UGI - Earnings call transcript Q2 2020

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Operator

Good morning. Ladies and gentlemen, thank you for standing by. My name is Simon and I will be your conference operator today. At this time, I would like to welcome everyone, to the UGI Corporation Second Quarter, Full Year 2020 Earnings Call and Webcast. And after the speakers’ presentation, there will be a question-and-answer session. you. Thank Instructions] [Operator Ms. Investor of Relations. Manager Zahora,

your You may begin conference.

Alanna Zahora

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

risks comments significantly, only. believes and uncertainties Before reasonable to our and that we our as begin, because Actual forward-looking could to certain of read affect an on, factors remind me list include let date extensive results our Form be differ may statements, of that today's difficult of Please are you, today which report that for annual management results. XX-K predict. release earnings

to We'll or from GAAP on measures. the We of are different measures describe that also Reconciliations reflect to available events certain assume to of forward-looking no duty non-GAAP expectations. circumstances comparable are business update our our using or measures financial presentation. XX these statements slide revise

Now the call John. to let me turn over

John Walsh

Thanks, call. that, results. XXXX safe for I reporting you've a our quarter welcome release the And no morning. is opportunity UGI. hope to FY hope had I press our Alanna. well this all to and second you're QX review quarter and of There doubt Good morning was that, memorable

COVID-XX our industry and challenged and the our onset company of pandemic. First by foremost, our world the were

posting and best addressed unprecedented in a the EPS European of our second into faced of largest we December Despite quarters impact one our the the the performance we quarter. history. in these carried addition, adjusted history general weather second and In commenced quarter strong France delivered strike the warmest a which in QX market our challenges, in in

in activities performance. On Roger executed Beard today's it critical call, Ted, to with an UGI's who over comment I'll financial will Bob of turn overview business you Perreault, will and initiatives key QX. several provide in the highlight Then on quarter. I'll

key end of and Ted balance will summarizing the details cash our elements to on the fiscal of our expectations the financials, of and provide In addition at flow our quarter position XXXX. QX liquidity for

always and foundation flow element strategy. now I'll with balance a been a provides important That initiatives. strength with Cash continued our strategic us is then focus sheet growth and crucially an great and on of Ted, for follow update investment. our have key

QX Turning above GAAP X% $X.XX. adjusted $X.XX. and financial EPS adjusted $X.XX QX of XXXX our our our to performance, EPS adjusted was our EPS QX EPS fiscal That was was

adjusted earlier only EPS noted XXXX. QX trailing I fiscal As this in the best QX UGI's second of history is

fiscal by the LPG adjusted year-to-date EPS over costs of initiatives weather year-to-date with cover our fiscal fiscal XXXX later. $X.XX hedges our We're for valuation adjusted transformation performance the the Both exceeds pleased, major entire and our XXXX items that, of associated our Ted been XXXX adjusted will other quarters, with basis On a XX%. of and strong unsettled have across warm business. the really given EPS challenge mark-to-market

guidance to some like on details updated provide our UGI's address response I Before COVID-XX. I'd to

significant potentially issue February see global in and markets to to developments in began European on, a operate. impact we focus we began several as where as We COVID-XX followed the

the address regular initiated pandemic operational to business team senior sessions, associated risks all critical safety planning and Our COVID-XX with geographies. across

our for over our our X,XXX over launched safe plan work-from-home global employees we million basis three million for members safety drive practices essential customers of services our and and provide to Our those of office-based to we had customers. from our By conclusion the field-based the continuity X,XXX second outset of revised teams our been customers. primary areas, critical and the a team of and on week focus March, work have operations of the in three

our on COVID-XX-related of impact the impact not material. results QX some see did we closures March, was While customer in

We impacted and for customers these months. reopening the to continue reopen in weeks several have seen few some expect activities commercial past

COVID-XX work months, by likely upon we're phased and the three largely And last that local in to We mode developing of employees to remain provided today. depending is our from authorities guidance customers. specific location six a our return-to-work and safety with phasing plan

of to taken we for the the focused actions addition, safety understanding customers to and the communities team, been on we've serve. In address our our also on impact COVID-XX,

to As those urgent of need the broad pandemic. of key a the services we for recognize impacted essential provider a range by services

needs area particular of temporary food see housing. educational in and the continuity security We

programs who school For educational closures as month to with we've of seeing on neighbors past of and agencies, social and our that surge reasons, announced a services unemployment impact a struggle strain demand a donations services. the are in available food the rising emergency economic banks series in

Together local employees and and have our the more banks support our in our communities. $XXX,XXX directors company agencies food than contributed other to

normal challenges the an in work our new While have have been operating significant this teams outstanding environment. job, done

days customer XX and been safety has past over the performance, service Our outstanding.

demand our but be in the surge We've seen potentially impacted outlook to such expect we pandemic do by bus a the year. overall the certain during and as demand will fleets And more his of through provide far have thus The detail Ted declined. fiscal has school other impact remarks. end seen has demand where on hotels areas. restaurants muted categories in been

key if helpful on, in would commented and it their business thought Rob? Rob Perreault be undertaken within activities of Beard QX. Robert I lines

Rob Beard

John. Thanks,

in QX, by Our brought headwind the the natural considering was And the on weather that XX% well especially warmer than normal. challenges of performed businesses outbreak. COVID-XX gas

UGI thus impact industry associated margins. have volumes seen is and effect the little unclear far on, Services full While of on virus the Energy COVID both Utilities and our somewhat

and that the QX, exceeded the both expectations of underlying strong. remain Stripping Energy out effect businesses quite in demonstrating Services Utilities weather,

placed the March, Pennsylvania service a of result a Commission As moratorium COVID in on the terminations. Public Utility outbreak,

related Because around Utilities for of and to COVID industry a closely to behavior we costs. effects ordinary of customer payments. investigating there's COVID outbreak, anything continues the regulatory of collectible the and peers Through UGI late April uncertainty seen our have team payment of the balances. special Our monitor are not possibility degree out relative seeking the treatment

our to regulators We about as situation. continue with unprecedented work we learn this will more together collaboratively

COVID we the of primary our the focus our safety As of remains customers. and our employees navigate outbreak, on

work very remains Our exceptional critical met possible. done job, companies are ensuring teams have energy areas that our they these at both continue continues an service key in not ensure have of proud all natural customer metrics and being work the the Performance of our gas safest as and critical customers strong. in to be I teams needs our to safety degraded. way

facility report that we pleased suspended of as construction With to an have construction. I'm abundance of restarted May caution X. we non-emergency in late March, all activities

We general our have employees, customers we as established our work. strict and the protocols execute safe to keep public

majority execute of annual to $XXX our is program Utilities. plan capital million at Our the

rates working As to I Public expects gas during the increase to Pennsylvania progressing at capital four all remotely. natural the the million. a appreciate increase they Utility building amount our next contend approximately mentioned by This call challenges with request a significant in of spend last Utilities Commission primarily are is rate we is with $XX rate UGI the January, Utilities by the we XX.X%. and of billion filed driven over $X CAGR efforts The of deploying. process parties years, as of case rate base

prices Appalachia Columbia to than gas warmer weather QX, that Finally, formerly was normal Midstream Group. I much Despite wanted UGI on well. very to low update UGI Appalachia provide perform natural in and an continues

We we brought production additional margins to outpace and building see is to our continue case these market. to out investment committed remain systems as

to Roger. it turn over that will With I

Roger Perreault

on Thanks, our There the strategic Bob. quarter is us doubt initiatives. and important strengths on our provided little has some that insights second with

realized Let million that an that that you an previously will will me of begin $XXX $XXX fiscal in XXXX. $XX will year over on million months, giving at our We of transformation provide permanent by AmeriGas. an announced exceed investment million update which initiative XX included program benefits be

COVID-XX and that QX, pleased as if are need efficiencies the enabled validated the to processes need technology processes to a working driving environment adapt didn't amplified deploy quickly of a to new redesign and component customer processes. better possible. anything, direction any experience. need the and to Digitized we continue the are say both a COVID-XX for resources The as of protocols key lose strategic momentum. in And We business way during to

essential and reliably safely like would propane our for and emphasize has top delivering introduced pandemic, to that an customers priority. will is service our been our and I the products despite by challenges remain

work on processes operating the efforts reengineering instrumental Our during been team COVID-XX have the in with environment. center-led

to fully our implemented, desired were able IT teams is our adjust. not platform While

customer we we As forward learnings from the processes, efficient streamline and COVID-XX path the our shape to improve tools we seek to will develop to be more our our use experience. as experience continue to

a to with to We team's a the at working customers new of serve time. ability pleased adapt our and resourcefulness such quickly way and critical are very

we More specifically did U.S.-based volumes segments out. business of some decrease see impacted. rolled while were business-to-business our and negatively lockdowns autogas March, During were COVID-related

the home volumes cylinder service also the residential of the business delivery offset record by service took newly activity launched as our was where in Some in and volumes exchange increased Cynch cylinder place. decrease is our saw level shutdowns cities available.

few LPG about business. a words distribution our Now international

by QX. in stringent more significantly impacted affected measures, than European European lockdown commercial segments the Our governments several here weeks earlier in place were put our COVID-XX in activities which U.S.

will look forward unfold. restrictions and the now see we to are how We some starting being lifted recovery seeing to

and pandemic we a Our U.S. very deal also how provided on adjust of to COVID-XX great here the could European teams operations insight in the were responsive

second million experienced XXXX still of fiscal our has international and am end driving and efficiencies year €XX of the report also pleased are at on €X savings over focused the that quarter. been year with fiscal of As in these the €XX beginning XXXX. million investments slowdown will deliver to in no mentioned million track year by on XXXX, is I of fiscal team objectives

second our look is ramping we businesses. know across international potentially for from we demonstrated the that will we closing, activities and what confidence based me like during U.S. lockdowns coming our now months our we're In as what quarter precisely What gives up low well-positioned in don't exit the season.

customers on Safety we will employees We focused priority to continue controllable. our and our efforts. controlling top remain execute our while the remains transformation for

Driving As enhancing plans customer digital transformation journey deliver second provided value. insights quarter action excellent mentioned our the earlier, efficiencies on validated and efforts. while our shareholder will our

over I to Now pass back will call John. the

John Walsh

best $X.XX pre-COVID it's our guidance, without EPS Thanks adjusted to that guidance impact the balance feel provide Roger. We're updating we to to range and over of the year. estimated $X.XX. respect with of of to guidance COVID-XX an With our

is the balance reduced be impact year. to by due $X.XX sector the The commercial and range that the hotel of to over exact to volume approximately determine impact COVID-XX will the $X.XX most duration of While still difficulty estimate our transportation the forecasting we restaurant at will of this customers. impact significant fully the in in categories. this time, and for challenge reduce the volumes primary recovery a with impacted providing We're timing commercial in reductions a EPS

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

Ted Jastrzebski

John. Thanks,

spend I talking liquidity quarterly get results, position. into wanted we Before our to a moment about

maintain the Our us always been philosophy strong serves to especially a approach challenges of and has we well sheet this COVID-XX as situation. the balance anticipate

of consolidated basis, XX. across units. well billion UGI available March all liquidity $X.X a the as our financing Corporation important, capacity Equally On in is of had distributed business

covenants and comfortably maturity remain are long-term and our maturities so XXXX. until to debt debt there are within -- significant no We expect

working generation, cash we capital our quarters earnings, and for Like season. requirements are during the consume heating the inventory second seasonal. as first capital build We and working

and The generation. capital working low requirements cash higher quarters have fourth tend to third and

we're Well when we're period the timing cash. from generating perspective, a entering

capacity incremental and to CMG Additionally, now we're named and the cash due commodity greater UGI from two first quarters cash of prices generated our historically low Appalachia. benefiting AmeriGas the in entering acquisition our the period through the the with generation merger assets we're

these challenges. our us confident address leave COVID-XX factors to Altogether, liquidity ability with any

As some the has eliminated mentioned, capital our of impacted that. of COVID-XX timing expenditures not

flow cash fiscal year the year. some fiscal and in on the We supports year. delay expect up on of still others this projects to next in timing execute The current free catch

honor quarterly per $X.XX to economic to is Lastly, our during strong we we're announce challenging consecutive commitment XXrd these increased This maintain that we've proud increased to conditions. liquidity, our the and annual year our dividend proud shareholders dividend. to that share. We're

XX.X We delivered of EPS Please prior fiscal $X.XX EPS issued the $X.XX in for the AmeriGas reflect million year period. the with to our XXXX that results. merger. figures incremental note an shares in versus Turning adjusted conjunction

reportable million Our EBIT $XXX to segment's was last compared $XXX million, year.

fourth face partially Our results by the quarter from third experienced cylinder expect spike not offset by commercial second quarter. the the but in quarter but international pandemic, customers and volume experienced to loss the do were this at some we impacted was we in business If we some AmeriGas. at the significantly sales headwinds COVID-XX look

to LPG a the COVID natural businesses were $X.XX $X.XX in to total, had COVID. materially businesses In impacted the second not headwind The gas by related quarter.

any Bob have payment continue but to closely. seen not atypical we As behavior highlighted, utility monitor from this customers

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

As number of of a in quarter of exclude adjusted earnings year impact XXXX. a commodity mark-to-market second items of fiscal a as you our this changes the loss can instruments see, in $X.XX versus $X.XX such hedging loss of the

to derivative we foreign on year, had a gain Last instruments currency compared $X.XX year. a this $X.XX gain

adjusted we out of can our expenses $X.XX you business Lastly, associated with LPG initiatives. transformation see

wanted take detail into tax shifts to one are that the moment offset regarding too the taking a strategy, CARES place. significant I to anticipated of few and tax a but get Act our usually These attributes, foreign We another. don't treatment largely relate which emerging address to much

result were benefit a of offset us we're year. CARES Act. $XX As tax the million reserves foreign reflect by expected we CARES of full tax currently of finish audits closure from prior anticipated. under release tax operating with is related resulting the projecting to the benefit benefit allow where leverage the credits weather-related coupled which period carry-back year-to-date, $X will to the a attributes, extent net of benefit to tax fiscal net a the to underperformance, loss largely unable This to tax million losses we

We XX% weather our was natural in gas approximately in businesses faced particularly where normal. our historically conditions quarter, warm than weather second warmer

XX% approximately than and the than business LPG headwinds nearly Our AmeriGas warmer warmer businesses as weather similar XX% weather warm was faced international normal, another quarter experienced had that normal. of

$X.XX, The management from of our delivered year-over-year improvement year. the fiscal EPS and quarter expense Appalachia, AmeriGas adjusted second at incremental biggest the Utility the merger, we drivers of XX% new rates Regardless, versus last margin UGI a base improvement. were

quarter. of Turning unit weather million margin by the a versus was a offsetting AmeriGas XXXX. reducing $XX retail to team operating the Total business. volumes AmeriGas by lower and administrative and of nice margin in sold driven weather the associated some average loss predominantly decreased QX by $XX margins. job did Again, headwind The lower with warm major million, expense of

at the call, underway spoke last business Roger initiatives our On about transformation our businesses. LPG

we identified AmeriGas of by mentioned, permanent operational to the just $XXX expect fiscal Roger that be end realized As million efficiencies XXXX. over of

in expenses. this called quarter transformation We out second related business the a $X.XX the LPG majority of adjustment from expense to business. The earnings comes to AmeriGas

seeing efforts from two over the $XX across are We now businesses LPG million. these benefits of

of the margins than that prior is to International only X% strong and higher very warmer result QX UGI expense fell EBIT million LPG a EBIT in This in was of XX% XXXX, $XXX result quarter. effective $XXX of UGI X% a XXXX. largely compared million International's achieved weather management. Despite warm the than versus normal fiscal warmer and year, unit

related XX% volume all contract that which loss in weather. quarter in the should reduction point Italy, the low-margin is a the We of terminated autogas to volume out year-over-year. for accounted I roughly not

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

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

management refund margin peaking our from higher warm low, and rates. Auburn remains and received prices first expansion our pipeline in $X connection contract to We in online coming also Capacity with weather. low due million IV margin benefited a quarter,

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

margin quarter's million in Total UGI decrease impact million The rate by reported core did that in to to despite in increased from XX. a offset a period. decrease this Utilities also margin compared historically October EBIT resulting the by million flat QX weather partially results. of the warm was of tax offset volumes savings market $XXX not payers of effective $XXX rates as was XXXX base prior roughly credit was $XX.X year XX% TCJA in

decreases and in expenses OpEx quarter, the contractor to allocated lower in corporate was due expenses. mostly

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

over I'll John. turn back With the John? call to that,

John Walsh

Thanks, Ted.

While XXXX very One we're and all highly past during during successfully the focused on fulfill continuing critical fiscal the development now significant to want forward to of pandemic, obligations I our look turn quarter to has Midstream been production UGI's beyond. the in production the oil that associated prices and will declines. to occur gas of significant due as This to production the dramatic that relevant activities. fall impact natural on business, in particularly is drop reduction oil to

of have production Southwest new impact for seen the on to upward as past production strip that the and over believe a natural upward the Northeast will gas We already the on the of oil the in movement both the normal market adjusted pricing nat month. activity positive gas future We've for regions movement Marcellus.

Marcellus. assets to acreage UGI's provide across the We are to improving well-positioned an gathering some our proliferate most can of access serve of that networks serve producer increased the existing efficiently base. in market through ready production expansion

Appalachia, One in production Columbia Last year's positions now well regions to acquisition increased the Southwest serve of us is see Midstream the that to is known activity. of Marcellus. an the activity assets, as likely UGI increase

since Bob, As with Ted our we're very acquisition. assets the noted performance the of and pleased earlier Appalachia UGI

that total market shipped The to strength producers route low prior systems be systems our shipper first our prices during serve. period fiscal six a for those on levels. a five confidence we us the of the volumes commodity of XXXX Over with from volume year of preferred months XX% significant provides will increased

the benefit sector. in significant Northeast the underway gas the Marcellus natural in systems will changes Our from also

-- most dry the Marcellus. fiscal as system in of serves over Auburn XXXX shipments our over on first grew months the six Producer most the came expansion some onstream. system Auburn gas of productive by the IV Our acreage XX% Auburn

As contractual Marcellus arrangements. take-or-pay we've UGI the previously the from our is noted, majority derived systems in long-term margin from fees under of

This LNG regional and to Marketing of respond demand $XX demand, our team million rising LDCs vaporization Pennsylvania. our demand on LNG storage new will end well resulting Midstream position add we're out rapidly near from to and the Our In Bethlehem, ability build as storage We growing market of LNG conditions. It LNG continues meet delays. for enhance constraints and network. project supply facility our services response LNG its to see to million dynamically rising for gallons X use users peaking based our system to that assets will construction network. pipeline asset and in our along supply to strengthen the

As our commitments gained making our changed number these from a the plans savings U.S. to field programs we of will months to laid in the and and we're Roger pandemic. response LPG normalized track progress the excellent office-based cases, In that or as work X indicated, our many of on We've cost remain initiatives. new resume We X as for XXXX from in new our working ways fiscal months out insights meet transformation exceed operation. and into we on past activities the Europe. incorporate over also we of these we'll

strength flow investments, position flow remarks. or his performance-related we'll and free strong been pay of fund and and it a during our year be has liquidity. the in another final a XXXX strength becomes great sheet economic will point and particularly growth Fiscal balance stress I'd cash strengthen highlight our the of our fiscal company our dividends. capital our XXXX year flow performance like enter cash to of very noted, for This One Ted market during cash core uncertainty. periods relevant to is long

UGI's was recent past annual Ted rate this XXrd flow Speaking five X%. the increase confidence just mentioned of years that compound in increase dividends, with our consecutive growth reflected decision under most the the the dividend in Board's our year April for was cash to over for our in dividend

was believe U.S. of look UGI's clear it opportunities the demonstration a While businesses. quarters our in very performance that positive and energy QX for emerge economy proceeds another major change. We a strength respects, the period quarter resiliency challenging quarter was sector the of UGI. I numerous also was the and coming to seizing through very forward this of as will in the

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

Operator

And a Thank UBS. we have Instructions] Gershuni Shneur of you. question line [Operator the with from

Your line is open.

Aga Zmigrodzka

behalf. the gas customers at Shneur's could your Good will morning. more the for This XXXX producers? strip? capitalize Could provide accelerate prices discussions updates Appalachia. your is potentially UGI color please on with and Aga you current Thank natural latest Are remain Zmigrodzka on you activity in if on

John Walsh

in recent assessing Thanks, is of in their the producers. capital Yes active every impact own process Aga. we're Sure. Obviously, plans. movements with of discussion the deployment on the producer most

certain important is I us think systems. the we have available factor for on capacity

accommodate flow efficient their we flow capital is systems their it which to minimal most their increasing additional to market. our incremental on increasing onward immediately for these with So represents and attractive investment producers, can acreage in from or cases really many part, production certainly option for some of or

kind movement last really of had So I with looking flows of in say we're over active. some the terms growth are systems. positive happy our quite over the the continued the at in six month. months we the movement, experience particularly and discussions And in the the of would They're first

characterize discussions. is So active dynamic. market I as The would them

in other I has the basins think the those of could accelerate of drilling shutdown nat incremental gas oil the impact on valuations. impact as

for and with they active customers So volumes stay have additional move sure we'll options to fully just we contact the understand make them. in our producer

Aga Zmigrodzka

Perfect.

impact your of discussed end You expected scenarios in will the impact. And leverage the $X.XX to leverage? of at fiscal this some range is included year? assumptions what it How $X.XX COVID-XX

John Walsh

was Ted the reopening as is impact, comment I'll impact basis to COVID of then of in assuming – Obviously, on activities, estimate sort comment well. it a seeing that to the our which and do be moderated – I'll of that use a wanted in Europe. trying seeing of Sure. Aga challenging. What that let experience briefly what Europe a we're and will we're an provide estimate is that we provide

we certainly specific a wanted we be to but it's challenge forecast to could So as be. as

Assuming impacted certainly those would seen investors keep balance subject change. a levels activities this fiscal to faster far pace I'll to With commercial if comment. of Ted we've kind updated, accelerated that normal And example, activities across of in the would thus for the U.S. than return year the that's over we let at Europe. that that's

Ted Jastrzebski

I Good our say we Yes. Aga. there's for timing ratios. guess, I strategy our is about what is would What may morning, how really on managing that change nothing about that that's changed managing and affected. the see leverage

We paying continue over time. debt to expect to down be

flow may example, see investments nothing for increase about anticipated our come had from what we As the we leverage rate slower down the in But than a rates Appalachia previously. bit has at see really little changed cash we prioritization.

We paying expect to time. see down AmeriGas over debt

cash the flows to with that opportunities as our corporate also over have. increase be our to expect continue reduced We time investment debt we see

Aga Zmigrodzka

my taking questions. Thank for you

Operator

to further now remarks. questions And be back to Walsh turn over closing I any will for there at Mr. appears no it this time.

John Walsh

this all Simon and certainly you, you speaking We'll of soon. you Thank and forward Okay. Take to updated to care. you progress look keep as your very again thank for things time all morning.

Operator

conference and call. Ladies today's concludes gentlemen, this

disconnect. You may now

UGI (UGI) 9 May 202020 Q2 Earnings call transcript