May 11, 2017 [OPIS] - Sprague Resources, a major fuel distributor and storage player in the U.S. Northeast, said that its first-quarter sales volume for refined products decreased by 1% from a year ago as higher transportation fuel volume failed to fully offset a drop in heating oil sales.
Despite lower margins and volumes for refined products as well as weaker margin from its Materials Handling segment, Sprague saw stronger financial performance from its Natural Gas business segment.
Volumes in the Refined Products segment in the first quarter were 472.7 million gal in the first quarter of 2017, compared to 477.4 million gal in the first quarter of 2016. Sprague did not offer a volume breakdown on oil products.
Adjusted gross margin in the Refined Products segment decreased $2.2 million, or 5%, to $39.5 million in the first quarter of 2017, compared to $41.6 million in the first quarter of 2016.
“Sprague’s Refined Products sales volumes were stable in the first quarter, as declines in heating oil sales were offset by increased sales of transportation fuels,” said David Glendon, Sprague’s CEO.
“The decline in our adjusted gross margin of $2.2 million was driven primarily by compressed unit margins, as competitors aggressively priced product to liquidate inventory during the quarter,” he said.
Net income was $64.5 million for the first quarter of 2017, compared to $29.8 million for the first quarter of 2016.
Adjusted gross margin was $90.4 million for the first quarter of 2017, compared to $86.5 million for the first quarter of 2016.
Adjusted EBITDA was $47.3 million for the first quarter of 2017, compared to $45.4 million for the first quarter of 2016.
Sprague’s Natural Gas segment volumes increased 7% to 20.2 million Bcf in the first quarter of 2017, compared to 18.8 million Bcf in the first quarter of 2016. Natural Gas adjusted gross margin increased $7.5 million, or 24%, to $38.6 million for the first quarter of 2017, compared to $31.1 million for the first quarter of 2016.
“Our Natural Gas adjusted gross margin increased by 24% for the quarter, with supply and logistics optimization delivering much of this increase,” said Glendon. “Sales volumes increased by 7%, mainly from the Global acquisition, which we expect to represent another successful execution of our Natural Gas consolidation strategy.”
Materials Handling adjusted gross margin decreased by $1.5 million, or 13%, to $9.9 million for the first quarter of 2017, compared to $11.4 million for the first quarter of 2016.
“Sprague’s Materials Handling adjusted gross margin decreased based on a reduction of break bulk activity related to windmill projects in the Northeast,” said Glendon.
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