Icahn Enterprises (IEP) Q1 2024 Earnings Name Transcript

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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 earnings 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 govt officer.

Andrew Teno — President and Chief Govt Officer

Thanks, Rob. I’ll present a short overview of Q1 outcomes, after which we might be obtainable for questions. First-quarter web loss was $38 million, an enchancment of $232 million over Q1 of 2023. First-quarter adjusted EBITDA was $134 million, a rise of $39 million in comparison with Q1 2023.

Indicative web asset worth ended the quarter at roughly $5 billion, up $194 million from the prior quarter. By way of our managed companies, CVI has benefited from decrease RINs expense offset by wider-than-usual refined product bases. We consider there are alternatives swirling within the refining area, and it is going to be disciplined to see if we will discover one thing accretive and enticing. The auto service division is engaged on a number of key initiatives to drive earnings and money circulation.

One in all explicit word embody product sourcing and stock discount. Relating to our automotive owned actual property, we’re making stable strides with our transformation plans. We have now added key personnel to the group to additional optimize the actual property portfolio and the auto service enterprise by way of leasing, greenfields, retailer optimizations, and outparcel growth. This quarter, the funding funds had a damaging return of 0.8%, primarily pushed by power sector and broad market shorts.

When you had been to subtract out the affect of our power scarcity which offset our refining publicity, our returns would have been a constructive 5.8% for the quarter. One explicit contributor to efficiency was Southwest Fuel Holdings, which elevated in worth by way of elevated utility profitability and the affect of the lately accomplished Centuri IPO. We consider that Centuri and one other certainly one of our lengthy positions, AEP, are beneficiaries of the necessity for funding within the grid and extra era to assist rising AI-related knowledge heart demand. Our headline web brief publicity of 27% is a web lengthy publicity of seven% if you modify for the power hedges.

This compares to web brief publicity of 6% as of year-end, excluding the power hedges. As you possibly can see, we proceed our current pattern of getting barely extra web lengthy and specializing in our activist efforts. Moreover, the board permitted a $1 quarterly distribution per depositary unit, which is per final quarter. With that, let me flip it over to Ted for an in depth dialogue of all of our segments.

Ted Papapostolou — Chief Monetary Officer

Thanks, Andrew. I’ll start by reviewing the efficiency of our segments and touch upon the power of our steadiness sheet. Turning to our funding section. The funds had a damaging return of 0.8% for the quarter.

Lengthy and different positions had a constructive efficiency attribution of 12.6%, whereas brief positions had a damaging efficiency attribution of 13.4%. The holding firm’s curiosity within the funds was roughly 3.2 billion as of quarter-end. And now, turning to our power section. Power section’s EBITDA was 118 million for Q1 ’24, in comparison with 229 million for Q1 ’23.

Q1 ’24 refining margin per throughput barrel was $16.29, in comparison with $23.24 within the prior-year quarter. This lower is primarily pushed by decrease crack spreads, offset partly by diminished RFS bills, bills, and favorable RIN revaluation. Q1 ’24 common realized gate costs for UAN decreased by 42% to $267 per ton, and ammonia decreased by 41% to $528 per ton when in comparison with the prior-year quarter. CVI declared a first-quarter money dividend of $0.50 per share.

And now, turning to our automotive section. Internet gross sales and different revenues decreased by 73 million in comparison with Q1 ’23, primarily pushed by the deconsolidation of Auto Plus throughout the prior-year quarter in addition to diminished automotive rely for the automotive service enterprise. Adjusted EBITDA improved 2 million for Q1 ’24 in comparison with Q1 ’23. Automotive service was in a position to preserve adjusted EBITDA by way of price chopping and margin initiatives, which offset diminished automotive rely.

And turning to our actual property section. Q1 ’24 web gross sales and different revenues decreased by 5 million, and adjusted EBITDA decreased by 2 million in comparison with the prior-year quarter, primarily pushed by diminished gross sales of single-family properties. And turning to our different working segments. Meals packaging’s adjusted EBITDA decreased by 4 million for Q1 ’24 as in comparison with the prior-year quarter, pushed by decrease volumes as a consequence of softening demand.

Dwelling trend’s adjusted EBITDA elevated by 1 million as in comparison with the prior-year quarter, primarily as a consequence of margin enchancment offset by decrease gross sales. Pharma section’s adjusted EBITDA for Q1 ’24 improved by 5 million as in comparison with the prior-year quarter, primarily as a consequence of greater gross sales and decrease working bills. And 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-end, the holding firm had money and investments within the funds of 4.9 billion, and our subsidiaries had money and revolver availability of 1.1 billion. In abstract, we proceed to concentrate on constructing asset worth and sustaining liquidity to allow us to capitalize on alternatives inside and out of doors our current working segments. Thanks. Operator, are you able to please open the decision up for questions?

Questions & Solutions:

Operator

Thanks. [Operator instructions] Please be suggested that the convention is being recorded. Once more, we ask that you just please stand by whereas we compile the Q&A roster. One second for our first query, please.

Our first query comes from the road of Dan Fannon with Jefferies. Your line is now open.

Dan Fannon — Jefferies — Analyst

Thanks. Good morning. Andrew, I wished to comply with up in your feedback round CVI. I believe you stated one thing about on the lookout for strategic — one thing round accretion.

I do know that the — on their name, they’ve talked about trying or exploring strategic choices. So, I hoped you can possibly develop a bit upon that and possibly the rationale behind sort of the timing and why now?

Andrew Teno — President and Chief Govt Officer

Hey, Dan. Good morning. So, when it comes to CVI and typically, over — we’re long-term buyers. We’re additionally dealmakers.

And so, we like to have a look at principally something that presents itself. And so, through the years, we have checked out all kinds of issues. We felt comfy mentioning it immediately, primarily as a result of we put out the 8-Okay a few weeks in the past that from each CVI and UAN. And so, after we take a look at our asset base, we predict we’re — the CVI group are excellent low-cost operators.

We predict they’re excellent at working our refining enterprise. And if we will discover one thing fascinating, then you definately would count on us to execute on it.

Dan Fannon — Jefferies — Analyst

So, that will — sorry, that will be extra from the context of including to your — by way of M&A or strategic capital deployment versus exiting any of the present companies?

Andrew Teno — President and Chief Govt Officer

I’d simply say we take a look at all alternatives, no matter is accessible.

Dan Fannon — Jefferies — Analyst

Understood. After which simply transferring to the auto section. If we take a look at the trail ahead and the street map you have laid out, it looks as if price chopping and value rationalization continues to be very a lot in focus. Is that actually the playbook for 2024 after which gross sales restoration from there? Or ought to we — are you desirous about — or is the sport plan or the outlook for gross sales to begin to enhance right here extra instantly in this type of subsequent couple of quarters?

Andrew Teno — President and Chief Govt Officer

Sure. So, I believe for those who had been to have a look at simply out there typically on this area, I would say demand just isn’t spectacular however — and that is sort of a short-term phenomenon, we hope. However after we take a look at the long-term alternative for our auto service enterprise, we predict we now have alternatives on all fronts. I believe Dave has now been there because the everlasting CEO for just a few months, and we predict sort of the alternatives are actually countless.

If we speak about product sourcing for an instance, we predict the corporate actually most likely might have finished a greater job up to now, proper? We — so, after we take a look at all of our completely different product classes, if we’re extra strategic about how we’re shopping for, if we’re extra strategic about how we’re pricing, then we predict there are alternatives to drive greater gross margins on merchandise. We predict there are alternatives to enhance the service stage within the shops. We predict there are alternatives to develop the greenfield program. We predict there are alternatives to assist in relocating shops.

And so, I believe actually, the alternatives are all the above.

Dan Fannon — Jefferies — Analyst

Nice. That is useful. After which I suppose simply at a excessive stage, as you consider the atmosphere from a macro perspective and what you are seeing when it comes to the activist funding model on this atmosphere given greater charges, greater for longer, are there extra areas that you just’re seeing alternative in than possibly you had been a 12 months in the past? Or is it the other the place the financial backdrop continues to be fairly robust and you are not possibly seeing the valuations and/or sort of the incremental alternative that you’ve got seen beforehand? Simply attempting to get a way of immediately versus possibly a 12 months in the past in that funding alternative set?

Andrew Teno — President and Chief Govt Officer

Yeah. So, I have been at Icahn for 4 years, and I might say that, just about, there’s all the time a chance for activism. Firms are all the time getting in hassle. Inventory costs are all the time falling.

Hidden gems can all the time be unlocked. And so, in any given quarter we’re going by way of, I will guess a minimum of 10 completely different names the place we predict there’s something. And we normally do not act, however we maintain trying to discover the correct alternative. I believe final quarter, we discovered two names which finally turned public.

We might or might not have made extra investments since then however nothing that’s not publicly disclosed.

Dan Fannon — Jefferies — Analyst

Understood. After which simply lastly, I recognize the incremental disclosures across the hedging within the funding fund and the progress that you’ve got made. Is that this — what do you envision as a gradual state when you consider the hedges and the lengthy publicity, clearly, not attempting to foretell what you are going to do. However simply usually, as a philosophy, are you the place you need to be? Or do you suppose that there is extra change within the context of the portfolio over the subsequent sort of couple of quarters?

Andrew Teno — President and Chief Govt Officer

Sure. So, I do not suppose we actually need to wager on the place the market goes. I believe we have been fairly clear, we need to steer clear of that. There most likely aren’t any large-scale adjustments as to what we will do when it comes to taking down our brief publicity.

I believe Carl would all the time wish to be appropriately hedged. And I believe based mostly on how we really feel and the way we really feel about our investments, that acceptable hedge might go down a bit of bit, nevertheless it’s arduous to take it off at these ranges. So, it is one thing we consider on a regular basis, however I do not actually foresee any materials adjustments.

Dan Fannon — Jefferies — Analyst

Understood. Thanks for taking my questions.

Operator

Thanks. I am at the moment exhibiting no additional questions at the moment. I would like at hand the convention again over to Andrew Teno for closing remarks.

Andrew Teno — President and Chief Govt Officer

Thanks. So, I would like to depart immediately with a reminder that right here at Icahn Enterprises, we’re intensely targeted on our activism technique. We have now distinctive benefits, together with the Icahn model title, and an extended historical past and willingness to wage proxy contests. It’s this monitor document which regularly permits us to be invited to hitch boards and work cooperatively with our fellow administrators to make the important thing adjustments that can drive shareholder worth.

Moreover, given our steadiness sheet, liquidity, and everlasting capital construction, we now have the power to tender for total companies, a instrument most easily don’t possess. Although returns will be lumpy and dissatisfying at instances, as we proceed to concentrate on our activist efforts at each our funding section and managed companies, we consider they may bear fruit for all of our unitholders. We’ll communicate to everybody quickly. Bye.

Operator

[Operator signoff]

Length: 0 minutes

Name contributors:

Rob Flint — Common Counsel

Andrew Teno — President and Chief Govt Officer

Ted Papapostolou — Chief Monetary Officer

Dan Fannon — Jefferies — Analyst

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