NOVEMBER 2, 2017 — Kirby Corporation (NYSE: KEX) yesterday reported net earnings for the third quarter ended September 30, 2017 of $28.6 million, or $0.52 per share, compared with $32.0 million, or $0.59 per share, for the 2016 third quarter. Consolidated revenues for the 2017 third quarter were $541.3 million compared with $434.7 million reported for the 2016 third quarter.
“Our third quarter results were better than expected as the negative impact from hurricanes was more than offset by the combination of some cost recoveries from marine customers for delays, a rebound in volume demand after the hurricanes, and strength in our distribution and services segment, including Stewart & Stevenson LLC,” said President and CEO David Grzebinski. “Inland utilization increased following Hurricane Harvey as pent-up demand and a stronger pricing environment for our customers’ products led to more liquid barge moves. Although this increase in utilization may be temporary, utilization has remained firm into the fourth quarter.”
Marine transportation revenues for the 2017 third quarter were $318.8 million compared with $359.0 million for the 2016 third quarter. Operating income for the 2017 third quarter was $36.0 million compared with $55.5 million for the 2016 third quarter. The cost and delay impact of Hurricanes Harvey and Irma was approximately $0.07 per share. Approximately $0.04 per share was offset by some cost recoveries from customers for delays, and elevated utilization in the inland business for the remainder of the quarter due primarily to pent-up demand, increased need for logistical solutions, and a higher pricing environment for customers’ products.
In the inland market, barge utilization was in the mid-80% to mid-90% range for the quarter. Operating conditions during the quarter were good prior to Hurricane Harvey’s arrival on the U.S. Gulf Coast at the end of August. For the remainder of the quarter operating conditions were considerably challenged. Unrelated upriver infrastructure challenges in September also increased delay days. Demand for inland tank barge transportation of petrochemicals and black oil was higher compared to the 2016 third quarter, while demand for the transportation of refined petroleum products was slightly lower. Both term and spot contract pricing were at lower levels relative to the third quarter of 2016, and spot contract pricing was stable sequentially. The operating margin for the inland business was in the mid-to-high teens.
In the coastal market, utilization was in the low 60% to mid-60% range as the market weakened further in the third quarter and barges continued to move from term contracts into the spot market. Revenues from the transportation of refined petroleum products, black oil, and crude oil were lower than the 2016 third quarter, while revenues from the transportation of petrochemicals were stable. The operating margin for the coastal business was in the negative mid-single digits.
The marine transportation segment’s 2017 third quarter operating margin was 11.3% compared with 15.4% for the third quarter of 2016 as a result of weaker pricing in both marine markets and increased idle time in the coastal market as more barges operated in the spot market.
Commenting on the 2017 fourth quarter and full year market outlook and guidance, Mr. Grzebinski said, “Our earnings guidance for the 2017 fourth quarter is $0.40 to $0.55 per share compared with $0.60 per share for the 2016 fourth quarter, and considers the full effect of the shares issued as part of the S&S acquisition. Our full year earnings guidance is updated to $1.90 to $2.05 per share, compared to prior guidance of $1.80 to $2.10 per share. Fourth quarter and full year guidance contemplates inland marine transportation utilization in the mid-80% range at the low end and mid-90% range at the high end. In our coastal market, we expect utilization in the low 60% to mid-60% range for the fourth quarter. In the coastal market we remain focused on managing costs and optimizing the equipment available for commercial use.”
Kirby expects 2017 capital spending to be in the $175 million to $185 million range, updated from previous guidance of $165 million to $185 million. Capital spending guidance includes approximately $50 million in progress payments on new coastal equipment, including a 155,000 barrel ATB, two 4900 horsepower and six 5000 horsepower coastal tugboats. The balance of $125 to $135 million is primarily for five new inland tank barges and capital upgrades and improvements to existing inland and coastal marine equipment and facilities, as well as distribution and services facilities.