Note of caution from Kirby
Tank barge specialist Kirby Corporation announced today that it is lowering its earnings guidance for the 2002 second quarter to $.36 to $.38 per share from previous guidance of $.46 to $.50 per share, and for the 2002 year to $1.60 to $1.70 per share from previous guidance of $1.92 to $2.02 per share. The revised earnings guidance compares with 2001 second quarter earnings of $.44 per share and 2001 year-end earnings of $1.63 per share. Kirby's 2001 results included goodwill amortization expense of $.07 per share for the second quarter and $.26 per share for the year.
While core petrochemical volumes have begun to improve during the 2002 second quarter, says the company, the small gains have not offset lower volumes of refined products and a very weak demand for liquid fertilizer shipments. High Midwest refined product inventories, and the opening of a new refined products pipeline from the Gulf Coast to the Midwest, have reduced the requirement for upriver movements of refined products by tank barge. Heavy spring rains in the Midwest have prevented farmers from applying fertilizer, resulting in high liquid fertilizer inventory levels and a reduced demand for tank barge movements of liquid fertilizer. During the second quarter last year, strong demand for liquid fertilizer, black oil, and refined products offset weakness in the petrochemical market, which historically constitutes approximately 60% of Kirby's marine transportation revenue.
The 2002 second quarter results will also be negatively impacted by reduced efficiency caused by high water conditions and strong currents on the Mississippi River System. High water and strong currents result in delays, diversions and limitations on speed and tow size throughout the River System.
Kirby's president and CEO, Joe Pyne, commented, "This has been a difficult quarter for Kirby. Although we have seen some marginal improvement in our upriver petrochemical market, continued weakness in our Intracoastal Canal petrochemical market, a very poor seasonal fertilizer market, reduced refined products demand and poor Mississippi River System operating conditions have all combined to result in a lowering of our second quarter guidance. High refined products inventories in the Midwest and the new refined products pipeline have delayed the start of the seasonal upriver movements of refined products to meet summer driving requirements. It is still too early to predict how much tank barge volume will be lost to the new pipeline. We do believe that the pipeline has created excess tank barge capacity and has negatively affected spot market rates throughout the system. It may be several quarters before this excess capacity is absorbed. Refined products accounted for 20% of Kirby's marine transportation revenues last year."
"We had an unusually strong refined products market in 2000 and 2001," noted Pyne."While we are optimistic that the petrochemical market will continue to improve in the second half of the year, we do not anticipate such improvement will be strong enough to offset the lower current volumes in the refined products market, which have returned to more normal seasonal levels. We do anticipate a normal liquid fertilizer market this fall."
"In summary, although we are projecting earnings to be 10% to 15% below last year (excluding goodwill amortization expense), our core petrochemical market appears to be in the early stages of a slow but steady recovery. We continue to focus on our long-term strategy of efficiency improvements in all of our operations. Finally, we believe that the current market environment is very conducive to further consolidation of the inland tank barge industry."