What happened

Units of Martin Midstream Partners (NASDAQ:MMLP) tumbled nearly 25% by 10:15 a.m. EDT on Thursday after the master limited partnership (MLP) slashed its distribution by 50%. It made that move to help strengthen its balance sheet, which is under even more pressure after the company posted weak first-quarter results.

So what

In a widely anticipated decision, Martin Midstream Partners cut its quarterly distribution in half. That move will enable the MLP to retain about $39 million in annual cash flow, which will enhance its financial flexibility. The company also said that it plans to sell some noncore assets, including its gas storage business to further shore up its financial profile.

A bright red arrow heading downward.

Image source: Getty Images.

These moves came on the heels of another disappointing quarter for Martin Midstream. It only generated $30.8 million of adjusted EBITDA during the first quarter, which was $7.1 million below its guidance. The culprit was "extreme weather patterns throughout our geographic footprint that negatively impacted the majority of our business segments," according to CEO Ruben Martin. The company noted that earnings at its sulfur services segment came in $3 million below guidance because weather disruptions impacted farmers' ability to plant fields. Meanwhile, warmer winter weather negatively impacted propane sales volumes, causing its natural gas services segment to come in $2.8 million below forecast.

Now what

Martin Midstream gave investors a double dose of bad news as not only did all its business segments underperform but it slashed its high-yielding payout. While the distribution cut will enhance the company's financial profile, investors shouldn't touch this MLP until it finishes selling assets and its financial results start improving.

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