IEP earnings name for the interval ending June 30, 2024.
Picture supply: The Motley Idiot.
Icahn Enterprises (IEP -4.30%)
Q2 2024 Earnings Name
Aug 07, 2024, 10:00 a.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Individuals
Ready Remarks:
Operator
Good morning, and welcome to the Icahn Enterprises L.P.’s second-quarter 2024 earnings name with Andrew Teno, president and CEO; Ted Papapostolou, chief monetary officer; and Robert Flint, chief accounting officer. I might now like handy the decision over to Robert Flint who will learn the opening statements. Please go forward.
Rob Flint — Chief Accounting Officer
Thanks, operator. The Personal Securities Litigation Reform Act of 1995 offers a Secure Harbor for forward-looking statements we make on this presentation, together with statements relating to our future efficiency and plans for our companies and potential acquisitions. Ahead-looking statements could also be recognized by phrases similar to expects, anticipates, intends, plans, believes, seeks, estimates, will, or phrases of comparable that means and embody however are usually not restricted to statements in regards to the anticipated future enterprise and monetary efficiency of Icahn Enterprises L.P. and its subsidiaries.
Precise occasions, outcomes, and outcomes might differ materially from our expectations on account of a wide range of recognized and unknown dangers, uncertainties, and different components which can be mentioned in our filings with the Securities and Trade Fee, together with financial, aggressive, authorized, and different components. Accordingly, there isn’t a assurance that our expectations might be realized. We assume no obligation to replace or revise any forward-looking statements ought to circumstances change besides as in any other case required by legislation. This presentation additionally consists of sure non-GAAP monetary measures together with adjusted EBITDA.
A reconciliation of such non-GAAP monetary measures to probably the most straight comparable GAAP monetary measures will be discovered behind this presentation. We additionally current indicative web asset worth. Indicative web asset worth consists of amongst different issues adjustments within the honest worth of sure subsidiaries, which aren’t included in our GAAP earnings. All web revenue and EBITDA quantities we are going to focus on are attributable to Icahn Enterprises until in any other case specified.
I will now flip it over to Andrew Teno, our chief government officer.
Andrew Teno — President and Chief Govt Officer
Clearly, the quarter wasn’t as much as expectations. Between a big decline in CVI and some names in our funding phase, NAV went down $969 million from the prior quarter. As we’ve got said earlier than, our funding returns might be risky given each the focus inherent in our portfolio and our activist technique. We proceed to consider our positions will outperform over the long term.
CVI was sadly impacted by a fireplace at Wynnewood that impacted the quarter’s profitability. As well as, the whole U.S. refining trade noticed cracks decline to extra normalized ranges. And regional foundation detracted additional for CVIs refineries.
CVI like its small-cap friends underperformed our hedge basket which helped offset some, however not the entire decline. Extra just lately, CVI has acquired excellent news from litigation relating to small refinery exemptions within the DC Circuit. We hope that it will assist scale back the excellent RIN obligation. Final quarter, we mentioned potential strategic actions involving CVI.
Whereas CVI is tough at work, we’ve got no updates at this level. The funding portfolio was damage by efficiency in just a few names, together with Bausch, Southwest, and Illumina. Our greatest performers within the quarter have been our refining hedges and IFF. We exited our place in Conduent by including publicity to Centuri.
Concerning the fund’s notional publicity, our web quick publicity was 16%. Excluding refining hedges, our publicity was web lengthy 13% at quarter finish. This compares to web lengthy publicity of seven% as of Q1 excluding the refining hedges. On the automotive facet, EBITDA was barely up as headwinds and topline income have been offset by price slicing efforts.
We count on that the associated fee slicing and sourcing initiatives will drive EBITDA enchancment within the again half of the 12 months. We proceed to make progress in our transformation plan. Our leasing pipeline continues to ramp up and we at the moment have 25 leases which can be signed, however hire has not but commenced. On the stability sheet, at quarter finish, we had $1.5 billion of money on the holding firm and $1.6 billion on the funds.
In the course of the quarter, we additionally refinanced our 2025 notes and our subsequent maturity is in Could, 2026. Given our money place and perception in our funding portfolio, we’re snug sustaining the $1 distribution for the quarter. I’ll now hand it over to Ted to debate the financials in additional element.
Ted Papapostolou — Chief Monetary Officer
Thanks, Andrew. I will start by reviewing the efficiency of our segments and touch upon the energy of our stability sheet. Turning to our Funding phase. The funds had a unfavorable return of 8.1% for the quarter, lengthy and different positions had a unfavorable efficiency attribution of 17.2% whereas quick positions had a optimistic efficiency attribution of 9.1%.
The holding firm’s curiosity within the funds was roughly $2.9 billion as of quarter finish. And now to our Vitality phase. Vitality segments EBITDA was $46 million for Q2 2024, in comparison with $173 million in Q2 2023. Q2 2024 refining margin per throughput barrel was $10.94, in comparison with $18.21 within the prior 12 months quarter.
This lower was primarily pushed by decrease refining margins on account of a lower in crack spreads and lowered throughputs associated to a fireplace on the Wynnewood refinery. Q2 2024 common realized gate costs for UAN decreased by 15% to $268 per ton and ammonia decreased by 26% to $520 per ton when in comparison with the prior 12 months quarter. CVI declared a second-quarter money dividend of $0.50 per share. Now to our Automotive phase.
Q2 2024 web gross sales and different revenues decreased by $42 million in comparison with the prior 12 months quarter, primarily pushed by lowered shopper spending on automotive repairs and upkeep. These traits are usually not related from our trade friends. Adjusted EBITDA improved $2 million for Q2 2024 in comparison with Q2 2023. Automotive companies was capable of enhance EBITDA by price slicing and margin initiatives, which offset the lowered automotive rely.
And now turning to our all different working segments. Actual property’s Q2 2024 adjusted EBITDA decreased by $1 million in comparison with the prior 12 months quarter, primarily pushed by lowered gross sales of single-family properties. At considered one of our nation golf equipment, our single-family dwelling stock is proscribed as we’re virtually offered out within the growth whereas the just lately acquired nation membership is ramping up its growth and we predict to have gross sales on the finish of 2024 or starting of 2025. Meals Packaging’s adjusted EBITDA decreased by $5 million for Q2 2024 as in comparison with the prior 12 months quarter, pushed by a weaker mixture of enterprise.
Though volumes have been much like the prior 12 months interval, the combo of enterprise was at decrease, much less enticing margins. Supplies and vitality proceed to be steady and there are alternatives to enhance labor and effectivity on the crops. The administration workforce is engaged on a capital plan to modernize a few of the strains in sure crops, which can enormously improve effectivity and productiveness. Dwelling Vogue’s adjusted EBITDA decreased by $1 million as in comparison with the prior 12 months quarter, primarily pushed by decrease demand from our worldwide enterprise.
In the course of the quarter, we invested in a small strategic acquisition within the U.Okay. to develop the hospitality enterprise and to broaden our international footprint. Pharma segments adjusted EBITDA for Q2 2024 improved by $3 million as in comparison with the prior 12 months quarter, primarily on account of increased prescription development. Vivus U.S.
patent exclusivity of Qsymia broadens to 2 rivals on the finish of 2024 and mid-2025, respectively. These two rivals will possible launch generic variations, which can erode product margins. Administration has taken actions similar to product launches beginning in Europe and ultimately to different worldwide markets whereas planning home price slicing initiatives and potential strategic partnerships. Now turning to our liquidity.
We preserve liquidity on the holding firm and at every of our working subsidiaries to benefit from enticing alternatives. As of quarter finish, the holding firm had money and funding within the funds of $4.4 billion and our subsidiaries had money and revolver availability of $1.1 billion. In abstract, we proceed to deal with constructing asset worth and sustaining liquidity to allow us to capitalize on alternatives inside and outdoors our present working segments. Thanks.
Operator, are you able to please open up the decision for questions?
Questions & Solutions:
Operator
Thanks a lot. [Operator instructions] Please stand by for our first query. And it comes from the road of Dan Fannon with Jefferies. Please proceed.
Daniel Fannon — Analyst
Thanks. Good morning. So wished to simply comply with up on the funds and never a lot efficiency for the quarter, which you form of outlined, however clearly the final week or so has been fairly risky. As you concentrate on the context of the way you positioned and/or transitioned the fund with the hedges extra macro and a few of the adjustments that you’ve got made, I suppose any — I suppose extra ideas given the totally different backdrop we is likely to be in at the moment versus simply a short time in the past?
Andrew Teno — President and Chief Govt Officer
Hey, Dan. Good morning. So I might say, the markets are risky. We have been taking a look at them for fairly a while and I would say the best way we’ll try to place ourselves may be very a lot preserve our e book hedged.
After which we’ve got to consider in our longs and consider in our activist technique, proper. So for those who take a look at our important holdings, the highest 5 that we’ve got listed within the web page. Southwest Fuel, you’ve a utility, it needs to be very steady. Earnings ought to enhance as they bridge their ROE hole.
They’ve had a little bit of a hiccup on this Centuri separation, however it’s a excellent enterprise and one which we predict can unlock worth over the long term. Should you take a look at AEP, we very a lot assume there is a ROE enchancment story. It is bought a brand new CEO who ought to enhance regulatory operations. It is bought a unbelievable asset base and has a little bit of an AI tailwind.
If we take a look at Caesars, it is a firm that’s nearly to hit its — capex is declining, EBITDA is rising, free money stream is inflecting. IFF is a enterprise that, even this morning outcomes have been I would say fairly darn good and exhibiting the affect of a brand new CEO. And for those who take a look at Bausch, clearly it is a sophisticated state of affairs, however there’s a whole lot of inherent worth in BLCO. So a long-winded means of me saying we consider in our longs, we consider our longs have catalysts and we consider our longs will outperform the hedge basket over time.
In a few of these names, you’ve simpler names to hedge, proper? Like big electrical utilities, loads of these for AEP, others you must form of rely extra on broad market indexes.
Daniel Fannon — Analyst
OK. Understood. That is useful. And only a query on the auto enterprise and attempting to know the place you assume you might be and the form of turnaround, price slicing’s been a spotlight, you gave just a few stats round leases coming on-line.
However simply, I do not know if you wish to use a baseball analogy or form of the place we predict we’re and simply when it comes to the form of evolution of that enterprise?
Andrew Teno — President and Chief Govt Officer
So if I take a look at Pep Boys and I take into consideration the service enterprise, EBITDA margins there, whether or not it is 4% or 4.5%. We take a look at friends and we predict over time, we’re speaking multi-years, there isn’t any motive that that should not get nearer to 10%. There’s a whole lot of shifting items to that, proper. You set to work on that price slicing efforts.
The market has to show round a bit. I feel you take a look at friends, the trade volumes aren’t doing us any favors. After which we’ve got to start out clicking on our actual property efforts, proper? So we’ve got the leases which can be — the place you’ve signed leases that have to begin, after which we have a bunch of empty containers we have to fill. So on the empty containers we have to fill, I would say, we have to fill.
The best way that my actual property workforce explains to me is, we get began, we discover the big nationwide retailers who wish to be positioned subsequent to us who establish, a number of areas might be 2025 that they’d prefer to occupy. After which we work on one lease and if we will get that throughout then impulsively it ought to be capable of flip into meaningfully extra numbers. So I feel we’re on the level the place we have most likely performed the max quantity of labor with possibly the least quantity to point out for it, and I would hope that over the pending quarters, the outcomes get higher and higher and replicate that.
Daniel Fannon — Analyst
Understood. OK. Thanks for taking my query.
Andrew Teno — President and Chief Govt Officer
You bought it.
Operator
Thanks. Our subsequent query comes from the road of Andrew Berg with Submit Advisory Group.
Andrew Berg — Submit Advisory Group — Analyst
Thanks. Only a fast query with respect to money on the holding firm was down a pair $100 million. Clearly, the liquidity throughout the entity is strong. And I do know you guys can have fairly important swings within the hedge fund on any specific day.
However that $200 million, was that moved into the hedge fund and simply the actions of different equities within the fund mass. The cash getting in there or what was the motion for?
Andrew Teno — President and Chief Govt Officer
Hey, Andrew. So the large motion to money the holding firm have been the fee of two distributions within the quarter. It is only a form of an odd timing factor the place we do not pay out a distribution within the first quarter. We pay out two of them within the second.
Andrew Berg — Submit Advisory Group — Analyst
Good. Thanks.
Operator
One second for our subsequent query. And it comes from the road of Bruce Monrad with Northeast Funding Administration.
Bruce Monrad — Northeast Traders Belief — Analyst
Hello, everyone. Thanks. Thanks for holding the decision. A query if it is OK on Meals Packaging.
And I see within the slides the reference to softening demand, however I assumed I heard you say that items have been principally flat. Is that proper? Are you able to assist me on that?
Andrew Teno — President and Chief Govt Officer
Sure, the kilometer is flat, however the margins are down. So quantity is there, the pricing softened up a bit. And I may offer you extra context across the quarter. The $5 million of EBITDA drop I discussed, which is 12 months over 12 months on a quarterly foundation, it is that very same story with the fiber gross sales that due to the Russian sanctions, we won’t repeat that enterprise, and that is about $8 million of topline that was there final 12 months that is not there this 12 months.
And that was at an excellent margin. The enterprise that changed that was at a a lot decrease margin, and that is most likely — that is one of many most important causes you’ve got seen the comparative drop.
Bruce Monrad — Northeast Traders Belief — Analyst
OK. These gross sales, is that — Is that this form of like oil shift round, so who’s supplying Russia at this second, so to talk?
Andrew Teno — President and Chief Govt Officer
Sure. It isn’t coming from the EU prefer it used to up to now. I am undecided the place they’re getting that achievement.
Bruce Monrad — Northeast Traders Belief — Analyst
OK. And a giant image query, if I may. So if I am considering out of your Okay, your 10-Okay, which delineates the margins in Meals Packaging, I feel North America is the one with the best room for enchancment. And my query form of strategically is, do you assume that that might — possibly that geography would profit from consolidation? Or any feedback on that?
Andrew Teno — President and Chief Govt Officer
Sure. One factor North America is dealing with and we talked about on earlier calls is only a excessive degree of waste there. We’re battling to get it again to historic ranges. And there have been some enhancements, however not the place it might be.
And one of many alternatives there to scale back waste is to modernize our gear, and administration is engaged on a capital plan to doubtlessly begin the method and implement that throughout many crops, which might start within the U.S. It is nonetheless within the starting stage and early at that, however relying on many components, it might be very capital intensive. And it may require capital infusion doubtlessly at debt or any mixture thereof. However I might say we’re nonetheless within the define type of that, and there will be extra to come back within the subsequent — most likely within the second half of this 12 months.
However that’s a technique we’re attempting to sort out the waste situation there.
Bruce Monrad — Northeast Traders Belief — Analyst
OK. All proper. Thanks.
Operator
Thanks. As I see no additional questions within the queue, I’ll flip the decision again to Andrew Teno for last remarks.
Andrew Teno — President and Chief Govt Officer
Thanks very a lot. So thanks, everybody, for becoming a member of. And I would like to simply go away with a reminder that right here at Icahn, we’re intensely centered on our activism technique. We now have distinctive benefits, together with the Icahn model identify and an extended historical past and willingness to wage proxy contest.
It’s this monitor report, which often permits us to be invited to affix the board and work cooperatively with them to determine the important thing adjustments that may drive shareholder worth. Moreover, given our stability sheet and liquidity, we’ve got the power to tender for whole companies, a instrument most easily don’t possess. Although our returns are lumpy and dissatisfying at instances, as we proceed to deal with our activist efforts at each our Funding phase and our management companies, we consider they’ll bear fruit for all shareholders. We’ll communicate quickly.
Bye.
Operator
[Operator signoff]
Length: 0 minutes
Name members:
Rob Flint — Chief Accounting Officer
Andrew Teno — President and Chief Govt Officer
Ted Papapostolou — Chief Monetary Officer
Daniel Fannon — Analyst
Dan Fannon — Analyst
Andrew Berg — Submit Advisory Group — Analyst
Bruce Monrad — Northeast Traders Belief — Analyst
