Martin Midstream Partners L.P. Q4 FY2023 earnings call

Management Statement and Operational Highlights

• 2023 Achievements: Refinanced secured notes and revolving credit facility; exited volatile butane optimization business while retaining North Louisiana underground storage; began construction of Oleum Tower at Plainview sulfuric acid plant for DSM Semichem joint venture; exceeded EBITDA guidance and met targeted leverage ratio.
• Fourth Quarter Performance: Adjusted EBITDA for fourth quarter was $29.2 million, exceeding revised guidance by $2.3 million. Bulk of outperformance from land transportation and Sulfur Services, offset by one-time insurance charge in marine transportation.

Segment Performance

• Transportation: Fourth quarter adjusted EBITDA was $12 million (revised guidance $11.3 million). Land transportation had adjusted EBITDA of $9.6 million (revised guidance $7.3 million). Marine transportation had adjusted EBITDA of $2.3 million (revised guidance $4 million).
• Terminalling and Storage: Fourth quarter adjusted EBITDA was $9 million, in line with guidance. Revenue slightly missed forecast by 3% due to reduced throughput volumes, offset by 5% reduction in operating expenses.
• Sulfur Services: Fourth quarter adjusted EBITDA was $7.4 million (guidance $6 million). Fertilizer group had $3.9 million (guidance $3 million), pure sulfur side had $3.6 million (guidance $3 million) with 17% higher sulfur volume received than forecast.
• Specialty Products: Fourth quarter adjusted EBITDA was $4.9 million, in line with guidance, with strength in grease business offset by slight underperformance in packaged lubricant line.

Guidance

• 2024 adjusted EBITDA forecasted at $116.1 million, with 71% from fixed fee contracts and 29% margin-based.
• Segment Guidance: Transportation to generate $41.2 million (vs 2023 $46.8 million); Terminalling & Storage $37.7 million (improvement from 2023); Sulfur Services $29.7 million (vs 2023 $28.1 million) with ELSA project reservation fees; Specialty Products $22.7 million (vs 2023 $22.8 million).
• Capital Expenditures: 2024 growth CapEx ~$17.4 million (Oleum Tower and ELSA project); maintenance CapEx ~$32 million.
• Cash Flow: Distributable cash flow forecast $30.4 million, free cash flow $13.3 million.

Risks

• Marine Insurance: Supplemental insurance costs in marine transportation due to global industry losses, a one-time charge.
• DSM Semichem Timing: Uncertainty in timing of sales from the ELSA project and potential delays in customer projects.
• Land Transportation Volatility: Volatility in volumes and equipment lease vs maintenance costs impacting EBITDA forecasting.

Q: Kyle May asked about Terminalling & Storage segment volumes in 4Q and 2024.

A: Randy Tauscher responded that lower 4Q volumes were due to low diesel sales in October-November, with improvement in 1Q 2024 and stability expected with new minimum volume contract.

Q: Selman Akyol inquired about DSM Semichem reservation fees and growth.

A: Randy Tauscher stated $1 million per quarter reservation fees going forward with no catch-up, and potential growth in oleum production but no formal expansion discussions yet.

Q: Patrick Fitzgerald asked about maintenance CapEx and transportation forecasting.

A: Randy Tauscher explained maintenance CapEx breakdown including marine dry dock, refinery turnarounds, and Bob Bondurant discussed transportation forecasting based on mileage and revenue per mile consistency with customers