Why a warm winter could sap propane demand
Propane and winter heating
Propane distributors such as Amerigas Partners (APU), Ferrellgas (FGP), and Suburban Propane (SPH) sell propane and related equipment to a variety of end markets. These companies generate the majority of their earnings during the winter heating season, as a large proportion of the propane goes to residential and commercial customers, who use the commodity for home heating. For example, Ferrellgas Partners generated $1.26 billion in revenues for the six months ended April 30, 2013, compared to $705 million for the six months ended October 31, 2012. FGP’s revenue during the colder months was nearly double that of the warmer months. This pattern represents the other propane distributors as well.
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So the colder months are critical for earnings. Read on to find out which trends could hurt propane names this winter.