Martin Midstream Partners LP :MMLP-US: Earnings Analysis: Q3, 2017 By the Numbers : October 27, 2017

Martin Midstream Partners LP reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Martin Midstream Partners LP – Ferrellgas Partners, L.P. (FGP-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 193.13 million, Net Earnings of USD -15.92 million.
  • Gross margins narrowed from 9.44% to 2.50% compared to the same period last year, operating (EBITDA) margins now 8.28% from 17.50%.
  • Year-on-year change in operating cash flow of -39.51% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 193.13 193.92 253.33 236.9 174.54
Revenue Growth (%YOY) 10.65 1.88 12.29 -6.87 -22.78
Earnings (mil) -15.92 0.97 13.28 17.47 -0.91
Earnings Growth (%YOY) -1645.94 119.05 13.86 514.74 -41.4
Net Margin (%) -8.24 0.5 5.24 7.37 -0.52
EPS -0.42 0.03 0.36 0.49 -0.03
Return on Equity (%) -5.03 0.28 3.99 5.61 -0.28
Return on Assets (%) -5.15 0.32 4.33 5.4 -0.27

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Market Share Versus Profits

Revenues History
Earnings History

MMLP-US’s change in revenue this period compared to the same period last year of 10.65% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that MMLP-US is holding onto its market share. Also, for comparison purposes, revenues changed by -0.41% and earnings by -1,746.64% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 9.44% to 2.50%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 17.50% to 8.28% in this time frame. For comparison, gross margins were 10.13% and EBITDA margins were 16.01% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

MMLP-US’s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 47.73 days, compared to last year’s level of 42.82 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

MMLP-US’s change in operating cash flow of -39.51% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 4.82% to -2.22% and (2) one-time items that contributed to a decrease in pretax margins from -0.43% to -8.38%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Martin Midstream Partners LP is engaged in the diverse set of operations focused primarily in the United States Gulf Coast region. The company operates through the following segments: Terminalling and Storage, Natural Gas Services, Sulfur Services and Marine Transportation. The Terminalling & Storage segment owns or operates marine shore-based terminal facilities and specialty terminal facilities located primarily in the U.S. Gulf Coast region that provides storage, refining, blending, packaging, and handling services for producers and suppliers of petroleum products and by-products, including the refining of naphthenic crude oil and the blending and packaging of various grades and quantities of industrial, commercial, and automotive lubricants and greases. The Natural Gas Services segment distributes natural gas liquids. It purchases NGLs primarily from refineries and natural gas processors. The segment stores and transports NGLs for wholesale deliveries to refineries, industrial NGL users in Texas and the Southeastern U.S, and propane retailers. The Sulfur Services segment develops an integrated system of transportation assets and facilities relating to sulfur services. It processes and distributes sulfur produced by oil refineries primarily located in the U.S. Gulf Coast region. This segment buys and sells molten sulfur on contracts that are tied to sulfur indices and tend to provide stable margins. The Marine Transportation segment operates a fleet of inland marine tank barges, inland push boats, offshore tug, and barge unit that transport petroleum products and by-products largely in the U.S. Gulf Coast region. Martin Midstream Partners was founded in 2002 and is headquartered in Kilgore, TX.

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