Kirby Corporation reports increased earnings

America’s largest tank barge operator, Houston-headquartered Kirby Corporation (NYSE: KEX), has reported net earnings for the quarter ended September 30, 2023 of $63.0 million or $1.05 per share. That’s up on its earnings of $39.1 million or $0.65 per share for the 2022 third quarter. Consolidated revenues for the 2023 third quarter were $764.8 million compared with $745.8 million reported for the 2022 third quarter.

These figures were slightly below analysts expectations, and Zacks Equity Research gives some insights into this and into why some other key Kirby metrics may be more telling than the headline numbers.

TEMPORARY CHALLENGES

“Both of our segments continued to perform well during the quarter despite facing some temporary challenges,” said Kirby president and CEO David Grzebinski. “In marine transportation, pricing on spot and term contracts continued to benefit from strong demand and limited availability of barges. Distribution and services delivered improved margins even as we continued to work through supply chain delays during the quarter. Overall, our earnings increased sequentially and year-over-year. We continued to repurchase stock during the quarter.

“In inland marine transportation, our third quarter results reflected continued improvement in pricing partially offset by temporary headwinds from the Illinois River closure and several refinery outages in the quarter. From a demand standpoint, customer activity remained strong in the quarter with barge utilization rates running in the high 80% range. Spot market prices continued to progress higher and were up in the mid-single digits sequentially and in the mid-teens range year-over-year. Term contract prices also renewed at higher rates with high single digit increases versus a year ago. Margins were in the high teens range.

“In coastal, improvements in market fundamentals accelerated with solid customer demand and limited availability of large capacity vessels resulting in spot price increases in the mid-single digits sequentially and in the low 30% range year-over-year. During the quarter, our barge utilization levels continued to run in the mid-90% range.”

Grzebinski noted that results this year are being impacted by planned shipyard maintenance on several large vessels which led to an overall decrease in third quarter coastal revenues year-over-year and operating margins just below break-even.

MARINE TRANSPORT

Marine transportation revenues for the 2023 third quarter were $429.9 million compared with $433.0 million for the 2022 third quarter, reports Kirby. Operating income for the 2023 third quarter was $63.5 million compared with $41.7 million for the 2022 third quarter. Segment operating margin for the 2023 third quarter was 14.8% compared with 9.6% for the 2022 third quarter.

In the inland market, average 2023 third quarter barge utilization was in the high 80% range, lower when compared to the 2022 third quarter due to the Illinois River lock closures and several refinery outages. Operating conditions were unfavorable with lock, weather and navigational delays contributing to a 24% increase in delay days year-over-year. During the quarter, average spot market rates increased in the mid-single digits sequentially and in the mid-teens range compared to the 2022 third quarter. Term contracts that renewed in the third quarter increased in the high-single digits on average compared to a year ago. Revenues increased 2% compared to the 2022 third quarter despite challenging operating conditions as increased pricing was partially offset by lower utilization from the Illinois River lock closures. The inland market represented 82% of segment revenues in the third quarter of 2023. Inland’s operating margin was in the high teens for the quarter.

In coastal, market conditions were strong throughout the quarter, with barge utilization in the mid-90% range. During the quarter, average spot market rates increased in the mid-single digits sequentially and in the low 30% range compared to the 2022 third quarter. Term contracts that renewed in the third quarter increased in the low double digits compared to a year ago. Despite these improvements, revenues in the coastal market decreased when compared to the 2022 third quarter primarily due to downtime associated with planned shipyard maintenance days. Coastal represented 18% of marine transportation segment revenues during the third quarter. Coastal operating margin was around break-even as improved pricing was partially offset by lost revenue and costs incurred as a result of planned shipyards.

FOURTH QUARTER OUTLOOK

Looking ahead to the 2023 fourth quarter, Grzebinski said that Kirby’s outlook in the marine market remains strong. However it expects some near-term issues related to low water conditions on the Mississippi River, increasing delay days due to normal seasonal weather conditions, and high levels of shipyard activity in coastal.

“In inland marine, favorable conditions are expected to continue, driven by the combination of high refinery and petrochemical plant utilization and minimal new barge construction across the industry,” said Grzebinski. “Kirby expects these strengths to be partially offset by increasing delay days due to normal seasonal weather conditions, lock delays, and low water conditions on the Mississippi River. The Company still expects further improvements in spot market prices, which currently represents approximately 45% of inland revenues. Term contracts are also expected to continue to reset higher. Overall, fourth quarter inland revenues are expected to be roughly flat sequentially with modest improvement in margins, exiting the year close to if not at 20%.”

“In coastal marine,” he said, ”revenues and operating margins are being impacted this year by an approximate doubling of planned shipyard maintenance days with ballast water treatment installations on certain vessels.” He added that Kirby expects steady customer demand through the balance of the year with barge utilization in the low to mid-90% range. Rates are expected to continue improving as the availability of equipment is tight across the industry. For the fourth quarter, coastal revenues are expected to be up in the low to mid-single digits compared to 2023 third quarter as the company continues to progress through major shipyard works with the timing of some possibly shifting to early 2024. Coastal operating margins are expected to be near break-even to low single digits on a full year basis.

• Read the full Kirby release HERE