The coronavirus crisis in the US and the oil price collapse has transformed Kirby Corp business from growing earnings to sinking losses
The US-based corporation has seen severe impacts to its oilfield services division and marine transportation business from the double whammy of Covid-19 and oil price slump.
Kirby reported a net loss of US$248.5M for Q1 2020 compared with net earnings of US$44.3M for the same period a year ago. Its distribution and services oil and gas-related activity declined sharply with oil prices that briefly crashed to zero.
Kirby’s inland and marine transportation section was seeing increasing profits and rising tug and barge utilisation until business was impacted by coronavirus and resulting oil price collapse.
Kirby’s president and chief executive David Grzebinski recognised the transformation coronavirus had on the business but said there were other priorities. “Our first priority is the safety, health, and well-being of our employees, customers, and communities,” he said.
“At the onset of Covid-19, we implemented our pandemic response plan. We have limited the direct impact of coronavirus on our company through quarantining and other actions while maintaining business continuity,” Mr Grzebinski added.
“Unfortunately, we have also had to implement workforce reductions, furloughs, and reduced work schedules in the distribution and services segment.”
Market conditions were improving in Q1 2020 for inland and marine tug-barge transportation and in distribution and services.
As the Covid-19 crisis deepened and energy prices fell, so did Kirby’s business activities, but that did not stop Kirby from investing as it completed a US$278M acquisition on 1 April 2020. Kirby expanded its tug and barge fleet by purchasing Savage Inland Marine’s 46 towboats and 90 tank barges, with total transportation capacity of around 2.5M barrels.
Mr Grzebinski is unsure of future market conditions, but reassured investors the company had cash to come through the crisis.
“Although there are many unknowns and business levels are expected to decline for a period of time, Kirby has ample liquidity, and we expect meaningful free cash flow in 2020,” he said.
“We remain confident that Kirby is well-positioned to overcome the current economic challenges while remaining focused on safety and serving our customers.”
Kirby had US$412M of cash and liquidity available after spending US$278M on acquiring Savage. It expects to receive $125M in tax refunds and has no debt maturities until 2023.
Kirby expects 2020 capital spending to be at the lower end of its previously announced range of US$155M-US$175M, representing a year-on-year reduction of about 40%.
Impact on maritime sectors from Covid-19 will be discussed during Riviera’s webinar series, including: How COVID-19 will transform your vessel operations over the next 24 months - on 20 May