管理層發言
Welcome to the UGI Corporation Q4 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Tameka Morris. Please go ahead.
Good morning, everyone. Thank you for joining our fiscal 2024 fourth quarter earnings call. With me today are Mario Longhi, UGI's Board Chair; Bob Flexon, President and CEO; and Sean O'Brien, CFO. On today's call, we will review our fiscal 2024 financial results and key accomplishments as well as the strategic priorities and financial outlook for fiscal 2025 before concluding with a question-and-answer session. Before we begin, let me remind you that our comments today include certain forward-looking statements, which management believes to be reasonable as of today's date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict. Please read our earnings release and our annual report for an extensive list of factors that could affect results. We assume no duty to update or revise forward-looking statements to reflect events or circumstances that are different from expectations. We will also describe our business using certain non-GAAP financial measures. Reconciliation of these measures to the comparable GAAP measures are available within our presentation. And with that, I'll turn the call over to Mario.
Thank you, Tameka, and good morning, everyone. Fiscal 2024 was a pivotal year for UGI as we embarked on a multi-year journey to enhance our financial profile. Strong execution against our strategy led to the company realizing the highest adjusted diluted EPS in its history. We took decisive actions to strengthen the leadership team, create greater operational efficiencies, and improve our balance sheet. I'm proud of our people who have come together and worked diligently to achieve these results. Now, I'm pleased that Bob has taken the role as President and CEO of UGI. Bob brings strong leadership, extensive experience, and in-depth knowledge of the energy industry. He has a proven track record of leading companies to create significant value. And with his leadership, I'm confident that UGI can be better positioned to meet the needs of our stakeholders. And now, I'll hand the call over to Bob so he can share his opening remarks.
Thanks, Mario. And good morning to all of you. Let me start by saying that I'm honored to rejoin UGI with its rich history and a solid reputation for integrity, excellence, and a deep commitment to customers and the communities in which we serve. I also want to express my gratitude to Mario for his strong leadership and contribution as Interim President and CEO, and for the effective and efficient transition that has taken place. Over the past few weeks, I have been getting up to speed by engaging, listening, and learning more about our customers, our operations, and strategies for each of our businesses. Post our call today, I hold the opportunity to engage more closely with our business partners and shareholders to gain alignment as we drive the company forward, focusing on what matters, leveraging our competitive advantages and generating greater shareholder value. Later in the call, I will share with you the strategic priorities for the current year. But now I'll hand it over to Sean to cover UGI's fiscal 2024 accomplishments.
Thanks, Bob, and good morning. As Mario mentioned, UGI had a strong fiscal 2024, delivering record adjusted EPS of $3.06 and a five-year EPS CAGR of 6%. Three of our business segments delivered their strongest EBIT on record due to higher margins and sustainable cost savings. These benefits helped offset the impact of lower financial results at AmeriGas as the business continued to experience volume decline. Earlier in the year, we shared several key areas of focus with you. One was to achieve permanent cost savings of $70 million to $100 million by the end of fiscal 2025. As noted on the slide, we achieved a $75 million reduction in operating and administrative expenses this year, accelerating the previously anticipated timeline. These cost savings were achieved through right-sizing operations and driving efficiencies within our business processes. Next, a key priority was to realign our capital allocation model to the business strategy.
In fiscal 2024, we returned approximately $320 million to shareholders through dividend payments, building a 140-year history of consecutively paying dividends. Over the past 10 years, UGI has provided a dividend CAGR of 6%. We were disappointed deploying capital. Of the roughly $900 million of capital, 80% was allocated to the natural gas businesses. Specifically, at our regulated utilities, we deployed approximately $500 million, primarily in infrastructure replacement and betterment, where we replaced roughly 109 miles of pipe and made noteworthy updates to our infrastructure. At the midstream businesses, we completed construction of the Moody Project, which is expected to produce up to 300 MMCF of RNG per year, once fully operational. The team also began construction of the Carlisle LNG storage and vaporization facility that is expected to come online at the end of calendar 2025. The facility is backed by a 15-year contract with the gas utility with margin underpinned by take-or-pay arrangements.
Similarly, expansion of LNG liquefaction capacity at the Manning facility is on track for completion in late fiscal 2025. We see increasing demand for natural gas, and with this expansion, we will double our liquefaction capacity at the facility to 20,000 dekatherms per day. And now this brings me to our focus on strengthening the balance sheet, which is crucial to sustaining operations and driving earnings growth. At AmeriGas, we reduced absolute debt by approximately $460 million and replaced the pre-existing revolver, which had more restrictive debt covenant metrics. This action was important to provide the business with runway to drive better performance. Additionally, we completed over $2.5 billion of debt financing actions across the enterprise to support our ongoing operations and improve liquidity. And finally, as Bob mentioned, UGI has a deep commitment to the communities in which we operate.
It is important that we do our part in helping to improve the lives and well-being of those around us. To that effect, we are proud of our employees who volunteered over 40,000 hours, serving and partnering with various organizations to meet the needs within our community. Now let me walk you through the year-over-year financial performance. As I mentioned earlier, for fiscal 2024, UGI delivered adjusted diluted EPS of $3.06 in comparison to $2.84 in the prior year. The utility segment was up $0.09 due to higher gas and electric base rates and increased disc revenues. Midstream and marketing had an increase of $0.22 in adjusted EPS, largely due to higher capacity management margins and approximately $0.07 of year-over-year increase in investment tax credits associated with the Moody RNG facility that was placed in service this year. At UGI International, there was significant improvement in year-over-year results led by higher LPG unit margins, lower operating and administrative expenses, and lower taxes through a favorable change in regulation that allowed us to utilize a previously expensed valuation allowance.
AmeriGas was down $0.44, as the effects of lower volumes were partially offset by lower operating and administrative expenses. Lastly, Corporate and Other was down $0.07, primarily due to higher interest expense. Now, before I walk through the key drivers for each reportable segment, I also want to note that we recorded a non-cash pre-tax goodwill impairment charge of approximately $195 million to reduce the carrying values of AmeriGas, reflecting lower growth expectation. Turning to the next slide, at our regulated utilities, EBIT was up $35 million over the prior year, largely due to higher gas and electric base rates, incremental benefits from the DISC program, as well as continued customer growth. During the year, we added over 12,000 residential heating and commercial customers, increasing our utility's customer base to roughly 962,000 customers in Pennsylvania, West Virginia, and Maryland.
Core market volume was slightly lower than the prior year, as the effects of warmer weather were partially offset by customer growth. Operating and administrative expenses were down $5 million, reflecting lower uncollectible accounts expenses. In our Midstream and Marketing segment, for the second year in a row, we saw record results, with EBIT of $313 million, up $22 million over the prior year. The segment benefited from its highly fee-based portfolio and the optimization of its peaking assets during a cold snap that occurred in January. These benefits were partially offset by lower margins from renewable energy marketing activities and reduced natural gas gathering earnings. Operating and administrative expenses were down $8 million, reflecting lower salaries and benefits from cost reduction actions taken, as well as lower maintenance expenses. Turning to the global LPG businesses, UGI International delivered record EBIT of $323 million, up $89 million over the prior year, largely due to higher LPG unit margins, lower operating and administrative expenses, and the effect of substantially exiting the non-core energy marketing business.
LPG volumes were comparable to the prior year as the effect of warmer weather was partially offset by additional volume from autogas customers and small industrial customers converting from natural gas to LPG. Operating and administrative expenses were down $45 million, reflecting lower costs from exiting the non-core energy marketing business and lower personnel, maintenance, and advertising expenses. Lastly, at AmeriGas, LPG volumes were down 10% due to continuing customer attrition and the effects of warmer weather. And this led to a $119 million reduction in total margin. Operating and administrative expenses were down $17 million due to lower personnel and advertising expenses, while the business reported lower gains from asset sales during the year. Turning to liquidity in the balance sheet, at the end of the fiscal year, UGI had available liquidity of $1.5 billion, inclusive of cash and cash equivalents, and available borrowing capacity on our revolving credit facilities.
In fiscal 2024, we completed over $2.5 billion of debt financing to support ongoing operations and improve liquidity. Subsequent to the fiscal year end, we were pleased to fully address the 2025 maturities at UGI Corporation by entering into a new $475 million revolving credit facility and a 2027 $400 million term loan. As of today, upcoming maturities within the next 12 months is limited to the $218 million outstanding at AmeriGas Propane. Finally, earlier this month, we also increased the borrowing capacity on AmeriGas's revolver from $200 million to $300 million, providing additional liquidity for the business. Looking ahead, we will continue to focus on improving our free cash flow generation and reducing absolute debt through operational actions, monetization of LPG assets, and disciplined capital allocation. And that takes me to the fiscal 2025 outlook. Yesterday we announced our fiscal 2025 guidance range for adjusted diluted EPS of $2.75 to $3.05, which assumes normal weather based on a 10-year average in the current tax regime.
Other core assumptions reflected in the guidance range include continued actions to stabilize AmeriGas and subsequently drive greater financial performance, additional interest expense associated with recent financing activities, and incremental tax benefits from RNG plans being placed in service. We have taken into account additional distribution costs of $0.05 to $0.08 at UGI International due to the previously mentioned damage to a supply port in France. As we mentioned on the Q3 earnings call, repairs to this facility are expected to take up to 18 months, which necessitates a change to our supply and logistics plan for fiscal 2025. We anticipate that all capital expenditure will be covered by our insurance policy. However, the incremental distribution costs may not be fully recoverable. Lastly, I'm excited as we build off the strong execution in fiscal 2024 and use 2025 as a critical rebuilding year to better position the company for long-term growth and value creation. And with that, I'll turn the call over to Bob.
Thanks, Sean. Before we open the line for questions, I want to highlight our key priorities for fiscal 2025. When I look at the pathway to improving UGI's overall performance, at the core is understanding our talent and acting on identified gaps. We need to establish the environment or culture that drives the desired performance and outcomes. We must be relentless in the accountability for executing against the strategy. This will likely result in assessing and redesigning our core business processes, our ways of working, to drive operational excellence, strategic alignment, and greater efficiencies. At AmeriGas, fundamental change is needed to reduce customer churn, win back customers, and drive performance in that business, assuring we remain customer-focused. We must get back to where customers want to do business with us, and we are their propane provider of choice. While the company is taking action in some of these areas, we are in the early stages, and so fiscal 2025 will be an important year to drive stability and subsequently better business performance.
Next is focusing on optimizing our overall LPG portfolio, pursuing opportunities where the economics make sense to monetize assets, and moving the company to become more heavily weighted to natural gas. With the execution of these priorities and the continued focus on right-sizing our balance sheet, the intent is to improve UGI's financial profile for the benefit of our stakeholders. In closing, I'm excited for this opportunity in driving the company forward. There's a lot of work to do, but the progress is well underway, and I look forward to providing more updates as we progress. We appreciate your time with us today, and now we will open the line for questions.
分析師問答
Certainly. Please hold for our first question, which will come from Julien Dumoulin-Smith of Jefferies, your line is open Julien.
Hey, good morning, team. Thank you guys very much. Hope you guys are all well and Bob, congratulations again on the role. Nice to see you back in the seat here.
Yes, thanks.
Absolutely, nice to chat with you guys. So maybe just following up on a couple things here. I mean, obviously you continue to highlight some of the challenges at AmeriGas. Maybe just to kick it off there first, how do you think about your mandate in coming into the firm here, specifically as it pertains to the strategic direction of AmeriGas? I mean, obviously, there was perhaps a former strategy here, how has that changed, and then how do you think about the opportunity existing within AmeriGas at this point?
Thank you, Julien. And then focusing specifically just on AmeriGas on your question, the immediate action for AmeriGas is really to solidify the business, bring stabilization to it. We've had a good running start fixing a lot of the past practices that were contributing to the churn of customers. Long way to go, but we've got teams mobilized and there'll be some supplemental talent coming in as well, but right out of the gate, what we need to do is to stabilize that business. I operate under the principle that from a capital allocation standpoint, each business needs to support itself. So AmeriGas needs to support itself. You're not going to see funds going from the parent company down to AmeriGas. So AmeriGas has to perform. AmeriGas has to work on their balance sheet, and AmeriGas has to work on providing excellent customer service and really fix our business processes that have gone awry over the past few years. So that's where I see spending a lot of my time will be on AmeriGas to really focus on those things and getting the performance up, stabilization and driving the cash flow there.
It seems that there will be no additional equity going into AmeriGas at this time, and there isn't a specific timeline for any strategic actions regarding potential investments. It appears that the focus will be more on internal improvements, addressing the metrics first before considering any discussions about the future direction.
I want to reiterate that there will not be any equity investment in AmeriGas. It needs to be self-sufficient and manage its own balance sheet. This applies to the entire LPG business as well. Our current focus is on improving the performance of that business. While strategic opportunities may come up in the future, our priority right now is to enhance operations and stabilize the business as quickly as possible. We've seen many positive developments over the past year, and we intend to maintain that momentum and continue our improvements.
Thank you. I would like to follow up on a more strategic level. As you consider the balance of the businesses, how do you view the potential for a comprehensive review from a cost perspective or in other strategic areas regarding that balance?
Well, Julien, when you look at the utility and the overall natural gas business, especially with energy services, the utility stands out as best-in-class when compared nationally. Our trading multiple of 8 times indicates that the UGI utility natural gas business should be considerably higher, reflecting its top-tier status given Pennsylvania's regulatory environment, low risk, and substantial capital program that offers ample investment opportunities. Energy Services effectively complements this, serving as both a customer and supplier to the utility. The demand for natural gas in the PGM market, along with the prospects for energy services within that space, means there will be plenty of opportunities due to increased power demand. Overall, the natural gas business is in an excellent position. Back in 2011, energy services lacked the physical assets it has now, which has dramatically transformed the business, allowing for great synergies with the utility and considerable upside potential driven by market demand, whether from investments in data centers or cold weather spikes. It truly is a strong natural gas franchise. They are functioning very well and have great opportunities. Therefore, prioritizing the effective management of the LPG side of the business is essential, and we will explore ways to maximize long-term value.
Awesome. All right. I'll leave it there, guys. Thank you so very much. Best of luck to you and the team, okay?
Thank you, Julian.
Our next question will be coming from Gabriel Moreen of Mizuho. Your line is open.
Good morning, everyone, and welcome, Bob. Look forward to working with you. A couple questions if I could maybe on guidance both near and long term. Just around AmeriGas, I know you're assuming normal weather, but can you speak to maybe what you're assuming around stemming customer attrition going into fiscal 2025, how that may compare year-on-year?
Yes, I can address that. As we head into 2025, AmeriGas still has challenges regarding volume metrics, as Bob mentioned. We anticipate continued volume declines from 2024 into 2025 while the team focuses on stabilizing the business. If you are modeling this, you should expect volume declines to persist. On a positive note, the 2024 results show that we managed to drive some cost efficiencies, with costs reduced by $17 million. Additionally, we decreased capital expenditures for AmeriGas by about $50 million. We are actively controlling these factors while concentrating on stabilizing volumes. Thus, for 2025, we expect continued volume declines as the business stabilizes. We are doing everything possible to ensure efficiency in costs and capital as we work on improving the business.
Great. Thanks, Sean. And then maybe if I can ask on midstream, and I appreciate some of the additional disclosures in this morning's presentation. One, I'm curious about guidance for next year. When you think about some of the marketing uplift you experienced in 2024, I'm wondering kind of what you are not slotting in for 2025? And then also kind of thinking bigger picture longer term to Bob's comments earlier about, I think some of the value in these midstream services. Can you just talk to how you're pricing these services currently? And whether you think over the medium to long term there will just be a natural uplift maybe in terms of some of the pricing behind some of these peaking services in particular?
Certainly. In the second quarter, we experienced exceptionally strong performance. We identified some areas where cold weather spikes boosted our capacity business, allowing us to leverage various pricing points along with our gas access, leading to a standout Q2. Typically, we would adjust our forecasts down to normal levels, but this presents a great opportunity, and we anticipate similar conditions this year that could benefit our business. For growth, we have two LNG facilities, Carlisle and Manning, with Carlisle expected to come online in the first quarter of 2026 and Manning in the third quarter of this year, which will impact this year. Despite being disciplined with our capital, we have invested in our midstream energy services business. On the renewable natural gas front, we have three facilities slated for fiscal year 2025, adding growth potential. Looking ahead, PJM is focused on controlling power costs and increasing generation, which will drive gas demand. We are well-positioned in Pennsylvania and West Virginia for data centers, which should positively affect future contracts and pricing. However, for 2025, aside from the growth already mentioned, we do not have additional forecasts in place, so potential upside would be seen post-2025.
Thanks, Sean. Appreciate it.
And I would now like to turn the call back to Bob Flexon, President and CEO for closing remarks.
Thank you, LaTonya. I appreciate the attendance at the call today. I'm thrilled to be back at UGI. I want to thank Mario for the work that he's done over the past year on stabilizing the company and getting improvements launched underway. So this is a handoff in flight. So we have great progress already and that will be certainly my focus over the balance of the new fiscal years to bring that stabilization and improvements to the business so we can generate the right level of cash flow, get the right valuation on our stock, which seems to be dramatically undervalued given the multiple that we trade at. And we have lots of opportunity here. And like I said, I'm thrilled to be back and look forward to engaging with all of you as we go forward. And with that, LaTanya, we'll end today's call.
Certainly. This concludes today's conference. Thank you for participating. You may now disconnect.