Kirby Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights

• David's Opening: Announced third quarter earnings per share of $1.65, a 6% year-over-year increase. Steady results driven by robust customer demand in power generation and disciplined operational execution. Navigated near-term headwinds in inland market and softness in parts of Distribution and Services.
• Inland Marine: Near-term softness due to favorable seasonal weather, improved navigational conditions, lighter feedstock mix, and fewer barges in maintenance. Barge utilization mid-80% range, spot market rates down, term contracts flat.
• Coastal Marine: Strong fundamentals with utilization in mid- to high 90% range. Driven by steady customer demand and limited large capacity vessels. Term contract renewals up mid-teens, operating margin ~20%.
• Distribution and Services: Power generation was a key growth driver with strong demand from data centers and industrial customers. Commercial and industrial showed steady activity, while oil and gas had mixed results but improved profitability due to cost management.

Segment Performance

• Inland Marine Transportation: Revenues declined 3% year-over-year. Average barge utilization was in the mid-80% range. Spot market rates experienced low to mid-single-digit sequential and year-over-year declines. Term contracts renewed flat compared to prior year. Contributed approximately 80% of the Marine Transportation segment revenue.
• Coastal Marine Transportation: Revenues increased 13% year-over-year and 11% sequentially. Barge utilization was in the mid- to high 90% range. Term contract renewals increased in the mid-teens year-over-year. Represented approximately 20% of the Marine Transportation segment revenue with an operating margin around 20%.
• Distribution and Services: Revenues were $386 million, operating income was $43 million, and operating margin was 11%. Power generation revenues increased 56% year-over-year, operating income 96% year-over-year. Commercial and industrial revenues up 4% year-over-year, operating income up 12% year-over-year. Oil and gas revenues down 38% year-over-year, operating income up 5% year-over-year.

Guidance

• Inland: Anticipate market stability in Q4 with utilization improving. Term rates expected to improve long-term, but spot pricing may face modest pressure near term due to potential demand softness.
• Coastal: Robust market with constrained supply, term contract prices supported, and utilization expected to remain in mid- to high 90% range.
• Distribution and Services: Power generation to drive mid-single-digit revenue growth for the full year with operating margins in the high single digit. Oil and gas revenues expected to decline in low to mid-double digits, but profitability improved due to cost management.

Risks

• Market Fluctuations: Near-term headwinds in the inland market and softness in some parts of Distribution and Services.
• Supply Chain: Constraints in long-term barge construction and engine supply affecting power generation deliveries.
• Macro Factors: Chemical market and other macroeconomic factors impacting inland and coastal performance, including potential demand softness.

Question and Answer

Q: Power gen lumpiness and backlog A: David says backlog is record, will be smoother but some quarter-to-quarter fluctuation, orders robust.

Q: Inland Q4 improvement A: Christian says utilization improved to 87.6% from Q3's 80%, chemicals showing some improvement.

Q: Spot rates and gap between spot and contract A: David says spot pricing down in Q3, term contracts flat, spot pricing firming in Q4, market constructive.

Q: Power gen backlog size and book-to-bill A: David says backlog between $0.5B-$1B, book-to-bill well over 1.

Q: Inland fleet and M&A opportunities A: David says fleet stable, some strategic opportunities but acquisitions hard to predict.

Q: Coastal market sensitivity to crude slate A: Christian says coastal less sensitive, concentrated capacity, new build capacity not expected soon.

Q: M&A and seller expectations A: David says both cash flow stress and peaky market drive M&A, balance sheet strong for opportunities.