Yahoo Finance Spire Inc (SR) (Q2 2024) Earnings Call Transcript Highlights: Navigating Economic Shifts and ...
Net Economic Earnings Per Share: $3.45 in fiscal Q2 2024, down from $3.70 in the previous year.
Net Economic Earnings: $197 million in fiscal Q2 2024, a decrease of $2.6 million from last year.
Gas Utility Earnings: $188 million, up $4 million year-over-year.
Capital Expenditure (CapEx): Total $409 million fiscal year to date; Gas Utilities $311 million, up 7% year-over-year.
Midstream Segment Investment: $98 million fiscal year to date, primarily for Spire Storage West expansion.
Interest and O&M Costs: Interest costs increased by $5 million; O&M costs up $2.3 million in Q2.
Regulatory Approvals: Missouri Public Service Commission approved $16.8 million in new revenues; effective rates in Alabama from January 1.
Weather Impact: Overall warmer weather by 15%, affecting usage and revenue.
Advanced Meter Installations: Over 120,000 new installations, totaling 660,000 customers.
Fiscal Year '24 Capital Investment Target: Increased by $35 million to $800 million.
Net Economic Earnings Guidance FY '24: Reaffirmed at $4.25 to $4.45 per share.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Spire Inc (NYSE:SR) reported a robust capital investment plan aimed at modernizing infrastructure and enhancing service delivery, with $409 million invested in the fiscal year to date.
The company successfully managed regulatory outcomes, securing $16.8 million in new revenues from the Missouri Public Service Commission for infrastructure upgrades.
Spire Inc (NYSE:SR) has expanded its board with strategic appointments, enhancing governance and oversight capabilities.
The company's Midstream segment showed solid performance with the successful acquisition and integration of MoGas and Omega, and a revised expansion plan for Spire Storage West.
Spire Inc (NYSE:SR) reaffirmed its long-term net economic earnings per share growth target of 5% to 7%, reflecting confidence in its strategic direction and operational management.
Negative Points
Spire Inc (NYSE:SR) experienced a decrease in net economic earnings per share from $3.70 last year to $3.45 this year, primarily due to warmer weather leading to lower usage and higher interest expenses.
The weather normalization adjustment rider in Missouri was less effective this year, leading to unmitigated losses in weather-related margins in the residential customer class.
Operational and maintenance costs increased by $2.3 million compared to the previous year's second quarter, despite efforts to control expenses.
Interest expenses were higher by $5 million due to increased long-term and short-term interest rates, impacting the company's financial performance.
The company faces ongoing challenges with weather fluctuations and their impact on customer usage patterns, requiring further analysis and potential regulatory adjustments.
Q & A Highlights
Q: Can you discuss the impact of weather on your guidance range and where you are trending within that range? A: Steven Lindsey, President and CEO of Spire Inc, acknowledged the impact of weather on their business units, indicating a slight degradation overall due to utility and interest rates at the corporate level. He highlighted the expectation of normalized weather and mitigation for the next year, suggesting a rebound in performance.
Q: How is the weather normalization adjustment rider (WNA) performing in Missouri given the unusual weather patterns, and what are the plans to address the lack of correlation between degree days and mitigation? A: Scott Doyle, EVP and COO, noted the unique weather patterns that did not align with the norms of the WNA, affecting customer usage. He mentioned the need for further study and modeling with the PSC staff to improve the mechanism, with discussions expected to take place in a future rate case.
Q: What are the assumptions for interest rates moving forward, given the current market conditions? A: Steven Lindsey mentioned that Spire Inc has adopted a "higher for longer" view on interest rates, focusing on managing impacts more related to balance rather than rate fluctuations. This approach helps in planning and mitigating interest rate impacts on their operations.
Q: Can you provide more details on the midstream segment, particularly the storage expansion and its financial impacts? A: Steven Rasche, CFO, discussed the midstream segment's growth, driven by the expansion of Spire Storage West. He highlighted successful contracting at rates above initial estimates and a stable contract term market. Rasche also mentioned potential future opportunities for expansion but emphasized the current focus on completing existing projects.
Q: What are the expected drivers for the improvement in the second half of the fiscal year compared to last year? A: Steven Rasche pointed out that cost management, particularly in operations and maintenance, and the recovery of deferred gas costs, which are expected to reduce balance impacts, are key drivers. These factors are anticipated to support better financial performance in the second half of the year compared to the previous year.
Q: Regarding the new storage rates and capacity expansion, is there any spare capacity, and how are the fees structured? A: Steven Rasche explained that the rates for new storage capacity are aligned with current market conditions and are secured under contracts with terms of three to five years. He also mentioned the ongoing evaluation of additional expansion opportunities, focusing on optimizing the current operations before considering further growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
