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Suburban Propane Partners (SPH) Q3 FY26 earnings call: guidance

Earnings call· Jun 2026 (Q3 FY26)· Energy· Aug 6, 2026

Source: earnings call transcript

Executive summary

Suburban Propane Partners Q3 FY26 — RNG Expansion and Debt Reduction Amidst Warm Weather

Suburban Propane Partners navigated a challenging third quarter marked by significantly warmer weather in April, which impacted heat-related demand, yet achieved volume growth in May and June. The company continued to advance its renewable natural gas (RNG) platform with new facilities coming online and benefited from improving environmental credit prices. Strategic capital allocation focused on debt reduction and strengthening the balance sheet, positioning the company for long-term growth in both its core propane business and emerging renewable energy segment.

Highlights

6

  • Volumes in May and June exceeded prior year levels, offsetting the impact of warmer April weather.

  • RNG injection revenue benefited from higher environmental attribute prices, with California LCFS credit prices up 31% YoY and D3 RIN prices up 8% YoY.

  • New anaerobic digester facility in Upstate New York placed into service, expected to add approximately 100,000 MMBtu of annual D3 RNG injection.

  • Columbus, Ohio biogas facility expected to inject pipeline quality RNG in Q4 FY26, adding nearly 200,000 MMBtu of annual D5 RNG injection.

  • Reduced debt by more than $36 million during the quarter using excess cash flows and ATM proceeds.

  • Distribution coverage remained very strong at 2.07x for the trailing 12 months ended June 2026.

Concerns

5

  • Adjusted net loss for Q3 FY26 was $17.7 million, compared to $10.8 million in the prior year, primarily due to lower volumes and higher operating costs.

  • Adjusted EBITDA for Q3 FY26 was $18 million, down from $27 million in the prior year.

  • Retail propane gallons sold decreased by 1.8% YoY to 70.6 million gallons, mainly due to warmer April weather.

  • Average temperatures across service territories were 17% warmer than normal and 3% warmer than prior year, with April being 24% warmer than normal and 11% warmer than April 2025.

  • Combined operating and G&A expenses increased by $5.2 million or 3.8% YoY to $141.4 million, driven by higher payroll, benefits, fuel, and vehicle maintenance costs.

Guidance & targets

CategoryTargetConfidence
Annual RNG Injection
750,000 to 800,000 MMBtu
medium materiality
High
Full-year Capital Spending for RNG Projects
$35 million
medium materiality
High

Capital programs

Existing RNG Projects Capital Spending nearing completion $35 million
Period spend: $28.7 million
Spent to date: $28.7 million
Funding: cash flows from operating activities and net proceeds from ATM program
Start: past 3-plus years

Benefit:750,000 to 800,000 MMBtu annual injection

Full year capital spending estimate for existing RNG projects, revised to the low end of the previously communicated range of $35 million to $40 million. Includes construction efforts at Columbus, Ohio and Upstate New York facilities.

Risks & headwinds

Warmer than normal weather impacting heat-related demand Q3 FY26

Average temperatures across our service territories during the third quarter were 17% warmer than normal and 3% warmer than the prior year third quarter. For the month of April, average temperatures were 24% warmer than normal and 11% warmer than April 2025 and ranked as the second warmest April on record.

Mitigation:Customer base growth in counter-seasonal segments (agricultural, industrial, national accounts) substantially offset the impact.

Volatile commodity prices Q3 FY26

posted propane prices were volatile and traded between $0.70 and $0.90 per gallon basis Mont Belvieu due to geopolitical tensions in the Middle East and strong export demand.

Mitigation:Maintaining discipline over operating costs and managing selling prices.

Higher operating costs Q3 FY26

Combined operating and G&A expenses of $141.4 million for the third quarter were $5.2 million or 3.8% higher than the prior year. The increase was primarily attributable to higher payroll and benefit-related expenses and higher fuel and vehicle maintenance costs.

Mitigation:Partially offset by lower variable compensation costs and a benefit of $1.1 million from production tax credits.

What to watch in Q4 FY26

Columbus, Ohio biogas facility RNG injection

Q4 FY26
Current not yet injecting pipeline quality RNG
Target injecting pipeline quality RNG

Why it matters

This facility is expected to add nearly 200,000 MMBtu of annual D5 RNG injection, contributing significantly to the overall RNG platform's production targets.

And following the completion of our RNG upgrade project at our Columbus, Ohio biogas facility, we expect to be injecting pipeline quality RNG from that facility during the fourth quarter, which is expected to add another nearly 200,000 MMBtu of annual D5 RNG injection.

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Detailed narrative

Q3 Performance Overview

Despite a slow start in April due to near-record warm temperatures (24% warmer than normal) and elevated residential customer tank levels, the company saw volumes in May and June exceed prior year levels. This was primarily driven by continued growth in counter-seasonal customer segments like agricultural, industrial, and national accounts, which substantially offset the weather impact.

Renewable Natural Gas (RNG) Operations

Average daily RNG injection was flat YoY, but revenues benefited significantly from higher environmental attribute prices, with California LCFS credits increasing 31% YoY and D3 RIN prices up 8% YoY. The company recognized a $1.1 million benefit from production tax credits (Section 45Z IRA) for D3 injections at its Stanfield, Arizona facility due to its negative carbon intensity score.

RNG Facility Expansion

Subsequent to the quarter, a new anaerobic digester facility in Upstate New York was placed into service, expected to add 100,000 MMBtu of annual D3 RNG injection. The Columbus, Ohio biogas facility is also expected to inject pipeline quality RNG in Q4 FY26, adding nearly 200,000 MMBtu of annual D5 RNG injection. These completions mean all three RNG facilities will be operational by FY27.

Capital Allocation and Balance Sheet

The company utilized excess cash flows and $6.6 million from its ATM equity sales program to repay $36.2 million of borrowings under its revolving credit facility. This debt reduction effort contributed to maintaining a consolidated leverage ratio of 4.35x for the trailing 12 months ended June 2026, flat compared to the prior year.

Market Conditions and Outlook

U.S. propane inventories remained strong, 21% above prior year and historical averages in June 2026. Despite this, wholesale propane prices were volatile, trading between $0.70 and $0.90 per gallon due to geopolitical tensions and strong export demand, resulting in a 3.6% YoY increase in average wholesale prices for the quarter.

Management expects improving environmental credit prices and regulatory support to provide a tailwind for the RNG platform.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.