Kirby Corporation (NYSE:KEX) Q2 2019 Earnings Conference Call - Final Transcript
Jul 25, 2019 • 08:30 am ET
David W. Grzebinski
work their equipment incredibly hard. With minimal investment and maintenance being performed today, this should benefit our manufacturing and remanufacturing businesses in the future.
Despite improved performance in our marine transportation businesses year-to-date, the financial impact from poor weather, high water conditions and closures of key waterways in 2019 has been significant. This year, we have experienced extensive periods of ice and fog and we are currently in the midst of the most prolonged period of flooding and high water conditions on the Mississippi River and her tributaries in modern history. Further, the lock maintenance and infrastructure projects throughout our network have significantly slowed operations and the Houston ship channel, which is important to our operations has experienced extended periods of delays and closures. Year-to-date, through June, we've incurred more than 7,900 delay days, which represents an 86% increase compared to the first six months of 2018.
We estimate that these conditions and incremental delays have cost inland marine about $0.10 per share thus far in 2019. And although the high water conditions are improving, we expect the high water will continue into mid-August. So the guidance reduction is primarily due to what we are experiencing in the oil and gas markets, but there is also a component related to the marine operating environment.
Moving back to the second quarter, in inland marine, we experienced a solid rebound in financial performance following a slow start in the first quarter. Strong customer demand, improved pricing and consistent barge utilization rates in the mid-90% range, all contributed to more than a 30% improvement in operating income compared to the first quarter. As previously discussed, our inland operations, particularly our contracts of affreightment were heavily affected by significant delays in this quarter, which were nearly double the second quarter of 2018. The impact is evident in our ton-miles, which declined 5% year-over-year despite an 8% increase in barges and a 9% increase in barrel capacity.
In addition to the effects from high water and lock issues, we were also delayed and impacted by a temporary closure of the Houston ship channel due to a storage fire -- a storage facility fire. Ultimately we estimate that the poor operating conditions and extensive delays negatively impacted inland second quarter earnings by approximately $0.05 per share.
In coastal, we reported sequential financial improvement with an 11% increase in revenues and reduced shipyard maintenance contributing to positive operating income. During the quarter, we experienced good customer demand and a tighter market for larger capacity vessels. Overall, our barge utilization levels increased into the mid-80% range, with higher usage on our equipment working in the spot market. Spot market pricing was flat compared to the first quarter, but we did experience mid-single-digit pricing increases on term contract renewals.
In distribution and services, as we indicated, results were challenged by widespread reductions in customer spending within the oil and gas sector, with only a few new orders booked, minimal maintenance and service activities performed and reduced part sales. We