Downturn weakens demand for engines
Low oil prices continue to take a toll on companies in related industries that are reporting firstquarter earnings.
Kirby Corp., which transports petrochemicals by barge and provides equipment for the industry, said Thursday that the market in oil and gas hurt its earnings at the start of the year, and the outlook for the rest of 2016 remains bleak.
The Houston-based company is the largest in the country that transports oil and petrochemicals in barges among U.S. ports. Before the downturn it was expanding its business repairing and selling diesel engines used for pumping oil and gas, with hot demand from companies that specialize in hydraulic fracturing. Now that part of the business is taking the biggest hit.
On Thursday, CEO David Grzebinski said on a call with investors that the company received no new orders for those pres-
sure-pumping engines for use on land in the first quarter of 2016: “Within our diesel engine services segment, market conditions deteriorated further from 2015 levels in the land-based market.”
Kirby also offers diesel engines for the offshore market and boats, where the market isn’t much better.
In the first quarter, Kirby’s net earnings dropped by more than a third from the same period a year earlier. Net earnings were $38.1 million, or 71 cents per share, compared with $61.1 million, or $1.09 per share a year ago.
Its diesel engine services business suffered a $800,000 operating loss for the quarter.
Kirby’s shipping business was more steady; because petrochemicals remain relatively cheap due to low oil prices, there’s still plenty of demand for buying and shipping them. But its barge business still saw a drop in earnings. Demand lessened for moving oil, while remaining more steady for petrochemicals, the company reported.
Earlier this month Kirby closed on the acquisition of 27 tank barges and 13 towboats for $88 million from Seacor Holdings, increasing the size of its fleet, which is already the largest among inland barge companies.
Grzebinski said Kirby has been cutting costs across the company to stay afloat, including job cuts in February.
A year ago the company also cut 200 jobs, about 4 percent of its employees, due to low demand in its diesel engine business.
The company would not say how many job cuts it made during the first quarter, but spokesman Matt Woodruff said most of the cuts were in marine transportation, though not among its tug and towboat crews.
Kirby also lowered its expectations for earnings for the rest of the year, anticipating a tough market for several more quarters.
Kirby’s stock fell almost 2 percent Thursday to $64.03.
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