FERRELLGAS FINANCE CORP

FERRELLGAS FINANCE CORP Annual Report - Cleaned Investor Summary

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1. What They Do & This Year’s Performance

FerrellGas is America’s #2 propane supplier, serving homes, farms, and businesses. This year was turbulent: profits turned into a $15.6M loss due to a surprise $125M legal settlement (like an unexpected bill). They’re using weather data to predict demand better, but the legal hit overshadowed operations.

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2. Money Made & Growth

• Revenue: The company didn’t provide updated figures this year. Last year’s revenue was $1.8B (down 5% from the prior year).
• Net Loss: $15.6M vs. a $110.2M profit last year. The $125M swing came almost entirely from the legal settlement.
• Bright Spot: Adjusted EBITDA (cash flow before interest/taxes) remains a focus—they argue this better reflects their ability to generate cash.

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3. Biggest Wins & Challenges

Wins:

• Held onto their #2 U.S. propane market share.
• Improved demand forecasting using weather patterns (“heating degree days”).
  Challenges:
• Legal costs wiped out profits.
• Spent $100K on financial hedges to guard against propane price swings—a small cost now that could pay off later.

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4. Financial Health Check

• Debt: Still sky-high at $1.5B (roughly 10x their annual cash flow).
• Cash: Improved to $50M (up from $30M), but it’s a thin cushion for their debt load.
• New Risk: Warns that warm winters could hurt their ability to meet debt payments in the future.

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5. Risks to Watch

• Weather Dependency: 90% of their financial hedges rely on next year’s propane sales. A warm winter = trouble.
• Electric Competition: 32% of new homes now use electric stoves/heat instead of propane.
• Debt Burden: High interest payments could drain future profits.

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6. Competitive Edge

• #2 Nationwide in propane sales, trailing only an unnamed industry giant.
• Dominates portable tank exchanges (those blue tanks at gas stations), giving them a convenience advantage over rivals like Suburban Propane.

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7. Leadership & Strategy

• A new CFO is focused on debt reduction (no major progress yet).
• Locking In Prices: Hedging propane costs through 2026-2027 to stabilize against market swings.

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8. What’s Next?

• Betting on renewable propane to align with eco-friendly trends.
• Winter weather remains critical—their success hinges on cold snaps.
• Debt compliance is the top priority for 2026.

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9. Market Trends

• Climate Paradox: Cooling U.S. winters could boost demand, but warming trends pose a threat.
• Regulations: Tighter safety rules may raise operating costs.

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Investment Summary

The Good:

• Strong #2 market position with a loyal customer base.
• Smart hedging to manage price volatility.
• Renewable propane could open new opportunities.

The Bad:

• Debt is alarmingly high—$1.5B owed.
• Profits are at the mercy of winter weather.
• Legal issues this year show vulnerability to unexpected costs.

The Bottom Line:
FerrellGas is a high-risk, weather-dependent play. Their market share and hedging strategy provide some stability, but the massive debt and shift to electric alternatives make this speculative. Only consider if you’re comfortable with volatility and believe in a cold winter/renewable fuel payoff.

Think of it like a propane grill: Useful in specific conditions, but not something you’d rely on every day.