Kirby Reports Lower Q4 Earnings, Loss For Year
On January 27, Kirby Corporation announced net earnings for the fourth quarter of 2021 of $11 million or $0.18 per share, down from $22.2 million or $0.37 per share for the same quarter of 2020. Revenues, however, were $591.3 million, compared with $489.8 million a year ago.
Excluding one-time charges related to a change in Louisiana’s tax law in the 2021 fourth quarter, net earnings for the quarter were $16.7 million or $0.27 per share. In November 2021, Louisiana voters approved a constitutional amendment that removed the corporate tax deduction for federal income taxes paid and lowered the corporate income tax rate from 8 percent to 7.5 percent effective January 1, 2022, Kirby reported. The result of the amendment was an increase in the effective state income tax rate—net of deduction for federal income tax—from 6.3 percent to 7.5 percent. As a result of the amendment, Kirby recognized a one-time deferred tax provision of $5.7 million or $0.09 per share in the quarter due to the remeasurement of the company’s Louisiana and U.S. deferred tax assets and liabilities.
For the full year of 2021, Kirby reported a net loss of $247 million or $4.11 per share, compared with a net loss of $272.5 million or $4.55 per share for 2020.
Excluding one-time items in both years, 2021 net earnings were $33.7 million or $0.56 per share, compared with $110.0 million or $1.84 per share for 2020. Consolidated revenues for 2021 were $2.25 billion compared with $2.17 billion for 2020.
“Kirby’s fourth quarter adjusted earnings sequentially increased driven by improved results in the marine transportation businesses,” said David Grzebinski, Kirby president and CEO. “These improvements were partially offset by a reduction in distribution and services earnings as a result of seasonality in the commercial and industrial market and supply chain delays in manufacturing. Looking forward into 2022, the outlook for marine transportation and distribution and services is very favorable, and we expect material growth in earnings during the year.
“In marine transportation, our inland business experienced improved market fundamentals due to strong refinery and petrochemical plant utilization and increased customer volumes,” Grzebinski said. “As a result, our barge utilization steadily increased during the quarter with an average in the mid- to high 80 percent range. Favorable market dynamics also led to increased sequential and year-on-year spot market pricing, as well as higher rates on term contract renewals for the first time since the start of the pandemic.
“However, the quarter was not without its challenges as poor weather conditions yielded a 55 percent sequential increase in delay days. In December, escalating cases of the COVID-19 Omicron variant contributed to crewing challenges and had an impact of $0.01 to $0.02 per share for the quarter. Overall, inland revenues significantly increased sequentially and year-on-year, and operating margins were approaching 10 percent.
“In coastal marine, market conditions were stable in the fourth quarter. At the end of the quarter, we completed our exit from the Hawaii market, positioning the coastal business for improved profitability and long-term success.
“In distribution and services, our markets remained strong and continued to build momentum heading into 2022,” he continued. “In oil and gas, we experienced favorable demand for new transmissions and increased orders for new environmentally friendly pressure pumping equipment and frac related power generation equipment. However, significant supply chain issues delayed many deliveries of new manufactured equipment during the quarter. As a result, our oil and gas businesses reported a sequential reduction in revenues and operating income. In commercial and industrial, demand remained strong as the economy continued to recover from the pandemic. This was offset by normal seasonality in Thermo King and the power generation rental fleet, resulting in sequentially lower financial results.
“Lastly, early in the quarter, we acquired an energy storage systems manufacturer based in Texas. This acquisition is a key step in our ESG journey and the development of Kirby’s energy storage solutions for the oilfield, industrial applications and marine transportation going forward.”
Marine Transportation Segment
Marine transportation revenues for the 2021 fourth quarter were $350.6 million compared with $299.4 million for the 2020 fourth quarter. Operating income for the 2021 fourth quarter was $25.7 million compared with $29.2 million for the 2020 fourth quarter. Segment operating margin for the 2021 fourth quarter was 7.3 percent compared with 9.7 percent for the 2020 fourth quarter.
In the inland market, average 2021 fourth quarter barge utilization was in the mid-to high 80 percent range compared to the high 60 percent range in the 2020 fourth quarter and the low 80 percent range in the 2021 third quarter.
The inland market significantly improved during the quarter as the impact of the COVID-19 Delta variant subsided and production levels at southeast Louisiana refineries and chemical plants recovered following Hurricane Ida, Kirby said. As cases of the COVID-19 Omicron variant rose in December, barge volumes were not significantly impacted, but the company did experience crewing challenges on its towboats.
During the quarter, operating conditions on the inland waterways were slowed throughout October by the closure of the Gulf Intracoastal Waterway resulting from Hurricane Ida. Significant wind and fog conditions along the Gulf Coast also impacted operations in December, contributing to a 32 percent increase in delay days year-on-year.
Improving market conditions contributed to average spot market rates increasing in the mid-single digits sequentially and the high single digits compared to the 2020 fourth quarter, Kirby said. Term contracts that renewed in the fourth quarter increased on average approximately 10 percent compared to a year ago. Revenues in the inland market increased 20 percent compared to the 2020 fourth quarter, primarily due to increased barge utilization, fuel rebills and spot market pricing, offset by lower pricing on term contracts renewed earlier in the year, the company said.
The inland market represented 77 percent of Kirby’s marine transportation segment revenues in the fourth quarter.
In coastal, market conditions for refined products and black oil transportation were unchanged during the quarter, the company said. Pricing on spot and term contracts was also stable. Average coastal barge utilization improved to the 90 percent range primarily due to the retirement of underutilized barges in the 2021 third quarter. Revenues in the coastal market increased 7 percent compared to the 2020 fourth quarter primarily due to higher fuel rebills and modest increases in spot market activity, partially offset by increased shipyard activity on large-capacity vessels during the quarter.
“After a very challenging year in 2021, we are encouraged by the strength of the ongoing economic recovery, the favorable outlook for inland barging and the oil and gas markets, and the continued growth in demand for our products and services,” Grzebinski said. “Although there are still some uncertainties surrounding the COVID-19 Omicron variant that are currently impacting our operations, we see strong momentum building and expect all of our businesses to deliver significantly improved financial results in 2022. As our markets rebound, we expect 2022 capital spending to increase, enabling our businesses to capitalize on growth opportunities and ensure safe, efficient and reliable operations. As always, we will continue to focus on costs and the balance sheet to drive strong cash flow from operations. We intend to use this cash flow to further pay down debt and to pursue attractive acquisition opportunities that may arise.”
Kirby said that it expects inland marine transportation revenues to grow 10–15 percent in 2022 as business improves and contracts renew. The first quarter growth is expected to be modest, however, due to the impact of winter weather and the ongoing crewing challenges related to COVID-19, the company said.
Grzebinski concluded, “2021 was a very challenging year for Kirby. The continued impacts of the COVID-19 pandemic and unprecedented weather events that shut down the two largest refinery and petrochemical complexes in the U.S. ultimately contributed to weak markets and financial results across the company. As we start 2022, despite continued uncertainty around COVID-19, for the first time in many years marine transportation and distribution and services are both poised to deliver significant profitability improvement. In inland, customer demand continues to grow, barge utilization is strong, and the price environment is improving. With limited new supply on the horizon, we believe the inland business is well-positioned for a multi-year upcycle. … Overall, the outlook for Kirby is bright, and we are excited about the coming year and the earnings growth potential that lies ahead.”