KIRBY CORP Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Acknowledged employees impacted by Hurricane Milton and their resilience.
• Third quarter earnings per share were $1.55 compared to $1.05 in 2023, with total revenues up 9% and EPS up 48% year-over-year.
• Generated over $130 million of free cash flow, used to pay down $70 million in debt and buy back $56 million in stock.
• Inland market remained solid with upward pricing, while coastal and Distribution and Services had mixed demand but some areas like power generation showed growth.

Segment Performance

• Marine Transportation: In the third quarter of 2024, Marine Transportation segment revenues were $486 million with an operating income of $99 million and an operating margin around 21%. Total marine revenues (inland and coastal combined) increased $56 million or 13% year-over-year, and operating income increased $36 million or 57% year-over-year. Inland business contributed approximately 81% of segment revenue, with revenues up 11% year-over-year and margins in the low-20% range. Coastal revenues increased 23% year-over-year with an operating margin in the mid-teens, driven by high contract pricing and strong customer demand.
• Distribution and Services: Total segment revenues for the third quarter of 2024 were $345 million, with an operating income of $30 million and an operating margin of 8.8%. Power generation revenues were up 16% sequentially and 61% year-over-year but down 6% year-over-year overall due to supply delays. Commercial and industrial revenues were up 4% year-over-year, while oil and gas revenues were up 19% year-over-year and 8% sequentially, though operating income in oil and gas was down 14% year-over-year but up 166% sequentially.

Guidance

• Inland: Anticipates barge utilization around 90% remainder of the year, expects continued improvement in term contract pricing, but revenues are flat to slightly down sequentially in the fourth quarter with margins expected to be down compared to the third quarter.
• Coastal: Favorable market conditions with barge utilization in the mid-90% range, margins expected to be in the mid-to-high single-digits, and revenues down mid-single-digit sequentially due to planned shipyards.
• Distribution and Services: Near-term uncertainty from supply issues and lower activity in oil and gas, but longer-term demand expected in oil and gas and commercial/industrial, with power generation orders strong but delivery schedules volatile.

Risks

• Weather and navigational challenges impacting marine operations.
• Supply chain constraints, particularly in power generation affecting delivery schedules.
• Labor shortages in the marine sector driving up labor costs.
• Inflationary pressures affecting input costs for equipment.

Question and Answer

Q: On the inland side, update on spot price environment and bid season coming into year-end and 2025.

A: Supply and demand are favorable, spot prices have increased, term contract renewals are good, and expect more of the same with continued upward pricing.

Q: What is the mix of spot and term on the inland side?

A: Approximately 65% term and 35% spot, expected to remain favorable with supply and demand in check.

Q: Impact of oil price on margins and D&S oil and gas business.

A: Fuel is a pass-through, e-frac business is growing, while conventional oil and gas business is weak with minimal activity.

Q: Electrification business backlog and growth outlook.

A: Backlog is hundreds of millions of dollars, deliveries start in late 2025, rental business strong due to heavy storm season.

Q: Marine maintenance cycle impact.

A: Heavy maintenance cycle in inland and coastal, affecting margins temporarily but part of normal industry activity.

Q: Coastal margins and bid season expectations.

A: Coastal has favorable market conditions, term renewals are going well, expecting mid-to-high single-digit margins and good bid season results.

Q: Inland tonnage and demand shifts.

A: Some demand shifts in crude oil and fertilizer, but recovering with fertilizer showing resurgence in Q4.

Q: Inland and coastal margin expectations.

A: Inland aims for above prior peak margins (over 27%), while coastal aims for margins above 20%.