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Propane demand reduced to pre-pandemic levels ahead of Memorial Day Weekend

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Ferrellgas COO Tamria Zertuche joins Yahoo Finance Live to discuss the propane demand, the expectations for a pre-pandemic summer season, supply chain constraints, and the outlook for Memorial Day Weekend.

Video Transcript

AKIKO FUJITA: US propane providers are looking to the Memorial Day weekend to gas up profits, even as energy remains strong and logistics spike. But loosened pandemic restrictions could mean sputtering demand as Americans move around, instead of staying put and grilling at home. Here with more, we've got Tamria Zertuche. She is the CEO of Ferrellgas-- or COO, I should say, of Ferrellgas. It's good to talk to you today. You're certainly not immune from the huge spikes that we have seen in natural gas, fuel overall. Can you speak to that, first of all, about how that has squeezed margins for you?

TAMRIA ZERTUCHE: Well, propane is a byproduct of a refining process. So as the commodities involved in that process increase, then so, too, could the cost of propane rise. However, supply, obviously, is a moderator for that. And there's plenty of supply of propane. Our supply chain obviously uses diesel for some of our fleet, so that is an increasing cost, so that has definitely impacted. And steel in our cylinders, that has been an impact as well.

BRIAN CHEUNG: Tamria, it's Brian Cheung here. Good to have you on the show. I wanted to ask about the seasonality factor of all of this. We know we're going into Memorial Day weekend. Propane for the purposes of grilling is starting to peak and will peak through the summer. So what do you see as the seasonal effects? How is that going to distort the prices that we should expect to see this summer?

TAMRIA ZERTUCHE: Well, ultimately, you know, grilling in the summer, that is something that we've always known. But really, grilling happens all year long. The Hearth, Patio, and Barbecue Association says that 73% of Americans, they grill and use their smokers all year round. And then during our at-home stay, during the pandemic, we increased the backyard to be a place for outdoor adventures. Fire pits and patio heaters are there. So it's really an all year round thing.

Seasonally right now, though, grill sales over Memorial Day weekend, it's going to be the heaviest for Blue Rhino. Everyone's going to be bringing their empty tanks in to a convenient location and exchanging them. It's definitely our biggest weekend.

AKIKO FUJITA: Yeah, I mean, typically, Memorial Day weekend is one of the biggest, certainly a kickoff to the summer season where I'd imagine you've got huge demand. But we're coming out of a period where people were stuck at home. They were grilling in a big way. How does the demand you're seeing this holiday compare to what you saw last year? And what does that tell you about how habits are shifting?

TAMRIA ZERTUCHE: I mean, that's a great question. What we know is that having a backyard barbecue with your friends and family, it's still one of the most affordable ways in which to share a meal. So we still see strong sales and demand for the weekend, but absolutely post at-home stays, people are out and about. And so restaurants that were using patio heaters and whatnot to extend their area, that definitely is down.

BRIAN CHEUNG: And also, I want to ask about just kind of the supply chain shortages and how that has affected your business as well, in addition to just the gas itself. What was interesting was just kind of the shortages that we saw in steel. Did you have difficulty over the last 12 months just getting the actual steel to have-- store this type of gas?

TAMRIA ZERTUCHE: Right, our suppliers definitely had difficulty. However, we have great relationships with those suppliers, and we were able to continue to have almost disrupted supply chain. We value the relationships we have. Steel continues to definitely be an impact for us.

BRIAN CHEUNG: And also, I just really quickly I wanted to ask about whether or not you see any sales right now, giving you an indication for how much people will be grilling this weekend.

TAMRIA ZERTUCHE: Well, all indications is that it's going to be a huge grilling weekend. And we will work very closely with our retailers. I could not be more proud of our delivery professionals, who are out all month, getting ready for this weekend. Some of our drivers will deliver 17 tons of propane this weekend.

BRIAN CHEUNG: All right, well, I'll have my propane tank ready for some hot dogs this weekend. Tamria Zertuche, Ferrellgas COO, thanks again for stopping by this morning. Appreciate it.