RGC Resources Inc (RGCO) (Q2 2024) Earnings Call Transcript Highlights: Key Financial Movements ...
Total Billed Customers: 63,660 as of end of April.
Delivered Gas Volumes: 9% increase year-over-year for Q2; modest increase year-to-date.
CapEx Spending: $11.3 million for the first six months of fiscal 2024, down from $12.9 million last year.
Operating Income: Decreased by $960,000 or about 10% to $8.6 million in Q2.
Equity in Earnings of Unconsolidated Affiliates: $1.2 million pretax from AFUDC.
Interest Expense: Increased by $170,000 due to higher rates impacting floating rate debt.
Net Income: $6.4 million in Q2; $11.5 million year-to-date.
Earnings Per Share (EPS): $0.63 per diluted share in Q2; $1.13 per diluted share year-to-date.
Debt Refinancing: Nearly $34 million in debt, refinanced with new maturities in 2025 and 2026.
Rate Case: Seeking an increase in base rates of approximately $4.3 million or about a 5% increase in total revenues.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
RGC Resources Inc (NASDAQ:RGCO) reported an increase in total billed customers to 63,660, indicating steady growth within its service footprint.
Delivered gas volumes were 9% higher compared to last year's second quarter due to colder weather, showing strong demand.
The company successfully managed capital expenditures, with a total of $11.3 million spent in the first six months of fiscal 2024, demonstrating effective cost management.
Net income for the second quarter was $6.4 million, slightly up from $6.3 million in the same quarter a year ago, driven by non-cash AFUDC from the MVP investment.
RGC Resources Inc (NASDAQ:RGCO) is nearing the commercial operation of the Mountain Valley Pipeline, which is expected to enhance supply and operational efficiency.
Negative Points
Second quarter operating income decreased by approximately 10% to $8.6 million due to rising costs across various sectors including personnel and IT.
Interest expenses increased by $170,000 due to a higher interest rate environment impacting the company's floating rate debt.
The company faces ongoing inflationary pressures which are expected to continue affecting financial performance in the upcoming quarters.
There is a significant amount of debt, nearly $34 million, associated with the MVP investment, posing financial risk.
The rate case filed with the Virginia State Corporation Commission is still under review with a final resolution not expected until the second quarter of 2025, creating uncertainty.
Q & A Highlights
Q: Can you discuss the impact of Mountain Valley Pipeline on your gas supply costs given the current low natural gas prices? A: (Paul Nester - President, CEO, & Director) Yes, despite the historically low natural gas prices, the introduction of the Mountain Valley Pipeline isn't expected to significantly alter our overall natural gas cost structure in the near term. The demand charges for Mountain Valley have already been incorporated into our purchased gas adjustment for this quarter as approved by the commission.
Q: With the Mountain Valley Pipeline coming online, will you prioritize its gas over other sources? A: (Paul Nester - President, CEO, & Director) Our asset manager optimizes our gas supply daily to ensure cost efficiency for our customers. The choice of gas source will depend on daily market conditions and pricing relative to our pricing basket, which includes seven different pricing points.
Q: How are the inflationary pressures and higher interest rates impacting your financial performance? A: (Tim Mulvaney - CFO, VP, & Treasurer) The inflationary pressures and higher interest rates have been challenging, particularly impacting personnel and IT-related costs. However, the AFUDC from the MVP project has bolstered our financial results this quarter.
Q: Can you provide details on the recent rate case filing and its expected impact? A: (Tommy Oliver - SVP - Regulatory and External Affairs) We filed a general rate case seeking an increase in base rates by approximately $4.3 million, reflecting a 5% increase in total revenues. The new rates are set to take effect on July 1, subject to refund, with a final resolution expected by the second quarter of 2025.
Q: What are the projections for capital spending and earnings for 2024? A: (Paul Nester - President, CEO, & Director) Our capital spending for 2024 is slightly up, mainly due to pressures similar to those affecting our operating expenses. However, our overall spend is lower than in 2023 due to the completion of the RNG project. Our consolidated earnings guidance remains unchanged from the first quarter.
Q: How is the completion of the Lafayette Gate Station progressing and what is its significance? A: (Paul Nester - President, CEO, & Director) The Lafayette Gate Station is nearing 100% completion and we are conducting final testing. This station is crucial as it represents one of the interconnection points with the Mountain Valley Pipeline, enhancing our supply capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
