STAMFORD, Conn. – The nation’s largest retail distributor of home heating oil, Star Gas Partners L.P. (NYSE: SGU), posted a profit of $11.85 million for its fiscal third quarter, compared with a year-ago net loss of $8.27 million, on total sales that rose 16.01 percent to $248.07 million
Diluted earnings per “limited partner unit” amounted to 16 cents, compared with the 2007 fiscal third quarter’s 11-cent loss, Star Gas said.
An increase in selling prices for home heating oil was partly offset by a decline in sales volume. Heating-oil volume fell to 46.0 million gallons, “as the additional volume provided by acquisitions was more than offset by the effects of warmer temperatures, net customer attrition, conservation and other factors,” the partnership said.
“The extreme volatility in home heating oil prices continued through the third quarter, and we hit record price levels 47 times through July 31, CEO Daniel P. Donovan noted in the after-market report. “Prices have increased by almost $2 per gallon versus last year.
“Predictably,” he added, “high prices have resulted in more price-sensitivity among our customer base. In addition to seeking ways to conserve, more customers are open to – or are actively seeking – low-price offers from our competition.
“We are fighting to retain this business, while conscious of the need to improve cents-per-gallon gross profit margins as we prepare for the winter heating season.”
The partnership, the report said, “was able to reduce certain operating costs, in response to the decline in home heating oil volume,” a savings that partly offset an increase in its reserve against doubtful accounts ($3 million) and “the additional expenses attributable to stand alone acquisitions ($2.2 million).” But Star’s higher operating costs and lower gross profit ($3.8 million) were outweighed by what the report described as “a favorable change in the fair value of derivatives of $25.2 million.”
“Margin management is crucial,” Donovan said, “since a large portion of our operating costs – necessary to profitably serve our customers – are of a fixed nature. … We have been focusing our off-season efforts on seeking and making sound acquisitions; planning and executing marketing and operating strategies to maximize profitable growth; effectively managing customer communications and requests for the coming heating season; and continuing to improve the various services we offer.”
In the heating season ahead, Star’s “solid balance sheet and ample liquidity” will represent “a key advantage, given the tight credit environment,” Donovan said. “Our goal is to continue to manage our business effectively through this challenging environment, and thus demonstrate that the resumption of quarterly distributions in February of 2009 is warranted.”
Star Gas Partners L.P. (NYSE: SGU) is a provider of heating oil and related services to customers in Rhode Island, Connecticut, Maryland, Massachusetts, New York, Pennsylvania, Virginia and Washington, D.C. Additional information is available at www.star-gas.com.
