UGI Corporation (NYSE: NYSE:UGI), a diversified energy company, reported a strong financial performance for fiscal year 2024, with record adjusted diluted earnings per share (EPS) of $3.06. This marks a significant milestone, reflecting a 5-year compound annual growth rate (CAGR) of 6%. Three of UGI’s business segments posted their highest earnings before interest and taxes (EBIT) on record, buoyed by increased margins and lasting cost savings. The company also continued its longstanding tradition of returning value to shareholders, with approximately $320 million distributed through dividends.
Key Takeaways
- UGI Corporation announced a record adjusted diluted EPS of $3.06 for fiscal year 2024.
- The company achieved a 5-year EPS CAGR of 6%.
- Three business segments recorded their highest EBIT on record due to higher margins and cost savings.
- Operating and administrative expenses were reduced by $75 million, ahead of schedule.
- Shareholders received roughly $320 million in dividends, upholding a 140-year history of consecutive payments.
- Significant capital was invested in natural gas businesses, including infrastructure, RNG projects, and LNG facilities.
- Regulated Utilities segment added over 12,000 customers, reaching 962,000 in total.
- Midstream and Marketing segment reached a record EBITDA of $313 million.
- UGI International delivered a record EBIT of $323 million.
- AmeriGas experienced a 10% decline in LPG volumes and a $119 million reduction in total margin.
- Fiscal 2025 adjusted diluted EPS guidance is set between $2.75 and $3.05.
- A non-cash pre-tax goodwill impairment charge of approximately $195 million was recorded for AmeriGas.
Company Outlook
- UGI anticipates adjusted diluted EPS for fiscal 2025 to range from $2.75 to $3.05.
- Priorities include stabilizing AmeriGas, optimizing the LPG portfolio, and focusing on natural gas businesses.
- The company aims to improve its balance sheet and financial profile.
Bearish Highlights
- AmeriGas is facing challenges with a 10% decline in LPG volumes.
- A substantial non-cash pre-tax goodwill impairment charge of $195 million was recorded for AmeriGas due to lower growth expectations.
Bullish Highlights
- The company's regulated utilities added a significant number of customers.
- Both the Midstream and Marketing and UGI International segments achieved record EBIT and EBITDA, respectively.
Misses
- Despite strong overall performance, AmeriGas's volume decline led to a notable reduction in total margin.
Q&A Highlights
- CEO Bob Fleckson emphasized the necessity of creating a culture that drives performance and outcomes.
- Fleckson stated that AmeriGas must be self-sustaining and will not receive additional funds from UGI.
- The CEO praised the utility segment, referring to it as "best in class" when benchmarked nationwide.
UGI Corporation's fiscal 2024 results demonstrate a robust financial standing, with strategic investments in natural gas and renewable energy signaling a focus on future growth. Despite the headwinds facing its AmeriGas segment, the company's diversified portfolio and commitment to operational efficiency position it to navigate the challenges ahead. As UGI moves into fiscal 2025, it remains committed to delivering value to its shareholders and strengthening its core business segments.
Full transcript - UGI (UGI) Q4 2024:
Conference Operator: Welcome to the UGI Corporation Q4 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Session. Please be advised that today's conference is being recorded.
I would now like to hand the conference over to Tamika Morris. Please go ahead.
Tamika Morris, Investor Relations, UGI Corporation: Good morning, everyone. Thank you for joining our fiscal 2024 Q4 earnings call. With me today are Mario Longhi, UGI's Board Chair Bob Fleckson, 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. Reconciliations of these measures to the comparable GAAP measures are available within our presentation.
And with that, I'll turn the call over to Mario.
Mario Longhi, Board Chair, Interim President and CEO, UGI Corporation: Thank you, Tamika, 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.
Bob Fleckson, President and CEO, UGI Corporation: 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 a 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 will see 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 to generate 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.
Sean O'Brien, CFO, UGI Corporation: Thanks, Bob, and good morning. As Mario mentioned, UGI had a strong fiscal 2024 delivering record adjusted EPS of $3.06 and a 5 year EPS CAGR of 6%. 3 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 $70,000,000 to $100,000,000 by the end of fiscal 2025. As noted on the slide, we achieved a $75,000,000 reduction in operating and administrative expenses this year, accelerating the previously anticipated timeline. These cost savings were achieved through rightsizing operations and driving efficiencies within our business processes. Next (LON:NXT), a key priority was to realign our capital allocation model to the business strategy. In fiscal 2024, we returned approximately $320,000,000 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 disciplined in deploying capital. Of the roughly $900,000,000 of capital, 80% was allocated to the natural gas businesses. Specifically, at our regulated utilities, we deployed approximately $500,000,000 primarily in infrastructure replacement and betterment where we've 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 $460,000,000 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 $2,500,000,000 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 40000 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 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 $195,000,000 to reduce the carrying values of AmeriGas reflecting lower growth expectation. Turning to the next slide.
At our regulated utilities, EBIT was up $35,000,000 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 utilities 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 5,000,000 down $5,000,000 reflecting lower uncollectible accounts expenses. In our Midstream and Marketing segment, for the 2nd year in a row, we saw record results with EBITDA of $313,000,000 up $22,000,000 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 $8,000,000 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 $323,000,000 up $89,000,000 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 auto gas customers and small industrial customers converting from natural gas to LVG. Operating and administrative expenses were down $45,000,000 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 $119,000,000 reduction in total margin. Operating and administrative expenses were down $17,000,000 due to lower personnel and advertising expenses, while the business reported lower gains from asset sales during the year.
Turning to liquidity and the balance sheet. At the end of the fiscal year, UGI had available liquidity of $1,500,000,000 inclusive of cash and cash equivalents and available borrowing capacity on our revolving credit facilities. In fiscal 2024, we completed over $2,500,000,000 of debt financing to support ongoing operations and improved liquidity. Subsequent to the fiscal year end, we were pleased to fully address the 2025 maturities at UGI Corporation by entering into a new $475,000,000 revolving credit facility and a 2027 $400,000,000 term loan. As of today, upcoming maturities within the next 12 months is limited to the $218,000,000 outstanding at AmeriGas Propane.
Finally, earlier this month, we also increased the borrowing capacity on AmeriGas' revolver from $200,000,000 to $300,000,000 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 and 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 plants 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 better position the company for long term growth and value creation.
And with that, I'll turn the call over to Bob.
Bob Fleckson, President and CEO, UGI Corporation: 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 rightsizing 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.
Conference Operator: Certainly. Thank you. And we will now begin the question and answer session. One moment for our first question, which will come from Julien Dumoulin Smith of Jefferies. Your line is open, Julien.
Julien Dumoulin Smith, Analyst, Jefferies: 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.
Bob Fleckson, President and CEO, UGI Corporation: Yes. Thank you.
Julien Dumoulin Smith, Analyst, Jefferies: Absolutely. Nice to chat with you guys. So maybe just following up on a couple of 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 is how does your appointment and how do you think about the opportunity that exists within AmeriGas at this point?
Bob Fleckson, President and CEO, UGI Corporation: Thanks, Joanne. And focusing specifically just on AmeriGas on your question, Beth, the immediate action for AmeriGas is really to solidify the business, bring stabilization to it. We've had a good running start of 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 away 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.
Julien Dumoulin Smith, Analyst, Jefferies: Right. So it sounds just to make sure I'm hearing that right. So no further equity going into AmeriGas at this point and no specific timeline on any kind of strategic actions to potentially review for divestment at this point. It sounds like more internal focus, turnaround the metrics first before going back to any kind of conversation about what to do with it, right?
Bob Fleckson, President and CEO, UGI Corporation: Yes. So I'll reiterate that. So no equity going down to AmeriGas. It has to support itself. It has to manage its own balance sheet.
And that's I can really expand that to the entire LPG business. And then I would also say that what we can control right now is to make that business perform better. Strategic thoughts and actions and opportunities may arise, I'm not ruling anything out in that from that standpoint. But what we can control right now is making that business perform better and that's where the focus is to do that. I think that will drive the most value for our shareholders to get this thing stabilized as quickly as we can.
And like I said, a lot of good things have been happening over the past year and we're going to keep that momentum going and expand the improvements.
Julien Dumoulin Smith, Analyst, Jefferies: Awesome. Excellent. Thank you. And then just if I can follow-up more strategic more holistically here rather, as you think about the balance of the businesses here, how do you think about the opportunity for more of a review from a cost perspective or otherwise strategically around the balance of businesses here?
Bob Fleckson, President and CEO, UGI Corporation: Well, Julien, when you take a look at and I know you know this quite well, when you take a look at the utility and the overall natural gas business with energy services as well. I mean the utility particularly when you benchmark it across the country, it's the best in class. And I look at our trading multiple of 8 times and you think where the UGI utility natural gas business where that multiple should be dramatically higher. It should be best in class given the construct of the regulatory environment in Pennsylvania, the low risk, the pretty deep capital program that provides plenty of opportunity for investment. So that's really just a tough decile utility in this country.
And energy services brings great synergy to that business. It's a great customer and supplier to the utility. And when you think about the demand of what's happening in PGM for natural gas and the opportunities that Energy Services has to be involved in that given the footprint of that business that the demand for power, the demand for additional natural gas is going to provide opportunities for Energy Services. So the overall Natural Gas business is really sitting in just a fabulous situation. When I was here back in 2011, Energy Services did not have the physical assets behind it like it does today.
So it's really a dramatically evolved business that has great synergies not only for the utility, but then also allows you to experience excellent upside with market demand, whether that's for additional power that's coming via the investment in data centers or weather driven when you have spikes in cold weather. So it really is a strong franchise on the natural gas side. So I think that actually they run very well. They've got great opportunities. So again, when I think of allocating my own time, it's got to be to make sure that we're running the LPG side of the business really, really well and we'll think about opportunities how to maximize value longer term.
Julien Dumoulin Smith, Analyst, Jefferies: Awesome. All right. I'll leave it there guys. Thank you so very much. Best of luck to you and the team, okay?
Bob Fleckson, President and CEO, UGI Corporation: Thank you, Julian.
Conference Operator: Our next question will be coming from Gabriel Moreen of Mizuho (NYSE:MFG). Your line is open.
Gabriel Moreen, Analyst, Mizuho: Good morning, everyone, and welcome, Bob. Look forward to working with you. Couple of 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?
Sean O'Brien, CFO, UGI Corporation: Yes, I can take that Gabe. AmeriGas going into 2025 on the volumetric side, there's still work to be done if you listen to some of Bob's comments. So we are assuming continued volume declines from 2024 to 2025 as the team really works on turning that business around and stabilizing it. So you would expect if you're modeling that to see volume declines continue. On the positive side, if you looked at the 2024 results on the AmeriGas side of the equation, there was we were able to drive some efficiencies in costs.
I think costs were down $17,000,000 And then on the capital conservation side regarding AmeriGas, I believe capital was down about $50,000,000 So we're trying to make sure that we're controlling the levers while the business is really focused on volumes and really getting that under as you said, you heard Bob say stabilize. So for 2025 continued volume declines as the business stabilizes. We're pulling all the levers we can to make sure that the variable nature of cost and capital that we see those efficiencies as we continue to turn the business around.
Gabriel Moreen, Analyst, Mizuho: 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, just in terms of the guide for next year, when you think about some of the marketing uplift you experienced in 2024, I'm wondering kind of what you are or 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 speaking services in particular?
Sean O'Brien, CFO, UGI Corporation: Yes, sure. The first one I've covered the first one on the I mean, when you look at Q2, Gabe, Q2 was incredibly strong, right. There was we saw some pockets and Bob was alluding to it earlier where you had some cold weather spikes and our capacity business that takes advantage of various basis points and our access to gas had an incredibly strong Q2. If you go back and look at it, it really stood out. So we would not in the normal forecast, the normal budget, we would take that back down to normal levels.
But it's a great opportunity if we continue this year, if we see similar opportunities like that for that business to really set up well for those types of opportunities. In terms of growth, maybe I'll just highlight some of the growth that we have in play. We've got 2 LNG facilities, Carlisle and Manning. I think Carlisle comes online in Q1 of 2026. Manning will be Q3 of this year.
So it will have some impact on this year. But we are even though we've been very capital disciplined, we have applied some capital to that Midstream Energy Services business. On the RNG front, you have 3 facilities coming in fiscal year 2025, 1 in Q2 in Q1 and 1 in Q3. So we have kept a little bit of the growth engine going there. In terms of future opportunities, I think Bob hit it.
You've got PJM really looking to control power costs and to add some increased generation, which will drive gas demand. You have the potential. We're in very good spot in Pennsylvania and West Virginia for data centers. So all this should have some favorable impact on future contract and future pricing. And I think we're set up very well to play a role in that increased demand as it goes forward.
But in 2025, I'll be clear, we don't have outside of the growth I mentioned, there is none of that in the forecast. So that would be post 2025 potential upside for the company.
Gabriel Moreen, Analyst, Mizuho: Thanks, Sean. Appreciate it.
Conference Operator: And I would now like to turn the call back to Bob Flexen, President and CEO for closing remarks.
Bob Fleckson, President and CEO, UGI Corporation: Thank you, Latanya. And I appreciate the attendance of 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
Julien Dumoulin Smith, Analyst, Jefferies: to the business so we
Bob Fleckson, President and CEO, UGI Corporation: 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.
Conference Operator: Certainly. This concludes today's conference. Thank you for participating. You may now disconnect.
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