Revises Fourth Quarter Guidance
- Reported net loss of $10.0 million, including a $24.0 million inventory valuation write down, for the nine months ended September 30, 2022
- Reported net loss of $28.0 million, including a $21.8 million inventory valuation write down, for the three months ended September 30, 2022
- Reported adjusted EBITDA of $18.8 million and $97.1 million for the three and nine months ended September 30, 2022, respectively
Martin Midstream Partners L.P. announced its financial results for the third quarter of 2022.
Bob Bondurant, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership, stated, "During the third quarter, which is typically the Partnership’s weakest quarter due to seasonal lows in the fertilizer and butane businesses, both the Transportation and the Terminalling and Storage segments continued to outperform our internal projections. In the Transportation segment, demand for reliable, experienced tank truck hauling continues to be strong and our expansion in Florida has been positive. On the marine side, rates have now recovered to pre-pandemic levels and asset utilization has improved. In the Terminalling and Storage segment, the underlying drivers of the lubricants and specialty products businesses are positive resulting in higher than anticipated sales volumes. However, the Sulfur and Natural Gas Liquids segments experienced volatility during the third quarter. In the Sulfur segment, both the fertilizer and sulfur groups faced pricing instability resulting in lower fertilizer sales volumes. In addition, the pure sulfur business was impacted by unplanned maintenance expense related to the marine assets deployed in support of the business. Finally, within the NGL segment the butane blending market was negatively impacted by steeply falling prices in September, resulting in a significant non-cash inventory value adjustment.
“Although the markets and the factors that influence them are unpredictable at this time, the Partnership has been able to improve our financial results year over year. However, as commodity prices continue to move erratically from the risk of a global recession and fears of weak oil demand, we are revising our fourth quarter adjusted EBITDA guidance to between $19 and $24 million, resulting in a range of $116 to $121 million for full year 2022.”
THIRD QUARTER 2022 OPERATING RESULTS BY BUSINESS SEGMENT
TERMINALLING AND STORAGE (“T&S”)
T&S Operating Income for the three months ended September 30, 2022 and 2021 was $5.6 million and $4.4 million, respectively.
Adjusted segment EBITDA for T&S was $12.3 million and $11.2 million, for the three months ended September 30, 2022 and 2021, respectively, reflecting continued strength in our lubricant and specialty products divisions.
TRANSPORTATION
Transportation Operating Income for the three months ended September 30, 2022 and 2021 was $12.1 million and $3.9 million, respectively.
Adjusted segment EBITDA for Transportation was $15.1 million and $7.6 million for the three months ended September 30, 2022 and 2021, respectively, reflecting robust demand for land transportation services coupled with improving marine fleet utilization and higher day rates.
SULFUR SERVICES
Sulfur Services Operating Income (Loss) for the three months ended September 30, 2022 and 2021 was $(6.7) million, including a $(3.3) million inventory valuation write down, and $2.3 million, respectively.
Adjusted segment EBITDA for Sulfur Services was $(4.2) million and $4.9 million for the three months ended September 30, 2022 and 2021, respectively, reflecting decreased fertilizer sales volumes related to pricing instability and higher operating expenses in the sulfur business due to marine asset maintenance expense.
NATURAL GAS LIQUIDS (“NGL”)
NGL Operating Income (Loss) for the three months ended September 30, 2022 and 2021 was $(19.0) million, including an $(18.5) million inventory valuation write down, and $1.6 million, respectively, as the butane blending market was negatively impacted by steeply falling prices in September 2022.
Adjusted segment EBITDA for NGL was $(0.2) million and $1.8 million for the three months ended September 30, 2022 and 2021, respectively, primarily reflecting decreased NGL sales volumes and margins.
UNALLOCATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSE (“USGA”)
USGA expenses included in operating income for the three months ended September 30, 2022 and 2021 were $4.3 million and $4.1 million, respectively.
USGA expenses included in adjusted EBITDA for the three months ended September 30, 2022 and 2021 were $4.2 million and $4.0 million, respectively, primarily reflecting an increase in employee related expenses.
CAPITALIZATION
At September 30, 2022, the Partnership had $547 million of total debt outstanding, including $202 million drawn on its $275 million revolving credit facility, $54 million of senior secured 1.5 lien notes due 2024 and $291 million of senior secured second lien notes due 2025. At September 30, 2022, the Partnership had liquidity of approximately $44 million from available capacity under its revolving credit facility. The Partnership’s adjusted leverage ratio, as calculated under the revolving credit facility, was 3.63 times and 3.46 times on September 30, 2022 and June 30, 2022, respectively. The Partnership was in compliance with all debt covenants as of September 30, 2022.
The Partnership’s revolving credit facility matures on August 31, 2023, therefore the outstanding borrowings under the facility are presented as a current liability on the September 30, 2022 financial statements. The Partnership is in the process of refinancing the credit facility, and although no assurance of success can be given, management presently believes the measures being taken will enable the Partnership to successfully extend the maturity of the credit facility.
RESULTS OF OPERATIONS
The Partnership had a net loss for the three months ended September 30, 2022 of $28.0 million, a loss of $0.71 per limited partner unit. The Partnership had a net loss for the three months ended September 30, 2021 of $6.9 million, a loss of $0.17 per limited partner unit. Adjusted EBITDA for the three months ended September 30, 2022 was $18.8 million compared to $21.5 million for the three months ended September 30, 2021. Net cash provided by (used in) operating activities for the three months ended September 30, 2022 was ($45.2) million, compared to $(18.5) million for the three months ended September 30, 2021. Distributable cash flow for the three months ended September 30, 2022 was $(3.5) million compared to $5.2 million for the three months ended September 30, 2021.
Revenues for the three months ended September 30, 2022 were $229.3 million compared to $211.3 million for the three months ended September 30, 2021.
The Partnership had a net loss for the nine months ended September 30, 2022 of $10.0 million, a loss of $0.25 per limited partner unit. The Partnership had a net loss for the nine months ended September 30, 2021 of $11.0 million, a loss of $0.28 per limited partner unit. Adjusted EBITDA for the nine months ended September 30, 2022 was $97.1 million compared to $74.9 million for the nine months ended September 30, 2021. Net cash provided by (used in) operating activities for the nine months ended September 30, 2022 was $(16.8) million, compared to $(12.4) million for the nine months ended September 30, 2021. Distributable cash flow for the nine months ended September 30, 2022 was $39.6 million compared to $25.3 million for the nine months ended September 30, 2021.
Revenues for the nine months ended September 30, 2022 were $775.5 million compared to $596.5 million for the nine months ended September 30, 2021.
EBITDA, adjusted EBITDA, distributable cash flow and adjusted free cash flow are non-GAAP financial measures which are explained in greater detail below under the heading "Use of Non-GAAP Financial Information." The Partnership has also included below a table entitled "Reconciliation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Adjusted Free Cash Flow" in order to show the components of these non-GAAP financial measures and their reconciliation to the most comparable GAAP measurement.
An attachment included in the Current Report on Form 8-K to which this announcement is included contains a comparison of the Partnership’s adjusted EBITDA for the third quarter 2022 to the Partnership's adjusted EBITDA for the third quarter 2021.
2022 REVISED FINANCIAL GUIDANCE
The Partnership now expects to generate adjusted EBITDA between $116 million and $121 million for full-year 2022, compared to the previously revised adjusted EBITDA guidance of between $126 million and $135 million. This decreased guidance reflects our expectation that the seasonal uplift in commodity prices, specifically normal butane prices as a percentage of crude oil, will be lower than historical patterns at least through year-end 2022.
Distributable cash flow is now expected to be between $38 million and $43 million for full-year 2022, compared to the previous distributable cash flow guidance of between $53 million and $62 million. Adjusted free cash flow is now expected to be between $29 million and $34 million, compared to the previous adjusted free cash flow guidance of between $44 million and $53 million.
MMLP does not intend at this time to provide financial guidance beyond 2022.
The Partnership has not provided comparable GAAP financial information on a forward-looking basis because it would require the Partnership to create estimated ranges on a GAAP basis, which would entail unreasonable effort as the adjustments required to reconcile forward-looking non-GAAP measures cannot be predicted with a reasonable degree of certainty but may include, among others, costs related to debt amendments and unusual charges, expenses and gains. Some or all of those adjustments could be significant.
