Kirby Corporation Q4 FY2025 earnings call

2025 Summary - 2025 was a record year for Kirby, with a solid final quarter. Over $100 million in share repurchases and $130 million in debt paydown. Generated over $400 million in free cash flow. ### Inland Marine - Early quarter market softness gave way to improving conditions, with barge utilization averaging mid to high 80% range by year end, and operating margins in the low 20% range. ### Coastal Marine - Market fundamentals solid, barge utilization in mid to high 90% range, operating margin ~20%. ### Distribution and Services - Power generation was a standout, with strong order flow and large project wins. Commercial and industrial activity steady but down sequentially, oil and gas revenues pressured but profitable.

Marine Transportation Segment: Inland business contributed approximately 79% of segment revenue. Average barge utilization was in the mid to high 80% range for the quarter, with operating margins in the low 20% range. Coastal business represented 21% of revenues, with barge utilization in the mid to high 90% range and an operating margin of approximately 20%. Distribution and Services Segment: Revenues were $370 million with an operating income of $30 million and an operating margin of 8.1%. Power generation contributed 52% of total segment revenues, with total revenues up 47% year over year. Commercial and industrial revenues were down sequentially, and oil and gas revenues were pressured but maintained profitability.

2026 Outlook - Expect steady financial performance. Inland marine: Anticipate barge utilization to average low 90% range, revenues up low to mid single digits, margins improving to high teens/low twenties. Coastal marine: Mid single digit revenue growth, operating margins in high teens, with some pressure in Q1 due to shipyards. Distribution and services: Stable growth with power generation offsetting weakness in other areas, operating margins mid to high single digits.

Risks - Increasing medical costs, supply constraints affecting working capital, inflationary pressures impacting margins, weather-related operational challenges affecting efficiency.

Q: Hey, guys. Thanks for taking the question. I just had a question on 4Q term contract pricing. It was down slightly, but I would assume that these have some type of forward-looking conversation when you get into the room with these customers. Is this somehow a read into maybe their demand outlook into 2026? Or is this solely a function of near-term pressures? And then if you can give any color on how the conversations are going so far in 1Q, as you say, you've seen a bottoming spot rate. That'd be very helpful.

A: Sure. Yeah. Good morning, Reed. Thanks for the question. Christian and I will tag team this a bit. Yeah. The fourth quarter, you know, we had pretty weak demand early in the fourth quarter. It was carrying over from the third quarter being a little weaker on demand. We had a little more barge availability than we would have liked. That puts some short-term pressure on term pricing. As you heard, it was down, low single digits. You know, that's just part of the normal renewal cycle. The good news is that we've already seen spot prices retrace and are probably up more so far in January than they were down in the fourth quarter. So that bodes well for the renewal cycle going into this year. I think it was really demand softness in, you know, in the latter half of last year, kinda set the tone for the price renewal, term renewals. But so far, the tone is much improved this year. Part of that is weather. For sure, we're tighter because of weather, but we are seeing more volumes. You know, I don't know, Christian. What was our utility morning? It was We were ninety-four percent this morning. So utility's tight. Yeah. Anything you wanna add on pricing?

Q: Hey, Greg. Good morning, Dave, Christian, and Raj. So you guys set a pretty big range for EPS. Right? Zero to 12. Maybe drive a barge through there. So maybe just talk a little bit about top to bottom expectations or thoughts. And I know. Is that more on the deliveries for PowerGen and the timing of that? Is it unknown about the I mean, I guess, most of your contracts, I thought, were done in the fourth quarter for Inland. Is there still a lot of debate given the flop of what's going on with rates? So maybe just walk through your thoughts on the range, why it's so large, and then where the opportunities lie.

A: Yeah. No. I think you hit the key reason. You know, there's a couple reasons for the breadth of the range. And power gen deliveries are a big part of it. As you know, the OEMs still are supply chain constrained. You know, we get lumpy deliveries from them, and then we've gotta process them through our manufacturing facility. So, you know, the cadence of power gen deliveries is a big part of it. And then a lesser extent is the inland market and how much pricing improves throughout the year. We're very optimistic, but we don't wanna be too optimistic given we saw a little demand pullback last year when the fruit slate went a little lighter. So far, you know, we're seeing a heavier feedstock slate come in, and that's certainly helping. You know, our refining customers are having really good years in I think they like cracking the heavier crude. And, you know, this Venezuela is just part of it. But given Venezuelan coming back in is also making, Mayan and Mexican crudes, slates a little cheaper. So there's some good dynamics coming, but, you know, we're a little cautious given what we saw in the third quarter in terms of demand. So, you know, that's part of our guidance range, Ken.