Icahn Enterprises L.P. (NASDAQ:IEP) Q4 2023 Earnings Call Transcript
Icahn Enterprises L.P. (NASDAQ:IEP) Q4 2023 Earnings Call Transcript February 28, 2024
Icahn Enterprises L.P. misses on earnings expectations. Reported EPS is $-0.33 EPS, expectations were $0.21. IEP isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the Icahn Enterprises L.P. Fourth Quarter 2023 Earnings Conference Call with Jesse Lynn, General Counsel; Andrew Teno, President and Chief Executive Officer; Ted Papapostolou, Chief Financial Officer; and Robert Flint, Chief Accounting Officer. I would now like to hand the conference over to Jesse Lynn, who will read the opening statement.
Jesse Lynn: Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. Forward-looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will or words of similar meaning and include, but are not limited to, statements about the expected future business and financial performance of Icahn Enterprises L.P. and its subsidiaries. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors.
Accordingly, there is no assurance that our expectations will be realized. We assume no obligation to update or revise any forward-looking statements should circumstances change, except as otherwise required by law. This presentation also includes certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the back of this presentation. We also present indicative net asset value. Indicative net asset value includes, among other things, changes in the fair value of certain subsidiaries, which are not included in our GAAP earnings. All net income and EBITDA amounts we will discuss are attributable to Icahn Enterprises unless otherwise specified.
I’ll now turn it over to Andrew Teno, our Chief Executive Officer.
Andrew Teno: Thank you, Jesse. Let me first say, I am honored to take on my new role as CEO. Carl, IEP and our activism strategy have established an important place in corporate America, and I am excited to get to work. So today, I’ll provide a brief overview of Q4 results, and then we will be available for questions. The fourth quarter net loss was $139 million, an improvement of $116 million over Q4 2022. Fourth quarter adjusted EBITDA was $9 million, an increase of $84 million compared to Q4 2022. Our controlled operating companies have performed well. CVI has benefited from strong crack spreads, good operating utilization, reduced RIN costs and has authorized a $0.50 dividend per share. Our Automotive segment has posted strong year-over-year performance.
David Willetts is now leading the day-to-day operations at Pep Boys and we see the potential for significant long-term value creation, both through margin improvement and reinvigorating the top line. In the Investment segment this quarter, the funds had a negative return of 4.1%, primarily driven by broad market shorts. Our headline net short exposure of 36% is approximately 6% when you adjust for the energy hedges. This compares to approximately 34% as of the prior year-end, excluding the energy hedges. The indicative net asset value ended the quarter at $4.8 billion. Additionally, the Board approved a $1 quarterly distribution per depositary unit, which is consistent with the last quarter. With that, let me turn it over to Ted for a detailed discussion of all of our segments.
Ted Papapostolou: Thank you, Andrew. I will begin by reviewing the performance of our segments and comment on the strength of our balance sheet. Turning to our Investment segment, the funds had a negative return of 4.1% for the quarter. Long and other positions had a positive performance attribution of 2.4%, while short positions had a negative performance attribution of 6.5%. During the quarter, the segment made a pro rata distribution of $400 million, of which the Holding Company received its portion of $242 million. The Holding Company’s interest in the funds was approximately $3.2 billion as of quarter end. Turning to our Energy segment. In Q4 2023, adjusted EBITDA was $120 million as compared to $168 million in Q4 2022.
Q4 2023 refining margin per throughput barrel was $15.01 compared to $17.14 in the prior year quarter. This decrease was driven by weaker crack spreads and unfavorable inventory valuations that were offset in part by favorable derivative and RIN-related impacts. Q4 2023 average realized gate prices for UAN decreased by 47% to $241 per ton and ammonia decreased by 52% to $461 per ton when compared to the prior year quarter. CVI declared a fourth quarter cash dividend of $0.50 per share. And now to our Automotive segment. As we previously discussed, the segment has undergone significant change due to the deconsolidation of Auto Plus in January of 2023. The segment results throughout 2023 are made up primarily of automotive service operations as compared to 2022, which also included the aftermarket parts operations of Auto Plus.
Q4 2023 automotive service revenues were down $15 million compared to Q4 2022, driven by store closures and lower car count. Adjusted EBITDA was $28 million for the quarter, a $71 million improvement as compared to Q4 2022, mainly due to the exit of the Auto Plus aftermarket parts business. Now, turning to our Real Estate segment. Q4 2023 net sales and other revenues increased by $8 million and adjusted EBITDA increased by $3 million compared to the prior year quarter, primarily driven by the sale of single family homes. Now on to our Other Operating segments. Food packaging’s adjusted EBITDA was flat for Q4 2023 as compared to the prior year quarter. The quarter-over-quarter comparison was positively impacted by pricing initiatives and lower distribution cost, which was offset by lower sales volume.
Home Fashion’s adjusted EBITDA increased by $6 million as compared to the prior year quarter, primarily due to lower raw material and freight costs. The Pharma segments adjusted EBITDA for Q4 2023 improved by $3 million as compared to the prior year quarter, mainly due to increased sales volume along with margin improvement. Now, turning to our liquidity. During December, IEP issued $700 million of nine and three quarter senior unsecured notes due 2029. The net proceeds from this issuance together with $376 million of cash on hand, was used to satisfy the outstanding notes due 2024. We maintain liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. As of year-end, the holding company had cash and investment in the funds of $4.8 billion and our subsidiaries had cash and revolver availability of $1.7 billion.
In summary, we continue to focus on building asset value and maintaining liquidity to enable us to capitalize on opportunities within and outside our existing operating segments. Thank you. Operator, can you please open the call up for questions?
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Dan Fannon with Jefferies. Your line is now open.
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