Q3 2025 UGI Corp Earnings Call
Good day, and thank you for standing by, welcome to the UGI Corporation, Q3 2025 earnings conference call.
At this time, all participants are on the way to only mode after the speaker's presentation. There will be a question and answer session
Thanks Tama and good morning.
UGI is continued to deliver outstanding year-to-date results.
Our increasing focus on safety driving. Superior business performance.
Operational excellence and creating greater Financial flexibility is yielding results across each of our businesses.
The oogies, year-to-date adjusted diluted earnings per share of $3.55 is a record performance.
Up 33 cents over the prior year period.
This performance reflects meaningful contribution from all segments.
Infrastructure.
Operating efficiencies particularly at UGI International.
The customer focused improvements now underway at maragas.
And income tax credits.
For the fiscal. Third quarter, we reported adjusted diluted earnings per share of negative 1 cent compared to positive 6 cents in the prior year period.
As a reminder, our third and fourth quarters typically represent the seasonally weaker periods for our business and this year's results. Reflect normal, seasonal patterns
Given our strong year to date performance.
And the momentum across our businesses. We expect to be at the top end of our fiscal 2025 adjusted earnings per share guidance range of $3 to $3.15, which Sean will discuss later in the call.
Slide 5 provides several key. Operational highlights for the third quarter.
We deployed over 600 million dollars of capital on a year-to-date basis.
With more than 80% directed to, our highest risk adjusted return businesses, the regulated utilities and UGI Energy Services.
In addition, our utility segment continued to demonstrate strong fundamentals with sustained, customer growth of approximately 9,000 Residential Heating and Commercial, customers added to Cisco year.
We also made progress on the Pennsylvania, gas utility rate case.
Where there was a joint petition for approval of settlement filed on July 9th.
This petition was for 69.5 million, in Revenue, increase, and is subject to review and approval, by the administrative law, judges and Pennsylvania, Public Utility Commission.
We anticipate that new rates will be finalized and implemented in the first quarter of fiscal 2026.
Which will support continued system Investments to promote pipeline, safety, reliability, and modernization.
Severely across both LPG businesses.
We are successfully executing on our strategic. Portfolio, optimization initiatives entering into definitive agreements for asset sales, which are expected to generate approximately 150 million dollars in total proceeds during fiscal 2025.
These targeted to vestures demonstrate Our intention to operate a locations where we have a competitive advantage.
Focusing resources on our highest return opportunities. While providing Financial flexibility to support deleveraging objectives and fund growth Investments.
Turning to Amerigas our customer focus Improvement, initiatives are progressing as expected with ongoing execution of key actions, including procurement, routing, and delivery and call center reassuring. As we prepare for the upcoming winter season,
furthermore, we are focusing on profitable customer segments.
Therefore, we will be substantially exiting the wholesale business.
While this may reduce the total LPG gallon sold, we expect no meaningful impact on our overall results as these volumes have little to no earnings contributions.
For reference.
Fiscal 2024, the wholesale business representative approximately 11% of total LPG, gallons sold, but was essentially a break even business.
And with that, I'll hand the call over to Sean to walk through the financial results in more detail.
Thanks Bob and good morning. I'll now provide more details on our financial performance.
For the third quarter UGI, reported adjusted diluted EPS of negative 1 cent compared to positive 6 cents in the prior year period.
This quarter reflected the impact of typical seasonal patterns within our business. Warmer weather across a fuel of our service territories and the anticipated reduction in Midstream margins specifically, the utility segment was down 4 cents, primarily due to higher operating and administrative expenses.
Midstream and marketing was down, 1 Penny, as the higher investment tax credits associated with the RNG projects largely offset, lower Gathering and processing margin.
UGI International was also Down 2 cents as the lower total margins more than offset, the benefits from reduced operating and administrative expenses and lower tax expense.
while Ava was fairly flat year-over-year, the business benefited from lower income tax expense,
At corporate and other, there is an offset to normalize the corporation's tax rate, and this is reflected in EPS, decline shown year-over-year.
To the quarterly results for each reportable segments.
At the utilities eviebot was 30 million for the quarter versus 39 million in the prior year period.
Total margin was up 4 million largely due to benefits from the infrastructure replacement and betterment program. At the West Virginia gas utility.
Operating and administrative expenses, Rose by 10 million reflecting among other things, higher, Personnel, related and maintenance expenses.
Depreciation and Amor expenses. Also increase due to continued investment in our distribution system.
At the Midstream and marketing segment, if it was 27 million for the quarter down 16 million over the prior year.
Total margin decreased, 9 million, as lower margins from natural, gas Gathering and processing operations, as well as the 2024 Devastator of our power generation asset. Hunga Creek were partially offset by increased margins from Gas marketing activities.
Year-over-year. The segment also saw lower other income, particularly due to the absence of income, from a storage Farm out contract in the prior year.
Turning to the global LPG businesses.
At UGI International.
LPG volumes declined by 9% due to the effects of continued, structural conservation. The absence of certain customers, who previously converted from natural gas to LPG and the impact of whether that was 16% more than prior year,
The effect of this volume decline along with the lower LPG unit, margins were partially offset by the translation effects of stronger. Foreign currencies leading to a 19 million dollar decline in total margin.
UGI International continued to drive operational efficiencies. And this quarter, we saw a 900 decline in operating administrative expenses driven by lower personnel and distribution expenses. Which was partially offset by the translation effect of the stronger foreign currencies.
Overall, the segment reported EBIT of $43 million in comparison to $57 million in the prior year period, largely due to a $19 million decline in margin and slightly higher depreciation and amortization expenses, partially offset by lower operating and administrative expenses.
At our gas, the operating loss of 28 million for the quarter was fairly consistent with the prior year as the effect of lower retail volume stemming from continued but reduced customer attrition was more than offset by higher retail unit margins.
Turning to the full year to date performance. The even from a reportable segments was comparable year-over-year, demonstrating the Brazilian of our Diversified portfolio amid a mixed operating environment.
At the utilities. Even it was up 12 million primarily driven by a 10% increase in core Market volumes from favorable weather conditions,
Mid-trim and marketing experienced a $22 million decline, reflecting the anticipated impact of lower minimum volume commitments on one contract renewal completed in Q4 last year, as well as the 2024 power generation assets sale.
UGI International's ebit decreased 9 million largely due to the absence of the Swiss business, divested in Q3 last year, along with software, retail volumes. And this was largely offset by the successful reduction of 35 million in operating and administrative expenses.
Ameri gas showed some momentum with ebit up 18, million reflecting, both higher, total margins and discipline expense management. Notably the segment achieved a slight increase in total. Retail gal largely due to colder weather conditions during the critical winter months which offset customer attrition.
This, underlying operational performance combined, with meaningful, tax benefits, primarily associated with investment tax credits, led to the year-to-date, adjusted diluted, EPS of 3 dollars.
Looking to the fiscal fourth quarter, we anticipate that earnings from our underlying businesses excluding, taxes will be largely consistent with the prior year period.
Of note, while we recorded a diluted loss of $0.16 in Q4 of fiscal 2024, this included $0.20 of tax benefit from regulatory changes that allowed us to utilize previously expensed valuation allowance.
Fourth quarter and our year-to-date results. We expect that UGI will achieve the top end of its fiscal 2025 adjusted EPS, guidance range of $3 to 3. 1 5.
While our team continues to review the impact of the bill on our business, the bills changes to the deductibility of interest expense is expected to provide additional tax expense favorability as we move forward.
Turning to the balance sheet. We continue to build Financial strength and flexibility as evidenced by our leverage ratio of 3.8 times for the quarter and robust free cash flow generation.
Seeds while streamlining. Our footprint enhancing our strategic focus and providing meaningful support for our deleveraging objectives. And with that, I'll turn the call over to Bob for his closing remarks.
Thanks, Sean.
Good morning, everyone.
Thank you at this time. We've both conduct our question and answer session. As a reminder, to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced.
To withdraw your question. Please press star 1 1 again.
Please stand by while we compile the Q&A roster.
Our first question comes from Julian.
Duman Smith of Jeffrey your line is now open.
Morning, Julian. Hi. Good morning. Hi. Good morning. It's actually Paul's and Bardot on for Julian. Thanks for taking the time.
The the first 1 I want to ask is if you could unpack a little bit the potential disclosure you have potential benefit from 1 big beautiful bill act.
Is that bonus depreciation on on regulated activities? Is that 45 Z is on the RNG, just, uh, any even just qualitative description. You can help with their
Yep, all this is Sean. I, I'll have a couple things and the biggest impact initially will be. Um, over time, we have lost some of the interest, uh, deductibility specifically at America's almost predominantly to Americas that that started to impact us. Paul, back in 23, it had impacted 24 and it would have had impact this year. So that's Step. 1 is, we'll be able to retroactively go back and and probably, you know, we're still finalizing the numbers. But remove, some of the allowance that we had that, you know, the valuation allowance we had to put on the books over the last 2 years and a little bit this year. So that's Step 1. By the way that will continue, you know, that's retroactive, but it will also continue as we go forward. Um,
The other 2 items. I think that have big impact for us, um, is because of the itc's this year, you know, we're very, very we're, we're closing out our RNG projects, as they all come into service.
Bonus hasn't been an uh an election that we really focused on, but this act will give us the ability. As we move forward, probably to utilize bonus. Um depreciation a little more. So I think you're spot on their R&D credits is another area with the amount of capital we're spending at the utility and that gas, we see some benefit there and then on the 45 Z's I think it's just more strengthening the position as we get into next year and Beyond um around 45 Z's. So we haven't given the exact number, but we definitely know the trend. This is going to be a positive impact to the company.
Okay. No, that's good to hear across the board. And then I, I know I have to ask about America as I'll I'll leave that for someone else. I wanted to drill in a little more on the Midstream side of the business, obviously, at the a lot of activity with the Pennsylvania, Ai and Innovation day just are there any way that you could frame? What you think? The investment opportunity set is for the Pennsylvania, Midstream business. Just giving a lot of the activity, in the near your footprint. That'd be helpful. Thanks.
Yeah, Paul, I think the best I can do with that right now is just say that both Midstream and the utility we expect will benefit. We have well into the double digits of NDAs with potential.
Uh, generators and other opportunities to utilize our infrastructure for providing natural gas or providing on-site LPG.
Uh, or sorry the LNG. So,
We see pretty robust opportunities there. Multiple like, say multiple?
Counterparties in in in depth discussions that are ongoing. So we have the right assets and the right place to take advantage of all of us. So it's just to continue to cultivate those opportunities.
Okay, great. And then if I could squeeze in 1, last 1, any commentary you provide on the multiple for the Strategic that Messengers had as of late.
no, I mean I I
Various multiples of our business even when you break them apart, uh it's got to either be equal or better than uh in our own hands. So that way on a risk adjusted basis, you're creating value versus
Uh, not selling. So
That's the way we look at it. Um, again, we we look at the MPV in our hands versus the sale price and make sure that it's not going to be diluted to us.
Thank you on Leverage Paul when you think about it. So it's got to be much better than our leverage ratio as well.
Yeah, it's not.
You Tim?
Nice.
As a reminder to ask a question, you will need to press star 1 1 1 on your telephone.
Our next question comes from Gabriel mean of Lugo. Your line is now open.
Uh, good morning, everybody. I I guess I'll take the Americas question then. Uh, just 2-fold their 1 is uh, you know, there's a lot of moving Parts I think between the wholesale Devastator.
Potential High grading of the customer base, so I'm curious Bob as you go into the upcoming winter heating season, what sort of metrics?
You're most focused on here, whether it's, I guess, profit—I'm sorry, profitability is a big one—but anything you can kind of direct us to, whether it's absolute or relative metrics. And then the second part on the destitute program, just on LPG.
wondering if you know, you think you're kind of done for now, if there's more to go at this point,
You're thanks. Okay, I'll go into it and certainly, as Americans topic, I'll try not to use the rest of the call time for that. Um, first of all, the wholesale business, um, again creates it's been creating a lot of activity in our business. Um,
But not providing any bottom line benefits. So if again, working on simplifying that business,
Uh, we're not going to supply largely, uh, competitors at basically our cost using our infrastructure. So it doesn't make any sense to continue doing that because the extent we've got.
Customers in there that are lost customers. They'll either become new national accounts that are on a profitable level or they again, will not be, uh, we will not be continuing on with them. So it's really I think, as you as you said, hi grading, the portfolio, taking the complexity out of the portfolio, so we're focusing on our highest value.
Uh, customers out there and providing, you know, the... the...
the measurement level of service that that, uh,
that our customers expect and deserve. So I think it's a good step as we go into the winter, to better handle on profitable businesses. Uh,
As profitable customers within America.
When you think about some of the indicators you're looking at,
It safety is 1 that we don't talk about about on on these calls. The the third quarter of this year at Americas had substantial improvements in our safety records. And to me that's a leading indicator of how well you're focusing on your businesses, your processes, and getting in efficiencies out of your business and maintaining
yeah, a safe Workforce and not creating rework or
Anything that's just adding cost and more complexity to the business. So, I'm really happy to see the dramatic improvements that we've experienced in the third quarter on safety. It's been a key focus area for us.
On a lot of the Improvement projects that are underway. Uh, we've gone from really the analysis of what is the root cause of issues and what's the solution to implementation. And we've talked about it in the past that it's, you know, this is a 2 winter effort going into this winter. You think about customer service we'll have
Uh, on efficiency on gal delivered per mile um and and the cost of delivery. So as we get to October 1st Nationwide, so that'll be another statistic that we're looking at, is the efficiency of our delivery routes, um, as well. And then always kind of bottom line, free cash flow, uh, regenerating cash flow from this business. As we've
Talked about.
need to stand on its own and 1 of the things that, um,
really excited about as well, from there, I guess is that they're leverage ratio, has improved by nearly 1 turn, so we'll continue to watch the balance sheet, the importance of maintaining the right credit metrics. Uh, but as we go into the winter, there will be various performance metrics some of which I just went through. So we're viewing up to the winter 1 of the other things though that.
came as a little bit of a surprise, to me in this quarter that I think about,
Substantial opportunity during the summer months to improve our race business as well.
And again, you know,
Through better productivity, better efficiency, and better processes, there's meaningful improvement that we can make over the summer months. I would say that before going into the summer,
you know, my focus was relentlessly on the winter but, uh,
Going out and visiting some of the locations and seeing the opportunity to really hit our production targets, I think, can really help us in the summer months as we go forward. So, I'm looking forward, not only to a good winter next year but also a stronger summer, um, that that we had this year. So, looking at those production metrics will be another 1 that we look at, as we go into, uh, next summer at our various AIDS facilities. So I there's a, a lot of opportunity.
Procurement of propane, uh, hedging proactively hedging to help our customers maintain stability of their bills.
So, we've got a lot going on, and a lot of progress. I think we're in really good shape going into the winter.
Okay, hopefully that's helpful. And then I can talk about for quite a long time, but I'll I'll stop there.
That was very comprehensive. Thank you. Bob uh maybe if I can come at Midstream from a different angle,
um, when you think about your producer, activity, besides behind some of the Supply push systems that you have,
You can maybe talk about what you're seeing given the uptick in Basin demand, maybe some egress capacity too. And as a second part to that question, are there any notable contract experts on the Midstream side that you're kind of watching over the next call at 12 to 18 months?
Yeah, I can I can hit a few of those gaps. No significant notable contract expertise, or at least nothing that we anticipate where there's a significant shift, meaning on the read, on The Re-Up. We think it'll be generally in line with over at. We did. Have that 1 year, maybe that's what you're referring to. Um, so I think as we look at 26, we're not, we're not um thinking about any big dip due to Big contract. Expirations
Yeah, and then again it gave us the follow up on maybe the earlier question from Paul as well. When we look at
The potential developers within the state of Pennsylvania.
Um both on the regulated and unregulated side uh for power generation in the life. We're we're seeing substantial inquiries and opportunities there. So we'll be continuing to work with with, uh, with all of those counterparties to see what we can do to.
Participate and help. Um,
Make these the energy investment that's uh, happening across the state. Again, we're in a
Exciting time for the state of Pennsylvania, the energy Summit, really highlighted that. And the great thing of Pennsylvania is how from a political standpoint, all parties are aligned on bringing investment into the state of Pennsylvania. So, it's really an exciting time here, uh, in Pennsylvania. And again, our Midstream business
And our utility business should be substantial benefactors of of the movement underway.
Great. Thanks Bob. Thanks Sean.
That's good.
I'm showing no further questions at this time.
I would like to turn.
To Bob flexon for closing remarks.
Thanks, Dana and thank you. Thanks everyone for for dialing in and just a few, maybe a few closing comments.
We had a record year, um, so that certainly that's exciting in its own, right? But uh work is underway to make uh the future even
As I just mentioned talking with Gabe, I'm very excited about.
Our safety performance and the improvements we're seeing in safety, I just see that as a leading indicator to a well-run company, so I feel great about that.
the financial performance this year, we talked about was great, the cash flow 558 million, so 11% Improvement year on year,
And that really takes me to the kind of the third point of what really focusing on is the balance sheet and we've got our corporate leverage down to 3. 8, 0, 0,
The maragas uh, achieving nearly 1, turn Improvement in this leverage ratio, so we're going to continue focusing on the intrinsic value drivers. Um,
In our business.
State of Pennsylvania in West Virginia. Um, we had a constructive rate case proceeding because we're looking to
Get that through its final stages and have that part of our fiscal 2026 results. We've completed our Midstream projects, and we've just continued to look at our merging opportunities. Finally, I'll just say that our eyes are completely focused on this upcoming winter and to be ready for winter.
Uh, to have a really successful launch, uh, into fiscal 2026.
So with that, I'll conclude the call and again, thanks everybody for participating and supporting us through through all this and look forward to our discussions, uh, in the future.
Thank you for your participation. In today's conference, this does conclude the program. You may now disconnect