Suburban Propane Partners Q3 Earnings Call Highlights

Key Points

• Warm weather hurt third-quarter results: Suburban Propane’s adjusted net loss widened to $17.7 million from $10.8 million, while adjusted EBITDA fell to $18 million from $27 million. Retail propane volumes declined 1.8% as April temperatures were significantly above normal.
• RNG growth remains a key catalyst: A new New York anaerobic digester began operating, and the upgraded Columbus facility is expected to start injecting RNG in the fiscal fourth quarter. The company expects all three facilities to be operational in fiscal 2027, with annual injections of roughly 750,000 to 800,000 MMBtus.
• Debt reduction and distributions continued: The partnership repaid $36.2 million of revolving-credit borrowings and maintained a quarterly distribution of $0.325 per common unit, supported by trailing-12-month distribution coverage of 2.07 times.

Suburban Propane Partners NYSE: SPH reported a wider adjusted net loss and lower adjusted EBITDA for its fiscal 2026 third quarter, as unusually warm April weather reduced heating-related propane demand. The partnership said continued growth in agricultural, industrial and national-account customers helped offset some of the weather-driven volume pressure.

Adjusted net loss for the quarter was $17.7 million, or $0.27 per common unit, compared with an adjusted net loss of $10.8 million, or $0.17 per unit, a year earlier. Adjusted EBITDA declined to $18 million from $27 million in the prior-year quarter.

Chief Financial Officer Mike Kuglin noted that the company typically records a net loss during its fiscal third quarter because of the seasonal nature of its business. The reported adjusted figures excluded unrealized commodity-hedge mark-to-market effects and certain other non-cash items. Commodity hedges produced an unrealized gain of $700,000 in the latest quarter, compared with a $2.9 million unrealized loss a year earlier.

Warm April Weighs on Propane Volumes

Retail propane volumes totaled 70.6 million gallons, down 1.8% from the prior-year quarter. Kuglin attributed the decline primarily to seasonally warm conditions in April, which reduced heat-related demand.

Average temperatures across Suburban Propane's service areas were 17% warmer than normal and 3% warmer than the prior-year third quarter. April temperatures were 24% warmer than normal and 11% warmer than April 2025, making it the second-warmest April on record, according to the company.

President and Chief Executive Officer Mike Stivala said the quarter began slowly because of near-record warmth across the company's footprint and elevated residential tank levels following strong demand and deliveries in the second quarter. However, he said volumes in May and June exceeded prior-year levels as the company's counter-seasonal customer base continued to expand.

Gross margin, excluding hedge mark-to-market adjustments, fell 2.4% to $159.6 million. The decrease reflected lower volumes, while propane unit margins remained steady, Kuglin said.

Combined operating and general and administrative expenses increased $5.2 million, or 3.8%, to $141.4 million. The increase was driven mainly by payroll and benefit expenses, as well as fuel and vehicle-maintenance costs. Those factors were partly offset by lower variable compensation costs and a $1.1 million benefit from production tax credits tied to renewable natural gas injections.

The company also noted that the prior-year quarter included a $2 million insurance-recovery gain related to Hurricane Helene, which had reduced prior-year operating expenses.

RNG Facilities Near Full Operation

Suburban Propane said its renewable natural gas, or RNG, platform is approaching a new operating phase as its three facilities move toward full operation. Average daily RNG injection during the third quarter was essentially unchanged from a year earlier, as higher manure-based D3 injections were offset by lower food-waste D5 injections.

RNG revenue benefited from stronger environmental-credit prices. Stivala said California Low Carbon Fuel Standard credit prices rose 31% year over year, while D3 Renewable Identification Number prices increased 8%.

After the quarter ended, the partnership placed a new anaerobic digester facility in upstate New York into service. The facility is expected to contribute about 100,000 MMBtus of annual D3 RNG injection. In addition, Suburban Propane expects its upgraded Columbus, Ohio, biogas facility to begin injecting pipeline-quality RNG during the fiscal fourth quarter, adding nearly 200,000 MMBtus of annual D5 RNG injection.

With the New York facility online and Ohio expected to begin operations, Stivala said the company expects to enter fiscal 2027 with all three RNG facilities operating and annual RNG injection of roughly 750,000 to 800,000 MMBtus.

The company recognized $1.1 million of Section 45Z production tax credits during the quarter for D3 injections at its Stanfield, Arizona, facility. Stivala said the site has a negative carbon-intensity score of approximately negative 380 and meets prevailing-wage and apprenticeship requirements, allowing the company to maximize the available credit value.

Debt Reduction and Distribution

Capital spending totaled $21.4 million during the quarter, including $15.1 million of growth capital. Spending increased $6.8 million from a year earlier, primarily because of construction work at the Columbus and upstate New York RNG sites.

For the year to date, growth capital expenditures for existing RNG projects totaled $28.7 million. The company expects full-year capital spending on those projects of approximately $35 million, at the low end of its previously stated $35 million to $40 million range.

Suburban Propane used operating cash flow and $6.6 million of net proceeds from its at-the-market equity program to repay $36.2 million of revolving-credit borrowings. Its consolidated leverage ratio was 4.35 times for the trailing 12 months ended June 2026, unchanged from a year earlier.

The board declared a quarterly distribution of $0.325 per common unit, equivalent to an annualized rate of $1.30 per unit. The distribution is scheduled to be paid Aug. 11 to unitholders of record as of Aug. 4. Stivala said distribution coverage was 2.07 times for the trailing 12 months ended June 2026.

About Suburban Propane Partners (NYSE:SPH)

Suburban Propane Partners L.P. NYSE: SPH is a publicly traded master limited partnership headquartered in Whippany, New Jersey, that provides propane and related energy services to residential, commercial, industrial and agricultural customers. As one of the largest propane retailers in the United States, the company delivers propane gas, heating oil, diesel fuel and natural gas throughout its service territories. In addition to fuel distribution, Suburban Propane offers HVAC installation, maintenance and repair services, as well as safety inspections and equipment leasing to support customers' energy needs.

The company's core business centers on the delivery of propane for space and water heating, cooking and agricultural applications.

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