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Ferrellgas' Q1 Loss Wider than Expected

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Ferrellgas Partners LP (FGP - Free Report) reported first quarter fiscal 2014 loss per unit of 31 cents, wider than the Zacks Consensus Estimate of a loss of 17 cents.

Quarterly loss per unit widened by 9 cents from 22 cents a year ago, primarily due to higher operating expenses, an increase in depreciation expenses and a marginal rise in units outstanding.

Total Revenue

Ferrellgas Partners reported first quarter fiscal 2014 total revenue of $415 million, beating the Zacks Consensus Estimate by 11.6%. On a year-over-year basis, the partnership’s sales increased 14.4%.

The improvement in revenues was primarily due to a 14.0% year-over-year rise in sales at the Propane and other gas liquids sales segment on the back of higher propane gallon sales and strong contribution from the Other segment.

Operating Highlights

In the quarter under review, Ferrellgas Partners’ propane sales volume increased 6.5% year over year to 191 million gallons, primarily due to a significant rise in wholesale sales level and higher agricultural demand.

The partnership’s gross profit edged up 2% to $142.9 million from $140.1 million in the year-ago quarter, primarily due to higher sales volumes.

Operating expenses increased 6.8% year over year to $103.0 million. This was driven by a rise in general liability and workers' compensation costs, and higher costs associated with acquisitions.

The partnership incurred an operating loss of $2.9 million compared with an operating profit of $4.3 million a year ago quarter. Weak operating results were mainly due to higher costs of product sold, depreciation and amortization expenses, and general and administrative expenses.

Interest expenses edged down 1.5% year over year to $22.1 million, benefiting from a lower cost of borrowing.

Quarterly adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) were $26.4 million, down 16.5% from the year-ago figure.

Financial Highlights

Cash and cash equivalents as of Oct 31, 2013 were $8.4 million versus $6.5 million as of Jul 31, 2013.

The partnership's long-term debt as of Oct 31, 2013 was $1,116.2 million, up from $1,106.9 million as of Jul 31, 2013.

Ferrellgas Partners invested $13.3 million during the first three months of fiscal 2014 as capital expenditure, higher than the year-ago spending of $9.9 million.


The partnership provided fiscal 2014 EBITDA guidance in the range of $265 - $275 million, taking into account a normal winter season.

Other Company Releases

Alon USA Energy, Inc. announced third-quarter 2013 operating loss of 47 cents per share, wider than the Zacks Consensus Estimate of a loss of 28 cents.

CVR Refining, LP (CVRR - Free Report) reported third-quarter 2013 operating earnings of 58 cents per unit, beating the Zacks Consensus Estimate by 9 cents.

Delek US Holdings, Inc. (DK - Free Report) announced third-quarter 2013 operating earnings of 4 cents per share, missing the Zacks Consensus Estimate by a penny.

Our View

Ferrellgas Partners follows a strategic inorganic growth plan. We note that the partnership’s acquisition strategy involves buying up assets having the same line of business, which are immediately accretive. Recently, the partnership acquired Kan.-based KanGas Corporation.

These acquisitions will enable the partnership to expand its operations besides enhancing product offering. The successful integration of new assets will enable Ferrellgas Partners to reduce operating expenses, thereby improving margins.

Overland Park, Kan.-based Ferrellgas Partners is a leading distributor of propane gas solutions and related equipment in the U.S. The partnership provides propane services to residential, industrial, portable tank exchange, agricultural and wholesale customers. Ferrellgas Partners currently has a Zacks Rank #2 (Buy).

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