Star Group (NYSE:SGU) executives said fiscal 2026 began “very well,” pointing to colder-than-normal temperatures, contributions from recent acquisitions, and improved margin and cost management as key drivers of stronger first-quarter performance.
Management cites cold weather, acquisitions, and margin management
President and CEO Jeff Woosnam said results benefited from “recent acquisitions, physical supply, and per-gallon margin management,” as well as continued focus on service and installation profitability. He also highlighted the impact of weather, noting temperatures were almost 19% colder than the prior year’s first quarter and 6% colder than normal.
Woosnam also said cold conditions continued into the second quarter. According to his comments, January finished 2% colder than the prior year and 9% colder than normal. He emphasized employee performance amid snow and ice conditions, describing the delivery environment as challenging but consistent with what the company plans for as a “full-service provider.”
Volume and gross profit rose, while service results were pressured
Chief Financial Officer Rich Ambury reported that home heating oil and propane volume increased by 11.5 million gallons, or 14%, to about 94 million gallons. He said volume gains from acquisitions and colder temperatures were partially offset by net customer attrition and other factors.
Product gross profit increased by roughly $29 million, or 19%, to approximately $179 million, which Ambury attributed to higher volume and improved per-gallon margins.
Service and installation performance was mixed. The company reported combined gross profit from service and installations of $5.6 million for the quarter ended December 31, 2025, compared with $6.9 million in the year-ago quarter. Ambury said installation gross profit increased by $1.4 million, but service gross profit worsened, with the service gross profit loss increasing by $2.7 million. He attributed that deterioration to high service demand during colder temperatures and additional costs tied to an increase in propane tank sets.
Expenses rose; weather hedge and higher delivery costs contributed
Ambury said delivery, branch, and G&A expenses increased by $11 million versus the prior-year period. Weather hedge contracts accounted for $5 million of that increase because temperatures from November through December 2025 were colder than the contracts’ strike price.
Delivery expenses increased by $3.8 million, or 13%, which Ambury said was “largely due” to the 14% increase in heating oil and propane volume sold. He added that remaining operating costs increased by $2.2 million, or about 2%.
Net income rose, while derivative fair value moved against results
Net income increased by $3 million to $36 million, according to Ambury. He said the improvement reflected the $16.5 million gain in adjusted EBITDA, partially offset by an unfavorable year-over-year change in the fair value of derivative instruments.
Ambury noted that during the first quarter of fiscal 2026, Star Group recorded a $5 million non-cash charge related to changes in the fair value of derivative instruments, compared with a $5 million credit in the prior-year quarter. He said the year-over-year swing totaled $10 million.
He also said net income was negatively affected by higher depreciation and amortization, as well as higher net interest expense “due solely to our higher acquisition program,” totaling $1.7 million in aggregate, along with higher income tax expense of $1.3 million.
Adjusted EBITDA increased to $68 million; acquisition pipeline discussed
Adjusted EBITDA rose by $16.5 million to $68 million. Ambury said the increase was driven primarily by a $16.8 million rise in adjusted EBITDA in the base business and a $4.8 million increase from recent acquisitions, partially offset by the $5 million increase in expense related to the weather hedge contracts.
Woosnam said the company did not close any acquisitions during the quarter, though it completed the purchase of a small heating oil business “just a few days ago.” He described a “slight lull” in prospect activity as not unusual during a busy heating season, but said there are still several opportunities under review and he expects additional prospects as the company approaches spring.
In closing remarks, Woosnam said the company remains focused on customer service, cost control, and growing service and installation profitability, and plans to report fiscal 2026 second-quarter results in May.
About Star Group (NYSE:SGU)
Star Group, L.P., together with its subsidiaries, provides home heating oil and propane products and services to residential and commercial customers in the United States. It offers gasoline and diesel fuel; and installs, maintain, and repairs heating and air conditioning equipment. As of September 30, 2023, the company served approximately 402,200 full service residential and commercial home heating oil and propane customers and 52,400 customers on a delivery only basis. It also sells gasoline and diesel fuel to approximately 26,600 customers.
