Kirby(US:KEX)2020-10-31 19:40Financial Data and Key Metrics Changes - Kirby Corporation reported Q3 2020 earnings of $0.46 per share, significantly impacted by COVID-19 and reduced demand for products and services [8] - Marine Transportation revenues were $320.6 million with an operating income of $32.4 million, reflecting a 16% decline from the previous quarter [21][22] - Distribution and Services revenues increased by 10% sequentially to $176 million, with operating income returning to slightly above breakeven [27][15] Business Line Data and Key Metrics Changes - In Marine Transportation, inland and coastal markets faced reduced volumes, with average barge utilization in the low 70% range for inland and mid-70% for coastal [14][24] - Distribution and Services saw a sequential improvement in commercial and industrial sectors, with increased demand for truck repairs and power generation [15][27] - The oil and gas market showed signs of recovery, with active frac crews increasing from about 50 to over 100 by the end of Q3 [19] Market Data and Key Metrics Changes - Refinery utilization averaged only 78%, significantly below the five-year average of 93% [11] - Chemical plant utilization was at 74%, still below levels experienced in 2018 and 2019 [12] - Spot market rates for refined products, crude, and black oil declined approximately 10% sequentially [24] Company Strategy and Development Direction - The company is focused on cost control, capital discipline, cash generation, and debt reduction during the downturn [41] - Kirby is exploring opportunities in decarbonization and alternative fuels, including ammonia and methanol, to align with long-term growth trends [78][82] - The company plans to maintain a strong position in the market by leveraging its expertise in environmentally-friendly pressure pumping equipment [53] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about gradual economic recovery, with expectations for improved activity levels in 2021 [39][52] - The fourth quarter is anticipated to be challenging due to seasonality and continued low barge utilization [41][44] - Management highlighted the importance of economic activity, particularly in driving refinery and chemical plant utilization [60] Other Important Information - The effective tax rate benefit in Q3 was due to net operating losses carried back to prior higher tax years under the CARES Act [34][102] - The company expects capital expenditures for the full year to be approximately $150 million, a 40% reduction compared to 2019 [33] Q&A Session Summary Question: What is driving customer demand trends in the inland market? - Management indicated that economic activity, particularly miles driven, is crucial for increasing demand from refineries and chemicals [59][60] Question: When might the company consider stock buybacks given its current valuation? - Management acknowledged the stock's attractive valuation but emphasized a focus on debt reduction before committing to buybacks [68][69] Question: How is the company addressing the decarbonization trend? - Management confirmed active participation in decarbonization initiatives and development of ESG-friendly products, including electric frac units [78][82] Question: What factors contributed to the better-than-expected performance in Distribution and Services? - Cost savings and the shipment of environmentally-friendly frac units were key contributors to the improved performance [96][98] Question: What is the outlook for tax expenses in the upcoming quarters? - Management suggested using a tax rate of around 5% for Q4 2020, with expectations for volatility in future tax rates [102][104]