JULY 30, 2015 — “Our results for the second quarter were largely in line with our expectations,” commented President and CEO David Grzebinski as Houston headquartered tank barge Kirby Corporation (NYSE: KEX) reported net earning for the second quarter ended June 30, 2015 of $58.1 million, or $1.04 per share, compared with $75.0 million, or $1.31 per share, for the 2014 second quarter. Consolidated revenues for the 2015 second quarter were $543.2 million compared with $628.1 million reported for the 2014 second quarter.
“Demand across the majority of the products we carry in the inland marine transportation market remained at healthy levels,” said Mr. Grzebinski. “Utilization remained in the 90% to 95% range and spot prices were at or above contract prices. However, uncertainty related to future barge movements for domestic crude oil and condensate continued to put pressure on contract renewals. Pricing on inland term contracts that renewed during the quarter declined in the low-single digit percentage range. In the coastal marine transportation business, market fundamentals remained stable, with pricing for term contract renewals increasing in the mid-single digit percentage range. As forecasted, the second quarter was negatively impacted by planned shipyards for our coastal business. In our land-based diesel engine services business, market conditions continue to be challenging due to the decline in the price of crude oil. In our marine diesel engine services and power generation markets, results reflected continued soft activity in the Gulf of Mexico oilfield service market, but otherwise stable levels of demand.”
Marine transportation revenues for the 2015 second quarter were $425.1 million compared with $456.7 million for the 2014 second quarter. Operating income for the 2015 second quarter was $97.0 million compared with $116.0 million for the 2014 second quarter.
Kirby’s inland marine transportation business maintained tank barge utilization in the 90% to 95% range. Demand for inland barge transportation of petrochemicals, refined products and black oil products, excluding crude oil, was healthy. Demand for barges moving crude oil and condensate during the quarter was lower sequentially and year over year. Inland marine operating conditions presented challenges, particularly late in the quarter, with high water conditions on the inland waterways leading to smaller tow sizes, increased transit times, navigational delays, and the closure of certain locks.
The coastal marine transportation market experienced stable demand for the transportation of refined petroleum products, black oil, including crude oil, and petrochemicals, with utilization remaining in the 90% to 95% range. Operating conditions in the coastal market were seasonally normal during the second quarter.
The marine transportation segment’s 2015 second quarter operating margin was 22.8% compared with 25.4% for the second quarter of 2014 as a result of higher labor costs, including pension, lower inland marine transportation rates, shipyard activity in the coastal business, and the impact of lagging fuel price escalators on inland marine affreightment contracts.
Commenting on the 2015 third quarter and full year market outlook and guidance, Mr. Grzebinski said, “Our earnings guidance for the 2015 third quarter is $0.95 to $1.10 per share and we are narrowing our full year 2015 guidance slightly to $4.10 to $4.35 per share. Our third quarter outlook reflects some impact on our inland marine business from challenging operating conditions. High water, lock and river closures, which are typical early in the summer, have been more pronounced in July this year. Utilization in our inland fleet is projected to remain in the 90% to 95% range with pricing on contract renewals similar to the 2015 second quarter. In our coastal marine transportation business, we expect supply and demand to remain consistent with the first half of the year and utilization for the fleet to also remain in the 90% to 95% range. Our guidance assumes normal seasonal operating conditions for the coastal marine transportation market, although a continued heavy shipyard schedule will impact results for the remainder of the year.”
Mr. Grzebinski continued, “For our diesel engine services segment, we expect demand to remain weak in the land-based diesel engine services market and the offshore oil services portion of the marine diesel engine services market. We expect demand to remain relatively stable in the remainder of the marine and power generation markets.”
Kirby expects 2015 capital spending to be in the $315 to $325 million range including approximately $70 million for the construction of 38 inland tank barges and three inland towboats, all expected to be delivered in 2015. The capital spending guidance range also includes approximately $95 million in progress payments for the construction of two 185,000 barrel coastal ATBs and two 155,000 barrel coastal ATBs. The balance of $150 to $160 million is primarily for capital upgrades and improvements to existing inland and coastal marine equipment and facilities, as well as diesel engine services facilities.