Star Group, L.P. Reports Fiscal 2024 Second Quarter Results

Rhea-AI Summary

Star Group, L.P. reported a 9.7% decrease in revenue for the fiscal 2024 Q2 due to lower volume and selling prices. Net income increased by $6.3 million, with Adjusted EBITDA at $96.3 million. The company's net income rose by $5.8 million for the first six months of fiscal 2024 despite a 13.8% revenue decrease.

Positive

• Net income increased by $6.3 million in the fiscal 2024 Q2.

• The company reported an Adjusted EBITDA of $96.3 million for the fiscal 2024 Q2.

• Star Group's net income rose by $5.8 million for the first six months of fiscal 2024.

Negative

• Total revenue decreased by 9.7% for the fiscal 2024 Q2.

• Revenue declined by 13.8% for the first six months of fiscal 2024.

• A 4.0 million gallon decrease in volume sold impacted Adjusted EBITDA for the fiscal 2024 Q2.

Insights

Financial Analyst

Star Group's fiscal 2024 second quarter report shows a complex financial landscape. While total revenue declined by 9.7%, due to a decrease in volume sold and lower selling prices for petroleum products, the company managed to increase its net income by $6.3 million. The key drivers behind this income increase appear to be a favorable change in the fair value of derivative instruments and a decrease in interest expenses. This juxtaposition of declining revenue but increased net income is indicative of effective cost management strategies, such as improved per-gallon margins and expense control, which could be seen as a positive indicator of the company's operational efficiency. The reduction in Adjusted EBITDA is a concern, however, as it suggests that despite higher margins, the company is not necessarily more profitable on an operational basis and investors should be wary of potential ongoing inflationary pressures. The role of weather conditions – a colder period that did not significantly boost delivery volumes – reflects the sensitivity of Star’s business to external factors, which adds an element of unpredictability to future performance.

Energy Market Analyst

The reported reduction in volume sold by Star Group must be contextualized within the broader energy market dynamics. The decrease in selling prices for petroleum products tracks with a global trend of fluctuating oil prices, influenced by geopolitical tensions, supply chain disruptions and shifting energy policies. The decline in wholesale product costs by $0.3775 per gallon is a reflection of these market conditions. The company's strategic acquisitions and measures to contain net customer attrition demonstrate a proactive approach to maintaining market share. However, investors should consider the long-term stability of demand for home heating oil and propane, especially as alternative energy sources become more viable and consumer preferences evolve. The influence of weather patterns on consumption is a recurring risk factor and the increasing unpredictability of weather due to climate change could have a material impact on future sales volumes.

STAMFORD, Conn., May 01, 2024 (GLOBE NEWSWIRE) -- Star Group, L.P. (the “Company” or “Star”) (NYSE:SGU), a home energy distributor and services provider, today announced financial results for its fiscal 2024 second quarter, the three month period ended March 31, 2024.

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023
For the fiscal 2024 second quarter, Star reported a 9.7 percent decrease in total revenue to $666.0 million compared with $737.6 million in the prior-year period, reflecting a decline in volume sold and lower selling prices for petroleum products. The volume of home heating oil and propane sold during the fiscal 2024 second quarter decreased by 4.0 million gallons, or 3.3 percent, to 117.1 million gallons, as the additional volume provided from acquisitions and colder weather was more than offset by the impact of net customer attrition and other factors. Temperatures in Star’s geographic areas of operation for the three months ended March 31, 2024 were 6.9 percent colder than the three months ended March 31, 2023 but 15.2 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. Selling prices decreased largely due to a decline in wholesale product cost of $0.3775 per gallon, or 12.5 percent.

Star’s net income increased by $6.3 million in the quarter, to $68.4 million, as a favorable change in the fair value of derivative instruments of $14.8 million and a $1.2 million decrease in interest expense was only partially offset by a $5.8 million reduction in Adjusted EBITDA and a $3.6 million increase in income tax expense.

The Company reported second quarter Adjusted EBITDA (a non-GAAP measure defined below) of $96.3 million, versus $102.2 million in fiscal 2023, as higher home heating oil and propane per-gallon margins were more than offset by a 4.0 million gallon decrease in the volume of home heating oil and propane sold and a $6.4 million reduction in the Company’s weather hedge benefit compared to the prior year.

“Temperatures in the second quarter were 15.2 percent warmer than normal throughout Star’s footprint. While slightly colder than the same period last year, it was unfortunately not enough to drive higher delivery volumes. However, we were able to mute the impact on adjusted EBITDA, even with a lower weather hedge benefit and some ongoing inflationary pressures, by improving per gallon margins and employing solid expense control,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “As previously noted, we closed on two strategic acquisitions in February on Long Island, and we were able to keep net customer attrition at modest levels during the quarter. We believe we are well prepared for the months ahead and the opportunities summer brings to further invest in our people and business development activity.”

Six Months Ended March 31, 2024 Compared to the Six Months Ended March 31, 2023
For the six months ended March 31, 2024, Star reported a 13.8 percent decrease in total revenue to $1.2 billion compared with $1.4 billion in the prior-year period, reflecting a decrease in total volume sold and a decline in selling prices in response to lower wholesale product costs. The volume of home heating oil and propane sold during the first six months of fiscal 2024 decreased by 13.0 million gallons, or 6.2 percent, to 197.3 million gallons as the additional volume provided from acquisitions was more than offset by slightly warmer temperatures, net customer attrition and other factors. Temperatures in Star’s geographic areas of operation fiscal year-to-date were 0.2 percent warmer than during the prior-year period and 14.7 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Star’s net income increased by $5.8 million for the first six months of fiscal 2024, to $81.4 million, primarily due to a favorable change in the fair value of derivative instruments of $13.4 million and a $2.1 million decrease in interest expense, partially offset by a $5.9 million reduction in Adjusted EBITDA, a $3.3 million higher income tax provision, and a $0.7 million increase in depreciation and amortization expense. 

Year-to-date Adjusted EBITDA decreased by $5.9 million, to $145.4 million, compared to the prior-year period as an increase in home heating oil and propane per-gallon margins and an increase in service and installation profitability was more than offset by the 13.0 million gallon decrease in home heating oil and propane volumes and a $5.0 million reduction in the Company’s weather hedge benefit.

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)
EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, other income (loss), net, multiemployer pension plan withdrawal charge, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges) are non-GAAP financial measures that are used as supplemental financial measures by management and external users of the Company’s financial statements, such as investors, commercial banks and research analysts, to assess Star’s position with regard to the following:

• compliance with certain financial covenants included in our debt agreements;
• financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;
• operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure;
• ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and
• the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.
  

The method of calculating Adjusted EBITDA may not be consistent with that of other companies, and EBITDA and Adjusted EBITDA both have limitations as analytical tools and so should not be viewed in isolation but in conjunction with measurements that are computed in accordance with GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are as follows:

• EBITDA and Adjusted EBITDA do not reflect cash used for capital expenditures;
• although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;
• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital;
• EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on indebtedness; and
• EBITDA and Adjusted EBITDA do not reflect the cash required to pay taxes.
  

REMINDER:
Members of Star’s management team will host a webcast and conference call at 11:00 a.m. Eastern Time tomorrow, May 2, 2024. The webcast will be accessible on the company’s website, at www.stargrouplp.com, and the telephone number for the conference call is 888-346-3470 (or 412-317-5169 for international callers).

About Star Group, L.P.
Star Group, L.P. is a full service provider specializing in the sale of home heating products and services to residential and commercial customers to heat their homes and buildings. The Company also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, provides these offerings to customers outside of its home heating oil and propane customer base. Star also sells diesel, gasoline and home heating oil on a delivery only basis. We believe Star is the nation’s largest retail distributor of home heating oil based upon sales volume. Including its propane locations, Star serves customers in the more northern and eastern states within the Northeast and Mid-Atlantic U.S. regions. Additional information is available by obtaining the Company’s SEC filings at www.sec.gov and by visiting Star’s website at www.stargrouplp.com, where unit holders may request a hard copy of Star’s complete audited financial statements free of charge.

Forward Looking Information
This news release includes “forward-looking statements” which represent the Company’s expectations or beliefs concerning future events that involve risks and uncertainties, including the impact of geopolitical events on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions and electrification of heating systems, pandemic and future global health pandemics, recessionary economic conditions, future union relations and the outcome of current and future union negotiations, the impact of current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, global supply chain issues, labor shortages and new technology, including alternative methods for heating and cooling residences. All statements other than statements of historical facts included in this Report including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are forward-looking statements. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “estimate,” and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, those set forth under the heading “Risk Factors” and “Business Strategy” in our Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended September 30, 2023. Important factors that could cause actual results to differ materially from the Company’s expectations (“Cautionary Statements”) are disclosed in this news release and in the Company’s Form 10-K and our Quarterly Reports on Form 10-Q. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this news release.

(financials follow)

STAR GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
		March 31,				September 30,
(in thousands)			2024				2023
ASSETS		(unaudited)
Current assets
Cash and cash equivalents		$	12,063			$	45,191
Receivables, net of allowance of $8,896 and $8,375, respectively			198,280				114,079
Inventories			63,293				56,463
Fair asset value of derivative instruments			222				10,660
Weather hedge contract receivable			7,498				—
Prepaid expenses and other current assets			28,574				28,308
Total current assets			309,930				254,701
Property and equipment, net			106,141				105,404
Operating lease right-of-use assets			87,834				90,643
Goodwill			268,360				262,103
Intangibles, net			81,359				76,306
Restricted cash			250				250
Captive insurance collateral			72,811				70,717
Deferred charges and other assets, net			13,067				15,354
Total assets		$	939,752			$	875,478
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable		$	37,597			$	35,609
Revolving credit facility borrowings			29,239				240
Fair liability value of derivative instruments			2,189				118
Current maturities of long-term debt			16,500				20,500
Current portion of operating lease liabilities			18,030				18,085
Accrued expenses and other current liabilities			147,796				115,606
Unearned service contract revenue			72,900				63,215
Customer credit balances			51,276				111,508
Total current liabilities			375,527				364,881
Long-term debt			119,189				127,327
Long-term operating lease liabilities			74,615				77,600
Deferred tax liabilities, net			23,207				25,771
Other long-term liabilities			16,079				16,175
Partners’ capital
Common unitholders			348,382				281,862
General partner			(4,544	)			(4,615	)
Accumulated other comprehensive loss, net of taxes			(12,703	)			(13,523	)
Total partners’ capital			331,135				263,724
Total liabilities and partners’ capital		$	939,752			$	875,478

STAR GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		Three Months Ended March 31,								Six Months Ended March 31,
(in thousands, except per unit data – unaudited)			2024				2023				2024				2023
Sales:
Product		$	595,298			$	669,212			$	1,043,848			$	1,239,141
Installations and services			70,734				68,405				150,280				146,663
Total sales			666,032				737,617				1,194,128				1,385,804
Cost and expenses:
Cost of product			389,394				466,267				692,732				885,360
Cost of installations and services			70,592				68,311				145,699				144,854
(Increase) decrease in the fair value of derivative instruments			(11,752	)			3,022				7,278				20,658
Delivery and branch expenses			104,085				95,942				198,449				193,878
Depreciation and amortization expenses			7,748				7,626				16,134				15,463
General and administrative expenses			6,887				6,698				13,908				13,554
Finance charge income			(1,253	)			(1,764	)			(2,024	)			(3,083	)
Operating income			100,331				91,515				121,952				115,120
Interest expense, net			(3,838	)			(4,963	)			(7,056	)			(9,237	)
Amortization of debt issuance costs			(249	)			(258	)			(499	)			(587	)
Income before income taxes			96,244				86,294				114,397				105,296
Income tax expense			27,870				24,253				33,044				29,716
Net income		$	68,374			$	62,041			$	81,353			$	75,580
General Partner’s interest in net income			620				562				738				684
Limited Partners’ interest in net income		$	67,754			$	61,479			$	80,615			$	74,896
Per unit data (Basic and Diluted):
Net income available to limited partners		$	1.91			$	1.72			$	2.27			$	2.09
Dilutive impact of theoretical distribution of earnings			0.35				0.30				0.39				0.35
Basic and diluted income per Limited Partner Unit:		$	1.56			$	1.42			$	1.88			$	1.74
Weighted average number of Limited Partner units outstanding (Basic and Diluted)			35,549				35,653				35,571				35,786

SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
		Three Months Ended March 31,
(in thousands)			2024				2023
Net income		$	68,374			$	62,041
Plus:
Income tax expense			27,870				24,253
Amortization of debt issuance costs			249				258
Interest expense, net			3,838				4,963
Depreciation and amortization			7,748				7,626
EBITDA			108,079				99,141
(Increase) / decrease in the fair value of derivative instruments			(11,752	)			3,022
Adjusted EBITDA			96,327				102,163
Add / (subtract)
Income tax expense			(27,870	)			(24,253	)
Interest expense, net			(3,838	)			(4,963	)
Provision for losses on accounts receivable			3,023				3,722
Increase in accounts receivables			(14,119	)			(9,600	)
Decrease in inventories			21,332				40,326
Decrease in customer credit balances			(39,763	)			(27,068	)
Change in deferred taxes			(1,165	)			(11,155	)
Change in other operating assets and liabilities			21,202				9,736
Net cash provided by operating activities		$	55,129			$	78,908
Net cash used in investing activities		$	(23,342	)		$	(2,013	)
Net cash used in financing activities		$	(39,649	)		$	(77,401	)
Home heating oil and propane gallons sold			117,100				121,100
Other petroleum products			30,200				33,200
Total all products			147,300				154,300

SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
		Six Months Ended March 31,
(in thousands)			2024				2023
Net income		$	81,353			$	75,580
Plus:
Income tax expense			33,044				29,716
Amortization of debt issuance costs			499				587
Interest expense, net			7,056				9,237
Depreciation and amortization			16,134				15,463
EBITDA			138,086				130,583
(Increase) / decrease in the fair value of derivative instruments			7,278				20,658
Adjusted EBITDA			145,364				151,241
Add / (subtract)
Income tax expense			(33,044	)			(29,716	)
Interest expense, net			(7,056	)			(9,237	)
Provision for losses on accounts receivable			3,672				4,768
Increase in accounts receivables			(87,709	)			(124,764	)
(Increase) decrease in inventories			(5,473	)			11,609
Decrease in customer credit balances			(61,615	)			(41,768	)
Change in deferred taxes			(2,756	)			(12,379	)
Change in other operating assets and liabilities			43,438				36,413
Net cash used in operating activities		$	(5,179	)		$	(13,833	)
Net cash used in investing activities		$	(29,217	)		$	(4,099	)
Net cash provided by financing activities		$	1,268			$	25,397
Home heating oil and propane gallons sold			197,300				210,300
Other petroleum products			62,500				68,800
Total all products			259,800				279,100

CONTACT:
Star Group, L.P.	Chris Witty
Investor Relations	Darrow Associates
203/328-7310	646/438-9385 or cwitty@darrowir.com

FAQ

What was the revenue decline for Star Group in the fiscal 2024 Q2?

Star Group reported a 9.7% decrease in revenue for the fiscal 2024 Q2.

What was the net income increase for Star Group in the fiscal 2024 Q2?

Star Group's net income increased by $6.3 million in the fiscal 2024 Q2.

What was Star Group's Adjusted EBITDA for the fiscal 2024 Q2?

Star Group reported an Adjusted EBITDA of $96.3 million for the fiscal 2024 Q2.

How did Star Group's revenue change in the first six months of fiscal 2024?

Star Group's revenue declined by 13.8% in the first six months of fiscal 2024.

What impacted Star Group's Adjusted EBITDA in the fiscal 2024 Q2?

A 4.0 million gallon decrease in volume sold impacted Adjusted EBITDA for the fiscal 2024 Q2.