UGI Corp. warned investors that it will likely post full-year profits at the low end of its forecast range and cut its earnings outlook for its AmeriGas Inc. propane unit, largely due to unfavorable weather conditions in the first half.
The international energy distribution company expects 2019 EPS to come in toward the bottom of its guidance of $2.40 to $2.60, executives said during an Aug. 6 conference call. UGI knocked down its original guidance for full-year earnings of $2.75 per share to $2.95 per share in April following warmer-than-usual winter temperatures in Europe and limited weather volatility in its U.S. Northeast and mid-Atlantic markets.
Those patterns persisted into UGI's fiscal third quarter and created headwinds that weighed on earnings, particularly during the shoulder period in April, UGI said.
"Although weather isn't as impactful in the third quarter as it is in the first two quarters, April accounts for approximately 70% of the heating degree days in the quarter, and the very warm weather negatively impacted volumes," UGI CFO Thaddeus Jastrzebski said.
Weather also played a part in UGI's decision to pare back EBITDA guidance at AmeriGas to $580 million to $590 million from an earlier projection of $610 million to $650 million.
EBITDA in the unit fell 37% from a year ago to $42.4 million as the company grappled with weather that was 8.7% warmer than in 2018 and 30% warmer in April alone, causing propane volumes to slump 6.7% year over year.
AmeriGas said its operating expenses were also impacted by setting aside reserves for litigation and by an accounting error related to the way the company was calculating depreciation on leased vehicles. Jastrzebski said he could not comment on the nature of the litigation.
UGI owns a 26% stake in AmeriGas. UGI expects its acquisition of the rest of the company to close in late August and have a negative impact on earnings of up to 5 cents per share.
During the call, UGI President and CEO John Walsh commented on the PennEast Pipeline Co. LLC development after project partner New Jersey Resources Corp. shifted the bulk of capital spending on the line from 2020 to 2021. Walsh said it is possible that major construction on the long-delayed pipeline will not begin until spring 2021, possibly pushing the start-up from late 2020 to the end of 2021.
UGI on Aug. 5 reported fiscal third-quarter earnings of $23.9 million, or 13 cents per share, up from $15.1 million, or 9 cents per share, in the year-ago period. The S&P Global Market Intelligence consensus normalized EPS estimate was 19 cents.
Shares of UGI closed down 3.5% to $47.67 on Aug. 6.