Suburban Propane Q3 Loss Widens on Costs and Weather Woes

Suburban Propane Partners, L.P. SPH reported a fiscal third-quarter 2026 loss of 26 cents per unit, wider than the year-ago loss of 23 cents and the Zacks Consensus Estimate of a loss of 16 cents by 62.5%. Higher operating costs and weaker heat-related demand hurt the company’s performance.

Revenues rose 0.5% year over year to $261.4 million and marginally beat the Zacks Consensus Estimate of $260 million. The top-line beat was supported by a 20.6% increase in fuel oil and refined fuels revenues, where higher selling prices more than offset lower volumes, helping counter softness in natural gas and electricity, and all other revenues.

SPH Propane Volumes Feel April Weather Pressure

Propane revenues were $227 million, essentially flat year over year. A 1.8% decline in volumes reduced revenues by $4 million, while a 0.7% increase in average selling prices added $1.5 million.

Average temperatures across SPH's service territories were 17% warmer than normal and 3% warmer than the prior-year quarter. April was 24% warmer than normal and 11% warmer year over year, ranking as the second warmest April on record. Weather also pressured peer UGI Corporation UGI, where AmeriGas propane gallons fell 10% as April temperatures were 16% warmer year over year. On the other hand, Global Partners LP GLP benefited from the breadth of its liquid-energy platform in a volatile market environment.

Suburban Propane Sees Mixed Revenue Trends

Fuel oil and refined fuels revenues increased 20.6% year over year to $11.7 million. Average selling prices rose 31.9%, more than offsetting an 8.3% decline in gallons sold.

Natural gas and electricity revenues declined 6.5% to $4.5 million, while all other revenues fell 2.8% to $18.2 million. The peer backdrop was mixed as well, with UGI's AmeriGas revenues declining 14% to $372 million, while Global Partners’ second-quarter sales increased to $6.8 billion from $4.6 billion, aided by higher sales across its Wholesale, GDSO and Commercial segments.

SPH Costs Weigh on Quarterly Profitability

Operating expenses climbed 6.3% year over year to $125 million, driven by higher payroll and benefit-related costs and increased fuel and vehicle maintenance costs. A $1.1 million benefit from production tax credits tied to renewable natural gas injections provided a partial offset.

General and administrative expenses decreased 12.2% to $16.5 million, primarily due to lower variable compensation costs. Adjusted EBITDA fell to $18 million from $27 million a year earlier, while adjusted net loss was $17.7 million, or 27 cents per unit, compared with $10.8 million, or 17 cents, in the prior-year quarter. Among its peers, UGI's AmeriGas EBIT loss widened to $53 million from $28 million, whereas Global Partners’ adjusted EBITDA increased to $148.2 million from $98.2 million, highlighting divergent profitability trends across energy distributors.

Suburban Propane Builds RNG Production Capacity

Suburban Propane’s renewable natural gas operations delivered relatively stable production in the fiscal third quarter. Average daily RNG injection was essentially unchanged from the prior-year period, as growth in manure-based D3 volumes was offset by lower food-waste D5 injection. Revenue trends were supported by stronger environmental credit pricing, with California LCFS credit prices up 31% year over year and D3 RIN prices rising 8%.

The Rank #2 (Buy) partnership also advanced the expansion of its RNG platform after the quarter ended. Its new anaerobic digester facility in Upstate New York entered service and is expected to contribute about 100,000 MMBtu of annual D3 RNG injection. Meanwhile, the upgraded Columbus, OH, facility is expected to begin injecting pipeline-quality RNG during the fourth quarter, adding nearly 200,000 MMBtu of annual D5 production capacity.

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SPH Targets Higher RNG Output Into Fiscal 2027

With the New York facility operational and the Columbus project nearing completion, SPH expects to enter fiscal 2027 with all three RNG facilities in operation. Management projects annual RNG injection of 750,000-800,000 MMBtu and sees additional growth potential from optimizing plant capacity and increasing feedstock intake.

Suburban Propane spent $21.4 million on capital projects during the quarter, including $15.1 million of growth capital. Year-to-date growth spending on the RNG facilities totaled $28.7 million, while the midstream operator expects full-year capital spending on its existing RNG projects to about $35 million, at the low end of its earlier $35-$40 million range.

Suburban Propane Cuts Revolver Debt

During the quarter, 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 borrowings under its revolving credit facility. Its trailing 12-month consolidated leverage ratio was 4.35 times compared with 4.33 times a year earlier.

The board declared a quarterly distribution of 32.5 cents per common unit, equivalent to an annualized rate of $1.30 per unit. Distribution coverage for the trailing 12 months ended June 2026 was 2.07 times.

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This article originally published on Zacks Investment Research (zacks.com).

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