Inergy, L.P. says continues to face a challenging operating environment For the twelve months ended December 31, Inergy generated distributable cash flow of approximately 68% of the total cash distributions paid for the period. Market conditions, primarily in its propane operations and to a lesser extent in the Texas gas storage market, remain challenging. Although there are a number of factors that may impact its operations through the remainder of this fiscal year, a material improvement in distribution coverage is not expected. In light of these factors, management is conducting an evaluation of the operating businesses at Inergy, and is in the process of a major cost reduction initiative in its propane operations. In addition, management and the board of directors of Inergy are evaluating a reset of the quarterly distribution to a level that is supportable by the cash flow expected to be generated from Inergy’s businesses in the near term. //////////////////////////////////////////////
Even if they cut the pay out to $1.40 while we wait.I'll hold and wait.
By Travis Hoium | More Articles January 27, 2012 | Comments (1)
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of propane distributor Inergy (NYSE: NRGY ) fell as much as 24% today as warm weather put pressure on the company's business.
So what: The company said it may reduce distributions and is reviewing operations because of an unexpectedly warm winter, which has crushed demand for propane. Cash flows in 2011 only covered 68% of distributions, so management is going to review future distribution levels and may cut them to match future cash flows.
Now what: The weak demand shouldn't be a huge surprise, especially for those of us in Northern states enjoying the warm weather. But one bad year doesn't make a trend, and I think this sell-off is awfully big considering the fact that next year we could be back to more normal temperature levels. For investors willing to wait out the warmth this year, I think shares will recover long term as cold eventually blankets the country and Inergy's business lights up again.