Update August 2022 | Cetane Associates’ Steve Abbate and Tamera Kovacs recently spoke at the Northeast Propane Show in Worcester, Mass.

This presentation explored the effects of inflation on propane and heating oil businesses.

Types of Inflation:

Headline Inflation – The raw inflation figure reported through the Consumer Price Index (CPI). Up 9.1% through June 2022. Largest increase since November 1981.

• The CPI determines inflation by calculating the prices on a fixed basket of goods.
• Core inflation removes the CPI components that can exhibit large amounts of volatility from month to month.

Core inflation – The change in prices of goods and services, except for those from the food and energy sectors. Up 5.9% through June 2022.

Annual Inflation Rates:

Effects of Inflation on the Economy:

• Inflation, the sustained and broad rise in the prices of goods and services over time, erodes purchasing power.
• A small but positive inflation rate is economically useful, while high inflation tends to feed on itself and to impair the economy’s longterm performance.
• Real estate, energy commodities and value stocks have historically outperformed during periods of high or rising inflation.
• Conversely, bonds and expensive growth stocks tend to lag as inflation lowers the present value of their future cash flows to investors.

Methods to Offset Inflation:

• Margin Increases

Other Methods:

• Invest in technology
  • Tank Monitors
  • Delivery Routing Software
• Lower fuel costs
  • Terminal Exchanges
• Shop Operating Expenses
• Diversify Revenue Streams
• Consider Delivery and Other Fees:
  • Fuel Surcharge
  • Statement Fee
  • Delivery Charge
  • HAZMAT Fee
  • Tank Rental/Monitor Ree

These are brief highlights from a 21-slide Powerpoint presentation. We invite you to attend future seminars at regional conferences around the country.  Please contact us for a confidential consultation at https://www.cetane.net/contact-us/

Next up: We’ll see you at the HEAT Show in Providence, R.I.

Update July 2022 | Cetane Associates’ Tamera Kovacs and Joe Rosengrant recently spoke at the Minnesota and Mid-States forum.

This presentation addressed several key elements of valuing and acquiring a delivered fuels business. It is not comprehensive yet gives owners essential data points to contemplate in their process.

Key take-aways for owners considering making an acquisition:

• Reasons to Buy:

  • Acquisition is the fastest way to grow your business
  • Acquisition opens the door for diversification
  • Above market return on investment (ROI) and return on equity (ROE)
  • Great for company morale and to gain skilled employees

• Key Points in Evaluating the Seller:

  • Geographical
  • Financial information
  • Product and service mix
  • Employees
  • Property purchase/lease
  • Customer demographics
  • Cultural fit

• Preparing to Buy a Business:

  • Meet with your bank
  • Develop relationships with owners
  • Talk to vendors
  • Contact industry brokers/advisors
  • Advertise
  • Search the Internet

• Business value is based on Operating Income (EBITDA)

  • The 3 EBITDAs
    • Owner’s EBITDA — from financial statements
    • Adjusted EBITDA — adjusts for non-recurring revenues and expenses
    • Buyer’s EBITDA — adjusted EBITDA with synergies and adjusted expenses

• What’s typically included in the Purchase Price?

  • Included
    • Customer list
    • Propane tanks in the field
    • Intangibles
    • Vehicles
    • Furniture, Fixtures, & Equipment
    • Real Estate (if purchased)
    • AR
  •  Excluded
    • Current assets (cash, non-company inventory)
    • Liabilities (AP, notes payable)
    • Agreed upon select assets

These are brief highlights from a 21-slide Powerpoint presentation. We invite you to attend future seminars at regional conferences around the country.  Please contact us for a confidential consultation at https://www.cetane.net/contact-us/

Next up: We’ll see you at the Northeast Propane Show in Worcester, MA and the HEAT Show in Providence, RI.