Kirby Hits Profit Marks Despite Extensive Midwest Flooding

Kirby Corporation KEX reported second quarter results that met consensus estimates, despite the ongoing problems for barging operations in the U.S. Midwest.

But the company did lower its earnings guidance for 2019 due to reduced demand from the oil and gas industry.

The largest U.S. owner of tank barges for liquid bulk materials, Kirby reported net earnings, including a one-time charge related to the retirement of its chairman, of $47.3 million for the quarter, or $0.79 per share, up 64 percent from a year earlier. 

The gain came despite revenue falling 4 percent to $802.7 million. 

Chief Executive Officer Dave Grzebinski said the results are due to the marine transportation business having "significantly improved its profitability despite challenging inland operating conditions."

The marine transportation division reported a 7 percent revenue gain for the quarter to $404.3 million, while operating income rose 39 percent to $53.2 million. 

Inland barge revenue was up 8 percent as spot rates rose 15 percent and term contract pricing was up mid- to high single digits. 

But the severe flooding occurring through the U.S. Midwest resulted in delay days nearly doubling from a year ago.

"Operating conditions were challenging with prolonged flooding on the Mississippi River system, lock maintenance projects, and closures in the Houston Ship Channel," Kirby said in a release. 

The coastal barge division reported a revenue increase of 3 percent from a year ago, as spot rates also rose 10 percent to 15 percent and term contracts repriced at mid-single digit increases.

Kirby's distribution and services business, which sells and repairs major mechanical equipment such as diesel engines and pumps, was impacted by reduced demand for pressure pumping equipment, transmissions, parts and services, particularly for the oil and gas industry. Revenue was down 13 percent to $366.7 million, while operating income fell 42 percent to $23.1 million. 

The weak demand from the oil and gas segment caused Kirby to issue earnings guidance of $2.80 to $3.20 per share for full-year 2019, down from a previous full-year outlook of $3.25 to $3.75 per share.

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