SGU · Star Group, L.P.

Operating income surged 25.4% to $157.2 million from $125.4 million, yielding an expanded operating margin of 20.5%. The increase in Adjusted EBITDA in the base business stemmed from higher home heating oil and propane per-gallon margins and improved installation profitability. These gains partially offset rises in delivery, branch, and service-related expenses triggered by the extremely cold weather, which drove higher service call volume. Notably, while installation gross profit improved, service gross profit reflected losses from elevated expenses tied to increased demand and propane tank installations.

Net income climbed 26.0% to $108.3 million from $85.9 million, bolstered by the combination of margin expansion and derivative fair value credits amid heating oil price volatility. This performance underscores the company's ability to capture value from per-gallon improvements even as weather intensified cost pressures.

Cash generation faced seasonal headwinds, with net cash provided by operating activities at -$61.1 million, compared to -$16.0 million last year. At quarter-end, liquidity and net working capital were negatively impacted by volatility in wholesale home heating oil prices and significant increases in product costs. Seasonal working capital needs escalated to finance these higher costs, contributing to the cash required for operations and resulting in free cash flow of -$68.8 million after $7.7 million in capital expenditures (up from $6.5 million prior year). Management anticipates financing any shortfalls via the revolving credit facility and subsequent seasonal reductions in inventory and receivables.

Overall, the quarter highlights resilience in core margins amid adverse weather and price swings, though working capital strains signal ongoing liquidity management focus into the heating season.