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Third Quarter Net Earnings
Ferrellgas Partners L.P., a leading provider of propane and related equipment in the United States, has reported an increase in net earnings for the third quarter of fiscal year 2023. According to the company’s quarterly report, net earnings attributable to Ferrellgas Partners, L.P. were $72.4 million for the three-month period ended April 30, 2023. This is compared to $67.6 million for the same period in 2022.
Factors Affecting Net Earnings
The increase in net earnings was primarily driven by a $10.4 million increase in gross margin. This was partially offset by a $5.3 million increase in general and administrative expense. Distributable cash flow attributable to equity investors also increased to $99.3 million for the third quarter of 2023, compared to $86.4 million for the prior-year period. This increase was mainly due to an $8.5 million increase in Adjusted EBITDA and a $4.2 million decrease in net cash interest expense.
Nine-Month Net Earnings
For the nine-month period ended April 30, 2023, net earnings attributable to Ferrellgas Partners, L.P. were $166.0 million. This represents a slight decrease compared to $167.4 million for the same period in 2022. This decrease was primarily driven by increases in operating expenses, including personnel, vehicle, plant, and other expenses, as well as general and administrative expenses. However, distributable cash flow attributable to equity investors increased to $252.9 million for the nine-month period, compared to $223.1 million in the prior year. This increase was mainly due to higher Adjusted EBITDA and a decrease in net cash interest expense.
About Ferrellgas Partners
Ferrellgas Partners is the second largest retail marketer of propane in the United States and a leading national provider by portable tank exchange. They serve residential, industrial/commercial, portable tank exchange, agricultural, wholesale, and other customers across all 50 states, the District of Columbia, and Puerto Rico. The company primarily focuses on retail distribution and sale of propane and related equipment and supplies. They have concentrations in the Midwest, Southeast, Southwest, and Northwest regions of the United States.
Risk Management
The company mitigates price risks associated with the purchase, storage, transport, and sale of propane through risk management activities. These activities include the use of financial derivative instruments and forward propane purchase and sales contracts. Ferrellgas Partners also enters into propane sales commitments with customers that provide contracted price agreements for specified periods of time.
Impact of Weather Conditions
Weather conditions, especially during the winter heating season from November through March, significantly impact the demand for propane. The volume of propane used for heating purposes is directly affected by the severity of winter weather in the regions served by Ferrellgas Partners. Warmer-than-normal temperatures can result in reduced propane usage, while colder-than-normal temperatures can lead to increased usage.
Evaluation of Business Performance
The company evaluates its overall business performance based on Adjusted EBITDA, a metric that measures cash flow generation. Adjusted EBITDA is calculated as net earnings plus income tax expense, interest expense, depreciation and amortization expense, and other relevant items. Management considers Adjusted EBITDA a relevant and useful measure for investors to assess the company’s performance and compare it to other companies with different financing and capital structures.
Conclusion
In summary, Ferrellgas Partners has reported an increase in net earnings for the third quarter of 2023. This increase was driven by higher gross margin and lower net cash interest expense. The company remains a key player in the propane industry, serving a wide range of customers across the United States. Weather conditions and economic factors will continue to impact the company’s performance, but Ferrellgas Partners remains focused on managing risks and generating strong cash flow.
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