Kirby Corporation Reports Higher Net Earnings For Third Quarter
In its quarterly earnings announcement October 25, Kirby Corporation, Houston, Texas, reported net earnings for the third quarter of $48 million, or 80 cents per share, compared with $41.8 million, or 70 cents per share, for the 2018 third quarter.
Revenues, however, were slightly lower, at $666.8 million for the quarter compared to $704.8 million a year ago.
“During the third quarter, our marine transportation business delivered strong results with significant sequential and year-on-year improvement in profitability,” said David Grzebinski, Kirby president and CEO. “In distribution and services, activity continued to decline as a result of the ongoing cyclical downturn in the oilfield markets and our customers’ focus on near-term cash flow. Our overall third quarter improved year-on-year, led by favorable results in marine transportation reflecting our enhanced earnings power from our recent investments and acquisitions.
“In inland marine transportation, our financial results meaningfully improved as flood waters receded and operating conditions were better,” Grzebinski continued. “Favorable operating conditions resulted in a 31 percent reduction in delay days as compared to the 2019 second quarter, which led to efficiencies across our fleet and reduced operating expenses. Customer demand and our barge utilization remained strong during the quarter, and term contracts continued to renew higher. Ultimately, the improvement in operating efficiencies, reduced costs and higher pricing led to inland operating margins that touched 20 percent during the quarter.
“Coastal marine transportation also provided improved financial results with gains in revenue and operating income. During the quarter, market conditions were favorable, and our barge utilization was stable in the mid-80 percent range. Our efforts to modernize and increase the efficiencies of the fleet during the downturn—including the purchase of a new articulated tank barge unit (ATB), construction of new coastal tugboats and the retirement of aging equipment—are showing benefits and contributing to better reliability and lower costs. Overall, coastal operating margins were in the high single digits during the third quarter,” he said.
“In distribution and services, continued weak activity and spending in the oilfield impacted our oil- and gas-related businesses throughout the third quarter. During the quarter, we experienced very little activity in our pressure pumping manufacturing and remanufacturing businesses, as well as lower demand for equipment, parts and service sales in our oil and gas related distribution businesses. As a result, we aggressively implemented additional workforce reductions and other cost-saving initiatives,” Grzebinski said.
Marine Transportation Segment
Marine transportation revenues for the 2019 third quarter were $412.7 million compared with $382 million for the 2018 third quarter, the company reported.
In the inland market, average barge utilization was in the low 90 percent range during the quarter. Pricing improved year-on-year, with spot rates increasing approximately 15 percent and average rates on expiring term contracts increasing in the low to mid-single digits. Overall, revenues in the inland market increased 10 percent compared to the 2018 third quarter due to improved pricing and the contribution from the CGBM and Cenac Marine Services acquisitions (WJ, November 19, 2018, and February 4, 2019, respectively). The operating margin for the inland business was 20 percent for the quarter, Kirby said.
In the coastal market, barge utilization was in the mid-80 percent range during the 2019 third quarter. Compared to the 2018 third quarter, spot market pricing was approximately 20 percent higher, and term contracts repriced higher in the mid-single digits. Revenues in the coastal market increased 3 percent year-on-year, primarily due to improved pricing and higher barge utilization.
During the quarter, the coastal operating margin was in the high single digits and benefited from both lower operating expenses and higher pricing, Kirby said.
Kirby reported capital expenditures of $56.8 million during the 2019 third quarter, which included $3.4 million for new inland towboat construction, $4.8 million primarily related to progress payments on the construction of three new 5,000 hp. coastal ATB tugs, $42.6 million primarily for upgrades to existing inland and coastal fleets, and $6 million in distribution and services and corporate. Additionally, $4.7 million was used to purchase two inland barges that were previously leased.
Total debt as of September 30 was $1,434.4 million, a reduction of $160.3 million compared to June 30, and Kirby’s debt-to-capitalization ratio was 29.8 percent.
Grzebinski said Kirby has narrowed its 2019 earnings guidance to $2.80 to $3 per share.
“Our third quarter was solid, with strong results from inland and coastal marine offsetting declines in distribution and services,” he said. “During the fourth quarter in marine transportation, we expect increasing delay days due to normal seasonal weather conditions, heavy shipyard activity in coastal, and higher than normal maintenance spending in inland. In distribution and services, we expect sequentially lower oilfield spending and seasonal declines in utilization of the rental power generation fleet to contribute to a further reduction in this segment’s operating margins. Although the timing of an oilfield recovery remains unclear, we have taken the necessary steps to reduce costs and realign to the current activity levels. We are also confident that we are well-positioned to capture the benefits of growing pent-up demand and the inevitable recovery in the oilfield market.”