8-K: Star Group, L.P. Announces Fiscal 2024 Third Quarter Results, Revenue Up 10.5%

Star Group, L.P. reported a 10.5% increase in total revenue for the fiscal third quarter of 2024, driven by higher sales volumes and prices.

Summary

• Star Group, L.P. announced its financial results for the third quarter of fiscal year 2024, which ended on June 30, 2024.
• The company's total revenue increased by 10.5% to $331.6 million, compared to $300.1 million in the same period last year.
• This increase was due to a 25.3% rise in the volume of home heating oil and propane sold, reaching 37.7 million gallons, and higher selling prices.
• The company's net loss decreased to $11.0 million, a $12.9 million improvement from the previous year.
• Adjusted EBITDA loss improved significantly to $4.1 million, compared to a $22.9 million loss in the prior year.
• For the first nine months of fiscal 2024, total revenue decreased by 9.5% to $1.5 billion, compared to $1.7 billion in the prior year, due to lower volumes and prices.
• The volume of home heating oil and propane sold decreased by 2.3% to 234.9 million gallons for the first nine months.
• Net income for the first nine months increased by $18.6 million to $70.3 million.
• Year-to-date Adjusted EBITDA increased by $13.0 million to $141.3 million.

Sentiment

Score: 7

Explanation: The sentiment is positive due to improved financial results in the third quarter, including increased revenue and reduced losses. The acquisition announcement also contributes to a positive outlook, although there are still some concerns about overall revenue decline for the year and customer attrition.

Positives

• Third quarter revenue increased by 10.5% year-over-year, driven by higher volumes and prices.
• The volume of home heating oil and propane sold increased by 25.3% in the third quarter.
• Net loss decreased by $12.9 million in the third quarter.
• Adjusted EBITDA loss improved by $18.9 million in the third quarter.
• The company is acquiring a fuel oil dealer for $35 million, expected to add 19 million gallons of heating oil annually.
• Net income for the first nine months of fiscal 2024 increased by $18.6 million.
• Year-to-date Adjusted EBITDA increased by $13.0 million.

Negatives

• For the first nine months of fiscal 2024, total revenue decreased by 9.5% compared to the prior year.
• The volume of home heating oil and propane sold decreased by 2.3% for the first nine months of fiscal 2024.
• The company experienced a net loss of $11.0 million in the third quarter, although it was an improvement year-over-year.

Risks

• The company's performance is subject to weather conditions, which can impact demand for heating oil and propane.
• The company faces risks related to geopolitical events, wholesale product cost volatility, and supply chain issues.
• Customer attrition remains a concern, despite efforts to improve retention.
• The company is exposed to risks related to inflation, recessionary economic conditions, and cyber-attacks.
• There are risks associated with governmental regulations, including climate change and environmental regulations.

Future Outlook

The company anticipates closing on the acquisition of a fuel oil dealer in the fourth quarter and looks forward to the return of winter, expecting to benefit from investments in operations and personnel.

Management Comments

• Jeff Woosnam, Star Group's President and Chief Executive Officer, stated that the company continues to post solid results, benefiting from higher volumes and improved per gallon gross margins.
• He also announced the agreement to purchase a fuel oil dealer for approximately $35 million.

Industry Context

The announcement reflects the seasonal nature of the home heating oil and propane business, with the third quarter showing improved results due to increased demand and prices. The acquisition of a fuel oil dealer is a strategic move to expand within their existing operating footprint.

Comparison to Industry Standards

• Star Group's performance is compared to other companies in the retail distribution of refined petroleum products, focusing on operating performance and return on invested capital.
• The company uses Adjusted EBITDA as a key metric, which is common in the industry, but the method of calculation may not be consistent with other companies.
• The company's reliance on weather conditions for demand is typical for the industry, and the company's results are compared to historical averages and NOAA data.
• Companies like AmeriGas Partners and Suburban Propane Partners are comparable in the propane distribution sector, while companies like Sprague Resources and Global Partners are comparable in the broader refined petroleum products distribution sector. Star Group's focus on home heating oil makes it a unique player in the market.

Stakeholder Impact

• Shareholders will likely view the improved third-quarter results and acquisition positively.
• Employees may benefit from the company's growth and investments in operations.
• Customers may experience improved service and offerings due to the company's focus on customer retention.
• Suppliers may see increased demand due to the company's higher sales volumes.

Next Steps

• The company will close on the acquisition of a fuel oil dealer in the fourth quarter.
• Management will host a webcast and conference call on August 1, 2024, to discuss the results.

Key Dates

Keywords

home heating oil, propane, fuel oil, energy distribution, EBITDA, revenue, acquisitions, financial results, petroleum products