Kirby to purchase Savage Inland Marine, announces quarterly results

Kirby Corp. announced today net earnings for the fourth quarter ended Dec. 31, 2019 of $2.8 million or five cents a share, compared with a net loss of $24.4 million or 41 cents a share for the 2018 fourth quarter. The Houston-based tank barge operator also announced that it has agreed to purchase the inland tank barge fleet of Savage Inland Marine for approximately $278 million.

Excluding one-time charges, 2019 fourth quarter net earnings were $34.5 million or 58 cents per share, compared with $44.9 million or 75 cents per share for the 2018 fourth quarter. Consolidated revenues for the 2019 fourth quarter were $655.9 million compared with $721.5 million reported for the 2018 fourth quarter.

For the 2019 full year, Kirby reported net earnings of $142.3 million or $2.37 per share, compared with $78.5 million or $1.31 per share for 2018. Excluding one-time items, 2019 net earnings were $174 million or $2.90 per share, compared with $171.4 million or $2.86 per share for 2018. Consolidated revenues for 2019 were $2.84 billion compared with $2.97 billion for 2018.

Kirby’s purchase of Savage Inland Marine’s tank barge fleet consists of 90 inland tank barges with approximately 2.5 million bbls. of capacity and 46 inland towboats. Midvale, Utah-based Savage Companies, which has operations in Gibson, La., primarily moves petrochemicals, refined products, and crude oil on the Mississippi River, its tributaries, and the Gulf Intracoastal Waterway. Savage also operates a significant ship bunkering business as well as barge fleeting services along the Gulf Coast. The closing of the purchase is expected by late in the first quarter. Savage Inland is part of Utah-based Savage Companies.

Kirby also purchased a small barge fleeting operation in Lake Charles, La., during the fourth quarter. The Lake Charles area has seen significant petrochemical expansion in the last year and additional new projects are planned in the future.

“The purchase of Savage’s inland tank barge and towboat fleet represents an excellent strategic addition to Kirby’s inland marine fleet with young, well-maintained vessels,” David Grzebinski, Kirby’s president and CEO said in a statement. “In the last few years, Savage has built a diverse and well-respected inland marine transportation business with a strong presence in towing, bunkering, and fleeting along the Gulf Coast. These operations complement Kirby’s inland business very well and will enable us to better service our customer’s towing and fleeting needs. Further, Savage’s ship bunkering business in New Orleans is an ideal expansion of Kirby’s existing bunkering operations in Texas and Florida, and gives Kirby the ability to service bunker customers in this important Gulf Coast port.”

“We’re proud of the excellent service our inland marine team members have consistently provided for customers in the Gulf Coast and throughout the Intracoastal Waterway,” Kirk Aubry, Savage president and CEO said in a statement. “I’m confident that along with Kirby’s existing team, they’ll continue to provide value for chemical companies, refineries, and other businesses that transport bulk materials and products on the water.”

During today’s earnings call, Grzebinski commented on the Savage purchase. “This acquisition will further improve our ability to service customers, lower the average age of our fleet and reduce future capital expenditures. It is a perfect strategic fit. Additionally, the Savage bunkering business, which has significant operations in New Orleans, expands our existing operations beyond Texas and Florida, giving us the ability to service bunker customers in this important Gulf Coast port.

Grzebinski also commented on Kirby’s fourth quarter results. “In coastal, we continued to experience strong customer demand and tightening market conditions with reduced availability of equipment, particularly in the Atlantic and Gulf Coast regions. As a result, barge utilization was in the mid-80% range, pricing on term contracts renewed higher, and many of our spot market barges were placed into new term contracts.”

In the inland market, barge utilization was in the low 90% range during the quarter. It was adversely impacted by reduced chemical plant and refinery utilization and extended turnarounds for some major customers. Operating conditions were negatively impacted by significant wind and fog, as well as lock maintenance closures along the Gulf Coast and the Illinois River. Pricing continued to improve year-on-year, with spot rates increasing in the mid-single digits and average rates on renewing term contracts increasing in the low to mid-single digits percentage range. Revenues in the inland market increased 7% compared to the 2018 fourth quarter due to improved pricing and the contribution from the Cenac acquisition, but were partially offset by the impact of reduced chemical plant and refinery utilization. During the quarter, inland represented approximately 78% of marine transportation revenue and had an operating margin in the mid-teens.

Commenting on the 2020 full year outlook and guidance, Grzebinski added, “Our earnings guidance range for the year is $2.60 to $3.40 per share, reflecting continued growth in inland, flat to modest growth in coastal, and a modest earnings contribution from Savage which takes into consideration integration costs, the time needed to integrate the fleet, inherited contracts, and interest expense. In distribution and services, although we anticipate a modest recovery in our oil and gas businesses relative to fourth quarter 2019 activity levels, significant uncertainty exists in our outlook, particularly regarding manufacturing activity.”

In the inland marine transportation market in 2020, Kirby sees favorable market conditions with continued growth in customer demand, increased volumes from new petrochemical plants, and modest net new barge construction in the industry. This is expected to result in barge utilization rates in the low to mid-90% range throughout the year. Combined with the anticipated contribution from Savage, inland revenues are expected to increase in the low double digits to mid-teens percentage range year-on-year with an overall operating margin in the high teens.

Grzebinski said that “2019 was an exciting, but challenging year at Kirby. In marine, I’m pleased with the hard work and performance of our teams which delivered significant year-on-year financial improvement in both inland and coastal, successfully integrated Cenac, and safely navigated and overcame historic high-water conditions. In 2020, the marine business is poised to deliver positive growth in revenue and earnings, and the addition of Savage, will further strengthen our fleet and earnings power for the future.”

About the author

David Krapf

David Krapf has been editor of WorkBoat, the nation’s leading trade magazine for the inland and coastal waterways industry, since 1999. He is responsible for overseeing the editorial direction of the publication. Krapf has been in the publishing industry since 1987, beginning as a reporter and editor with daily and weekly newspapers in the Houston area. He also was the editor of a transportation industry daily in New Orleans before joining WorkBoat as a contributing editor in 1992. He has been covering the transportation industry since 1989, and has a degree in business administration from the State University of New York at Oswego, and also studied journalism at the University of Houston.

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