Charter rates upturn boosts US towage giant's profits

One of the largest operators of towboats in the US increased operating income to US$72.7M in Q3 2019 from US$48.5M a year earlier.

“During Q3 2019, our marine transportation business delivered strong results with significant sequential and year-on-year improvement in profitability,” said Kirby president and chief executive David Grzebinski. “Favourable results reflected our enhanced earnings power from our recent investments and acquisitions.”

This includes US$165M spent in 2019 on new marine equipment and fleet upgrades and US$45M on new marine vessels. This incorporates progress payments on three new 3,730-kW coastal articulated tug-barge (ATB) tugboats and 13 inland towboats of 1,940 kW each.

“In inland marine transportation, our financial results meaningfully improved as flood waters receded and operating conditions were better,” said Mr Grzebinski.

“Favourable operating conditions resulted in a 31% reduction in delay days as compared to Q2 2019, which led to efficiencies across our fleet and reduced operating expenses.”

Barge utilisation remained strong during Q3 2019, and term contracts continued to renew higher.

“Ultimately, the improvement in operating efficiencies, reduced costs and higher pricing led to inland operating margins that touched 20% during Q3,” said Mr Grzebinski.

Kirby’s operating margins in coastal marine transportation also improved in that period, with gains in revenue and operating income.

“Market conditions were favourable, and our barge utilisation was stable in the mid-80% range,” said Mr Grzebinski.

“Our efforts to modernise and increase the efficiencies of the fleet during the downturn, including purchasing a new ATB, constructing new coastal tugboats, and retiring ageing equipment, are showing benefits and contributing to better reliability and lower costs.”

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In inland transportation, Kirby reported a 15% increase in spot rates and a 10% rise in revenues compared to Q3 2018. This was due to improved pricing and the contribution from the Cenac and CGBM fleet acquisitions.

Kirby’s revenues from the coastal transportation business rose by 3% and spot market pricing was approximately 20% higher in Q3 2019, compared with the same period a year ago.

The marine transportation segment’s Q3 2019 operating margin was 17.6% compared with 12.7% for Q3 2018.

Part of Kirby’s fleet investment this year involves US$20M on installing ballast water treatment on its coastal ATBs for regulatory compliance purposes.