Company News

Kirby Corporation Reports Reduced Second-Quarter Earnings

Kirby Corporation announced July 30 that its net earnings for the second quarter were $25 million, or 42 cents per share, a sharp reduction from the $47.3 million (79 cents per share) reported for the second quarter of 2019.

Revenues were $541.2 million compared with $771 million for the same quarter a year ago.

“The dramatic economic slowdown associated with the COVID-19 pandemic in the second quarter was felt across our marine transportation and distribution and services businesses,” said David Grzebinski, president and CEO. “We responded by aggressively lowering costs across the company and were able to generate solid earnings and strong cash flow. Although the demand impacts have continued into the third quarter, activity appears to have bottomed and is starting to slowly improve.”

The company reports that its marine transportation segment generated revenues of $381 million, compared to $404.3 million for the 2019 second quarter. Operating income was $51.4 million compared to $53.2 million a year ago.

In the inland market, Kirby said its average barge utilization was in the mid-80-percent range, compared to the mid-90-percent range a year ago. Barge volumes were heavily impacted by reduced demand for refined products and petrochemicals, the company said, although operating conditions were improved, with improved weather conditions and reduced flooding compared to a year ago. Overall, the company reported 2,815 delay days in the second quarter, down 15 percent from a year ago.

Revenues in the inland market declined 2 percent compared to the 2019 second quarter due to the impact of reduced barge utilization and lower fuel rebills, partially offset by the acquisition of Savage Inland Marine, which closed on April 1.

In the coastal market, barge utilization was in the mid-70-percent range, during the second quarter, down from the mid-80-percent range in the 2019 second quarter. Revenues in the coastal market were down 17 percent compared to 2019.

Kirby said the inland market represented 80 percent of its marine transportation segment revenues in the quarter.

“In marine transportation, with demand for many liquid products down significantly during the quarter, refiners scaled back their utilization levels into the high 60 percent range before it gradually improved into the mid-70-percent range, and chemical plant utilization fell to near 70 percent,” Grzebinski said. “As a result, demand for barge transportation weakened as the quarter progressed, and when combined with favorable summer operating conditions, our barge utilization fell into the mid-70-percent range in inland and the low 70-percent range in coastal by the end of June.

“To offset the impact of these activity declines, we aggressively implemented additional cost reductions across the business, significantly reducing horsepower, operating costs, and general and administrative expenses. Despite a 6 percent sequential reduction in segment revenue, our cost reduction efforts contributed to a sequential improvement in segment operating margins from 12.6 percent to 13.5 percent.”

Kirby’s distribution and services segment generated revenues of $160.2 million, down from $366.8 million a year ago. The segment’s results were adversely affected by $3.3 million of bad debt expense resulting from a large oil and gas company’s bankruptcy as well as $1.4 million of severance, Kirby said.

Kirby reported it used $279 million to acquire the Savage Inland Marine assets, and as of June 30, it had $108.5 million of cash and cash equivalents on its balance sheet. Total debt was $1,642.8 million, a $59.7 million reduction compared to March 31. The company’s debt-to-capitalization ratio was 35 percent.


Commenting on the company’s outlook, Grzebinski said, “In the past quarter, our businesses experienced unprecedented declines in demand as a result of the COVID-19 pandemic. Recently, we have seen slight increases in demand across the company, which we believe represent an initial recovery and a bottom to our activity and utilization levels. However, given the risk of future spikes in virus cases and governments issuing new restrictions, the timing and magnitude of a material recovery remains unclear. Until we see a significant improvement in demand, we will continue to aggressively manage our costs, restrain capital spending, and focus on cash generation. Kirby has ample liquidity, and we continue to expect strong free cash flow in 2020 which will be used to repay debt, increase liquidity, and strengthen the balance sheet.”

In inland marine, although refinery and petrochemical plant utilization rates have started to improve, Kirby expects a slow recovery going forward until economic activity rebounds more significantly, the company said in the announcement. With barge utilization rates starting the third quarter in the mid-70-percent range, Kirby anticipates sequentially lower average barge utilization for the quarter, which will have an adverse impact on revenues and operating margins. Overall, Kirby expects inland revenues and operating income will sequentially decline in the third quarter.

Kirby expects 2020 capital spending to be approximately $150 million, representing a year-on-year reduction of approximately 40 percent. While the company said it is committed to regulatory and recurring maintenance on the marine transportation fleet, capital spending is being stringently managed. Overall, Kirby said it expects to generate net cash provided by operating activities of $400 million to $500 million, with free cash flow of $250 million to $350 million during 2020.