Posted on October 27, 2022
Houston-headquartered Kirby Corporation (NYSE: KEX) today reported third quarter results that beat analysts’ expectations. Net earnings were $39.1 million or $0.65 per share. Total revenues were $745.8 million, up 25% compared to the 2021 third quarter with steady gains in both marine transportation and distribution and services.
Inland marine results included a 35% year-over-year increase in revenues with operating margins in the low double digits
“I am pleased with Kirby’s third quarter results and the improvement in both of our segments, said President and CEO David Grzebinski. “During the third quarter, our inland marine transportation business delivered strong results with significant sequential and year-over-year improvement in profitability. Tight market conditions in inland led to sequential increases in spot market rates in the high single digits, and term contract pricing that continued to push higher. Overall, higher demand and pricing improvements helped to improve inland operating margins into the low double digits during the quarter.”
“Coastal marine transportation also delivered improved financial performance with steady gains in revenue and operating income,” Grzebinski continued. “Market conditions were favorable in the quarter, with our barge utilization in the low to mid-90% range and modest increases in spot prices. These factors coupled with continued cost discipline resulted in further improvement in operating income for our coastal business during the third quarter.”
“In our distribution and services segment, lingering supply chain constraints continued to impact our ability to deliver new equipment during the third quarter. Despite these headwinds, we were able to show both sequential and year-over-year improvements in revenues and operating income. Strong demand and pricing improvements contributed to increased profitability with operating margins improving to the high single digits,” Grzebinski concluded.
Marine transportation revenues for the 2022 third quarter were $433.0 million compared with $338.5 million for the 2021 third quarter. Operating income for the 2022 third quarter was $41.7 million compared with $16.9 million for the 2021 third quarter. Segment operating margin for the 2022 third quarter was 9.6% compared with 5.0% for the 2021 third quarter.
In the inland market, average 2022 third quarter barge utilization was in the low 90% range compared to the low 80% range in the 2021 third quarter. Operating conditions were favorable with fewer weather and lock delays contributing to a 16% decrease in delay days versus the year-ago period. During the quarter, average spot market rates increased in the high single digits sequentially and in the mid 20% range compared to the 2021 third quarter. Term contracts that renewed in the third quarter increased in the low-teens range on average compared to the year-ago period. Revenues in the inland market increased 35% compared to the 2021 third quarter primarily due to increased volumes, barge utilization, pricing, and fuel rebills. Inland’s operating margin improved into the low double digits despite ongoing headwinds from high fuel costs and inflationary pressures. The inland market represented 80% of segment revenues in the third quarter of 2022.
In coastal, market conditions continued to improve modestly during the quarter, with Kirby’s barge utilization in the low to mid-90% range. Pricing in the spot market increased in the high-single digits sequentially and term contract renewals increased in the 20% range year-over-year. Revenues in the coastal market were 6% higher compared to the 2021 third quarter and represented 20% of segment revenues. The coastal business continued to show improvement in operating margins with margins in the low-to-mid single digits during the quarter.
FOURTH QUARTER OUTLOOK
In his remarks on the 2022 fourth quarter outlook, Grzebinski said, “We had a good quarter with both businesses performing well. Refinery activity remains at high levels, our barge utilization is strong in both inland and coastal, and rates are steadily increasing. While we expect some near-term headwinds related to record low water conditions on the Mississippi River, increasing delay days due to normal seasonal weather conditions, and high levels of shipyard activity in coastal, our outlook in the marine market remains strong.
Kirby expects 2022 capital spending of between $170 to $190 million. Approximately $5 million is associated with the construction of new inland towboats, and approximately $145 million to $155 million is associated with marine maintenance capital and improvements to existing inland and coastal marine equipment and facility improvements. The balance of approximately $20 to $30 million largely relates to new machinery and equipment and facility improvements in distribution and services, as well as information technology projects in corporate.