Post Earnings Coverage as Ferrellgas Partners Announces Dividend Cut to Maintain Leverage and Replaces CEO

LONDON, UK / ACCESSWIRE / September 30, 2016 / Active Wall St. announces its post-earnings coverage on Ferrellgas Partners L.P. (NYSE: FGP). The company posted its fiscal 2016 earnings results on September 28th, 2016. One of the U.S.’s largest propane retailer posted a wider than expected quarterly loss, and the company announced a potential distribution cut. Ferrellgas Partners also replaced its CEO during the reported quarter. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the year ended on July 31st, 2016, Ferrellgas reported net loss of $665.4 million compared to net profit of $29.6 million in FY15. On a per-unit basis, which reflects general partner interests, the loss was $6.68 versus a year-earlier loss of $0.64 per share, and wider than analysts’ expectations of $0.34 per share. The company reported revenue of $409.5 million for Q4 FY16 which was lower than analysts’ projections of $462 million. Revenue for FY16 came in at $2.04 billion which was below analysts’ expectations of $2.09 billion.

The company sales were badly hit by record-high temperatures in the winter.

“As we highlighted last quarter, record temperatures across the nation continue to have an adverse impact on the propane sector of our company and low oil prices have seriously damaged our midstream sector,” Founder and Interim Chief Executive James Ferrell said in a statement.

Propane Volume Decline

Propane sales volumes for Q$ FY16 were approximately 144 million gallons, down 3.5% from the 149 million gallons in Q$ FY15. For FY 2016, 779 million total gallons were sold compared to 879 million gallons in FY15. This decrease is primarily due to the warmer than normal nationwide temperatures previously mentioned.

Operating Metrics

Ferrellgas reported that FY16 adjusted EBITDA was $345 million compared to $300 million in FY15. Adjusted EBITDA for its Propane segment was $287 million or $39.1 million less than the prior year, primarily due to the decline in the company’s propane sales resulting from temperatures, which were 19% warmer than average and 16% warmer than the prior year period. The effect of weather was partially offset by stronger margins driven by lower propane wholesale cost. Adjusted EBITDA for its midstream operations Crude Oil Logistics segment was $108 million compared to $8.6 million in the prior year’s period.

Dividend Cut

Ferrellgas stated that due to the increase in debt it took on to fund the acquisition of Bridger, the outstanding debt balance from its Jamex’s settlement and the decrease in propane demand, the company’s leverage ratio has increased to levels approaching the 5.5 times limit allowed under its secured credit facility and accounts receivable securitization facility. On September 27, 2016, Ferrellgas entered into amendments for both facilities, under which the maximum leverage ratio was increased to a range of 5.95 times to 6.05 times over the next six quarters.

The company stated that it is focused on preserving capital and enhancing its financial position, including a possible reduction in annual cash distribution. The distribution for the first quarter has not yet been determined, but the board believes the annual distribution rate could be reduced to $1 per unit from $2.05.

CEO Departure

Ferrellgas announced that James E. Ferrell, the Company’s founder and Chairman of the Board of Directors, has been appointed as Interim President and Chief Executive Officer, effective immediately. Mr. Ferrell succeeds Stephen L. Wambold, who has stepped down from his roles as President and Chief Executive Officer and as a member of the Board.

Stock Performance

On Thursday, September 29, 2016, Ferrellgas Partners’ shares tumbled 9.46%, finishing the day at $11.77 with volume of 2.42 million shares exchanging hands by the close of the trading session, which was higher than their three months average volume of 344.91 thousand. Shares of the company have a dividend yield of 17.42.

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