of year The the effective of in EBIT of fiscal warmer-than-normal drying achieved $XX XX% on The were large million by than

to challenging of Additionally, manage the OpEx the improvement compared conditions. the point international year also outside should expenses prior out weaker and period. maintenance the was in effects that this I but translation lower continued team to by service the euro, supported

we out in significance the due hedging other Lastly, income broke FX to gains quarter. its from realized

to AmeriGas, the also drive international an making Like team operational the in investment business efficiency. is

savings. over We €XX expect these million annual efforts generate permanent to of

the deliver AmeriGas it’s in UGI on both process, Although out the on last to our efficiencies laid time and are early International call. pace in the frame operational

of income, the of side Marketing the gas and Appalachia, last and Midstream depreciation reported in administrative EBIT impact reflect and to year. driver million in quarter natural Total compared QX expenses, all of main the was $XX house, the of UGI CMG, and or improvement. the year-over-year margin, to the operating $XX Turning million the amortization other acquisition.

but weather. quarter as benefited a Capacity expansion in much our online to but low was largely very also enforce not the the pipeline during meaningfully expect in impact Pipeline extent. of restrictions remain November, lesser we pipeline volatile values from earnings warm management did coming to quarter, weather. prices due to operators Auburn in margin periods We IV them lower and depressed, capacity still

lower due our decreased Hunlock facility margin volumes. to generation Lastly, electric at

million period. effective as reported weather Utilities was increased in to XX. compared prior rates, increased the margin UGI slight decrease Total market EBIT of offset despite by $XX in million $XX million warm base a core year October volumes $XX

large We also higher margin saw delivery service interruptible and customers. firm from

versus lower see, can process systems OpEx and the decreased collections capabilities million compensation period year increased you and and and As to prior benefits $X due expenses.

due system IT expense distribution depreciation activity. quarter to prior versus year our expenditure continued capital increased Lastly, the and

natural to I’ll turn the on that, and for Appalachia over call our UGI update gas an Bob priorities. business Bob? With

Rob Beard

Great. Thanks, Ted.

at to best our safety and we across Midstream practices. both Utility businesses Our efficiencies in to everything both emphasize focus And we and as always, identify do. to continue opportunities companies, gas seeing by and Marketing growth on drive our natural opportunities sharing businesses continue are we we

At of energy that operating which UGI what Columbia pleased throughput gains, Group. Appalachia. Midstream us of from control was these contracts solid driven assets the of encouraged performance quality in Performance services, about now team the QX. remain by is helped and very joined expenses. primarily was we’re This growth potential the efficiency I with

drive is growth production the and are gas Marcellus the While lower Utica. warmer-than-normal natural natural forecast helping in gas the from temperatures prices, for continued

of million growth million Having and years. five level we on work six and owned When CMG, these we $XXX to of and UGI expansion to for announced would the months, with capital potential growth we indicated next to our spend opportunities. assets identify over acquisition approximately likely, the $XXX continue is existing believe between continue we projects this customers

Of XX% example Our remains basins. day. midstream Pennsylvania of opportunities strong just X, and service into activities IV project, northeastern is placed well. continues The in Auburn in system Utica Marcellus throughput XXX,XXX to growth energy which November by over per we the note, find on build-out our how and services increased or system as of Auburn the our dekatherms one of the central

in power filed On parcels Act hold declaratory is with including to to properly the of project. to its order holders. important information interest an PennEast PennEast face against that grant Also, the when PennEast this states on request construction Gas February. Court U.S. January which with January in a to later gives issued FERC of FERC for XX, for the view believes the PennEast’s agreeing PennEast cert certificate XX, the petition Supreme filed consider authority Natural condemnation,

not received interest construction market to in the have phased legal delays, has PennEast While and for overall Pennsylvania. has start delays, declined, on and primarily the project. New the these In a initial commitments demand for of project, in with overall project points Jersey, regulatory delayed delivery response significant

If phase that two intends – approved XXXX. in new would approved, to completed the me, November to supply which addition this connect points with in pipeline, project online In initially in recently XXXX planned Gateway to the of of were Pennsylvania. Utilities pipeline, first southeastern Columbia PennEast to delivery the estimated to Adelphia balance excuse with UGI come provides be

IT request Utility filed Utilities to perform the record by our to in natural business $X increase despite by upgrade systems. is to increase is Public Utilities our normal. approximately gas driven Utilities next rate five UGI systems over a of expects billion Commission nearly weather capital, Pennsylvania rates continued million. This the X.X% $XX than was QX well piping spend years, Our recently enhance Utility warmer with level that the requested and deploying. and to expand

carbon programs on infrastructure have Our upgrade impact emissions. significant

approximately reduced expect fuel for emissions XX as use strong, an equivalent remains XXXX, XX% utilities XX% since the Growth and electric from see a conversions reduction remains years. COX vehicle levels robust gas have further industrial to and fuel. processes in over next of and current generation, we been the at natural increasing we by from oil gas interest natural Our

added Over customers come growth majority XX%. choose for provide has the new to with nearly last conversions, each XXX,XXX of emissions carbon our by XX and Utility years, this reduce customer as customers has customers. These natural replace fuel almost oil. converted conversions The from meaningful savings gas heating

the meaningful as we’re performance and growth pleased for gas opportunities, strong. very natural summary, both see in with demand So businesses of gas natural remains

to turn John. it I’ll that, And with back

John Walsh

areas crucial several first was long-term in now noteworthy Thanks, Bob. respects. strategic developments From key success. highlight perspective, a are that the our in like I’d to to quarter

see viable supply focus to demand. their continue for LNG meet LDCs on gas as peak natural demand to peaking significant We options accessing

and Our Pennsylvania project storage schedule, we and later latest bring vaporization that online expect unit in year. remains this to on Bethlehem,

units, seen short-term supply address interest can construction activities. pipeline also LNG supply challenges significant created utilized we’ve in In systems, by our large to to or to which addition portable constraints due shortfalls be permanent

a Our the is The area element active strategy earlier the southwest and on I the in our call. of referenced UGI Marketing remains addition Marcellus, in the strength Marcellus to northeast an UGI. critical for network activities Midstream that in LNG Appalachia midstream and team of

a noted, As Auburn project on IV take-or-pay supported our was in by service November placed expansion XX-year X, commitment. Bob

remain his project. Bob As focused PennEast remarks, noted we in our on

plan. Our the execution partnership will of development continue to with two-phased pursue PennEast a

additions in in the is continued and LNG LPG of interest existing project. a portfolio, natural encouraged this includes PennEast, investment growth expansion, addition company. systems, of development project PennEast the This the portfolio bio our to gas and We’re investment initial on for capacity by opportunities in noteworthy Utilities renewable continued strong at projects. our

the and The important level the at state significant and is critically transformation at programs diversity our of underway UGI portfolio policy in energy International. QX federal We made on as progress evolve. AmeriGas

full fiscal XXXX. initiatives end of cases, last In efficiencies by Perreault €XX the Roger million these we’ll realize to on call, AmeriGas, are As efficiencies noted of operational quarter’s in permanent million and both expected permanent yield in $XXX International. the benefits UGI of

commitments programs We continue to these be our achieve savings efficiency and initiatives. on track with for expect related to to these XXXX fiscal key

just As in our Bob coming noted, request rate we for filed January, PUC latest total case We late working for utility of rate our all in the to months. look constituents a million. and the the $XX under forward gas with

X. will conclude rates that this hopeful or early and will go the process effect into new by We’re about October fall, on

continued normal earnings In that the in on we pipeline quarter was Europe values Given in and quarter. U.S. is comment most in temperatures December capacity eastern I QX significant higher I dampened over of through saw weather with year, in January, the supply XX% the and The December that our plentiful consistent the challenges experience. to short, in also Weather thought January. January. date should in the weather warmer than

company, we QX, provide that and As take growth. the great underway short-term long-term transformation every for weather. for programs to the did us strategic look in opportunity the The offset help described actions a investments impact future we’ll in critical of with to I’ve foundation challenging the

the about excited for the We’re ahead opportunities company. lie that

Kenzie, turn will open over call I’ll your it back that, for questions. up With the to who

Operator

of comes Thank Shneur ahead. from Gershuni go Please first the Investment]. question you. [Operator Instructions] [UBS line Our

Your line is open.

Shneur Gershuni

everyone. morning, good Hi,

John Walsh

morning. Good

Shneur Gershuni

last the to remarks. prepared just start with off on your comment Maybe, literally

comments how quarter, that this year? extend guidance January offset during offset of margin you of with it’s weather you and this can quarter, bigger able sort are? last that it. of and as the makes enough you that about successfully we of the comfortable any this sort it fact still to to the for bulk Just weather were Are think your a range achieved quarter. the for partially up where Given you you quarter feel Do

John Walsh

Sure.

no the exception, days that March winter February the as we the well. revisit is are As this quarter of the when but basically you second at the for be degree of season kind will year typically, over. is and January – know, the end significant, and material year,

we and that. comment yes, terms So guidance winter of would end any in on normal don’t have at stick to comment least, our season just until of to the waiting, the practice of

Shneur Gershuni

the what opportunity falling rig of is you of some respect the of really capital capital And facilities producers you’d further of When we that question enough. to are follow-up is to opportunities counts I still the CapEx you defer kind fair about – growth their spends, intended Okay, it about capital of talked deleveraging? and you and the forth, so provided with all to for existing Is it? and spend sort towards then if the my or forth? Dip] redirect CapEx see sort kind slowing capital. see [Audio connection was update so wondering And some to just of is buybacks that an actually assets. there

John Walsh

Yes. Sure.

As still underway, the customers we’re of systems. at to today, existing meaningful and or we all essentially look our about time, talking discussions we expansion have it producers

and as already in that’s an at is best infrastructure. developed has in each producer supported every capital own many and gathering in by acreage trimming optimizing but the almost position, is their in option unique their – been capital they as So, case, expansion instances, look spend, spend and existing their

time investment a on lot expansions at expansion provide production our a more require So, which attractive be part. with opportunities which capital existing at production incremental their efficient most of what we’re an where systems, opportunity, looking some doing other the to producer is very the can

be will bring the spend we’ve – market, our producers’ and discussions going levels path the determined they product around to where of lower had, decisions the that’s the timing be prices. the to encouraged but production commodity we’re nature. the to So and end by our Clearly, even we’re that with want in their by

we’re but fundamentally as capital closely our plans on levels. our haven’t working spend, levels, production changed around that, we’re obviously, going finalize outlook and their they and with we CapEx customers be So, to monitor spend capital going to

Shneur Gershuni

a to bit. little Just paraphrase

capital plans So what by the saying spend the will growth basically your be you’re are of driven customers.

what the leverage pace, What’s consider you with end down if priority? deferring do do CapEx? you up buybacks? reduction? they you – Is So consider Do their slowing or do the it saved

John Walsh

Corp. look some those sure. but UGI debt look particularly for incremental we Sure, the that it’s for We transactions as look important as here, deploy. the were last consider alternatives us, all the – we’ll down two of in other could but AmeriGas, of investments terms quarters alternatives. those paying at prioritization paying new well, available of Certainly, several all and We’ll talked executed, being emerge. about we in down debt. to across at cash We’ll the

remain So, year. our the full bumped significantly last range year, obviously last of dividends you and saw we opportunities

at with look we’ll that cash and to Board the deploy in the is most the – discussions any we end available effective and way full So, possible. incremental see range in what

Shneur Gershuni

Perfect. I you thank will in queue. jump right. back and Well, All the much very

John Walsh

Thanks, Great. Shneur.

Operator

from from Barclays. Christine the question line next Our Cho comes of

Your line go is Please open. ahead.

Christine Cho

everyone. morning, Good

John Walsh

morning. Good

Christine Cho

we it expect with I in of on you continue to lower? the could just through color LPG provide this can the some costs the start should how what more drove If And year? International, lower remainder

John Walsh

last in But market over the in become that commodity happening costs especially benefits of the a global butane, generally, and in what’s with been and levels seeing the considerably propane and U.S., is that you on and Europe. forecast. and internationally, pretty Europe increased provide focused production we’re propane we’re has dropping for can’t resulted fluid, much have both specifically particularly the and of more I now commodity the because butane year, Yes.

can we’ve in helped as outlook, seen which current solid And the remains see drop a the of future far has So, margins. our terms pretty as attractive. in strip, it enhanced we costs, and

quite it’s change, can of levels a with positive demand but LPG storage Now pretty And LPG weather, is that less, high, are demand. – because weather-sensitive warmer outlook. obviously,

more in a positive move a as probably global produced at to the we availability – unexpectedly. liquid earlier, costs distributor, I if distribution a last opposite we’re for It’s primarily and And if in a the least over short-term from direction and environment the market. very it’s costs the as due on that’s or as five again, as has Europe to low, noted indicator, butane company, of healthy that. but supply Europe benefited move impact So ready years, huge to company, a we propane become remaining had But the the much need U.S. a on

Christine Cho

propane some Well, like Saudi that and the September, like with supply were Europe brought offline. at butane Did global outage of in impact all?

John Walsh

you or for There minimal two. mean, impact. probably a almost I was day No. very noticed it a

with example from be I think because on Europe used the changed. east and from lot a great coming product how that’s interruptions, some Europe the a has market to supply dependent volatile the of Gulf. more more was

some of Now, you’ve addition U.S., from to got in from the options. supply west, other product these the coming

that So, Europe there seven a terms supply. in or resiliency years of now five in there’s ago wasn’t

Christine Cho

if you’re XX% project cost Okay. a ROE earning capital think debt split just we to And we PennEast you about on the Should the on Phase I two? now and How think equity that full like in then capitalization. do XX-XX assume that here One. One the the Phase economics could move

John Walsh

Obviously, think that We’ll that. and we’ll assumption, you make at the we the of forward. of advise level, a you I filing to the fundamental progress with progress kind assumption. make could economics high changed FERC. move made We’ve can as materially. project we’re haven’t that – But just going that

Christine Cho

you. Okay, great. Thank

Operator

to John back remarks. for at are the I’ll There Walsh further no time. turn questions this closing call

John Walsh

for call. our and with to We on time you quarter Okay. to second Thank updated you attention look progress care. this morning. keeping on again forward speaking and Take your you our

Operator

Thank you today’s concludes your conference call. participation. This for

You may now disconnect.

UGI (UGI) 6 Feb 202020 Q1 Earnings call transcript