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Houston-based Kirby Corporation, the leading domestic tank barge operator, saw profit fall in the third quarter of 2020 compare to last year as the COVID-19 pandemic dragged down demand for petroleum products.
The company reported 2020 third quarter results before the market opened on Thursday. Net earnings were $27.5 million, or $0.46 per share, on $320.6 million in revenue. This compares with 2019 third quarter net earnings of $48.0 million or $0.80 per share, and $412.7 million in revenue. Kirby Corporation’s (NYSE: KEX) share price was up over 4% on the day to $37.95.
Kirby operates the largest fleet of tank barges for transporting liquid bulk products on the inland and near-coastal waterways of the the United States, including the Mississippi River System and Gulf Intracoastal Waterway. The company said lower earnings reflect disruptions caused by the COVID-19 pandemic and an overly active hurricane season.
“The COVID-19 pandemic and the associated economic slowdown adversely impacted Kirby’s businesses during the third quarter,” said David Grzebinski, Kirby’s President and CEO. “Although general economic activity was slightly improved and increased profitability was realized in the distribution and services segment, the marine transportation businesses experienced lower volumes and barge utilization.”
“In marine transportation, our inland and coastal businesses were heavily affected by weak demand for liquid products including refined products, crude, and black oil. Throughout the third quarter, refinery utilization was well below historical norms as many of our customers experienced low consumer demand, high product inventories, and unfavorable economics,” said Grzebinski.
“Additionally, a very active hurricane season resulted in further reductions in volumes and widespread disruptions including prolonged closures of some refineries, chemical plants, waterways, and major ports. These challenging market conditions during the quarter contributed to low barge utilization and limited spot market activity,” he added.
In the inland market, Kirby reported average barge utilization in the third quarter in the low 70% range, compared to the low 90% range in the 2019 third quarter. Barge volumes were heavily impacted by lower refinery and chemical plant utilization and reduced demand for refined products and petrochemicals.
But Grzebinski predicts business has bottomed. Speaking on 2020’s fourth quarter outlook, he commented:
“Although Kirby continues to be challenged by unprecedented declines in demand as a result of the COVID-19 pandemic, our business activity and utilization levels have bottomed. Economic activity is slowly improving, and we have seen pockets of increased demand. While this is encouraging, in the fourth quarter our results are expected to be impacted by continued low barge utilization and pricing pressure, normal seasonality from weather in marine, and likely, customer budget exhaustion in distribution and services. Looking beyond 2020, while the timing and magnitude of a material economic recovery are unclear, we believe this demand driven downturn is temporary and demand will rebound sometime in 2021. In marine, as discussed before, pricing typically does not improve until barge utilization is in the mid-80% range. Nevertheless, Kirby is in a strong financial position, and we will continue to tightly manage our costs, maintain capital discipline, generate free cash flow, and pay down debt.”
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