Kirby Corporation · NYSE:KEX
Kirby — Investor Day (May 2018)
34 slides from Kirby's investor day presentation, May 2018
Slide 1: Marine Transportation Analyst Day 2018
Marine Transportation Analyst Day 2018 Christian O’Neil – President, Marine Transportation
Slide 2: Cautionary Statement
Cautionary Statement Statements contained in this presentation with respect to the future are forward-looking statements. These statements reflect management’s reasonable judgment with respect to future events. Forward- looking statements involve risks and uncertainties. Actual results could differ
Slide 3: Industry Leader Well Positioned for Continued Growth
Industry Leader Well Positioned for Continued Growth The U.S. barge industry serves the Inland Waterways, U.S. Coastal ports, Alaska and Hawaii Kirby is principally in the liquid cargo transportation business - Inland share (barge count): 27% - Coastal share (capacity): 25%* No competition fro
Slide 4: Waterways are a Crucial Link between U.S & Global Trade
Waterways are a Crucial Link between U.S & Global Trade Kirby operates on 12,000 miles of navigable US waterways Texas and Louisiana account for 80% of the total U.S. production of chemicals and petrochemicals Analyst Day 2018 3
Slide 5: Marine Revenues Driven by Stable and Growing Demand
Marine Revenues Driven by Stable and Growing Demand Inland & Offshore Drivers Revenue by Product1 4% Petrochemicals and Chemicals 20% Black Oil 21% 55% Refined Petroleum Products Agricultural Chemicals ¹ YTD as of March 31, 2018 Analyst Day 2018 4
Slide 6: Coastal Division
Kirby Marine Transportation Coastal Division Analyst Day 2018 5
Slide 7: Largest Coastal Operator & Positioned for Growth
Largest Coastal Operator & Positioned for Growth 30.0% 90 Share - Est. Barrel Capacity 25.0% 24.5% 75 Coastal Barge Count* 20.0% 60 15.0% 45 12.7% 11.4% 10.9% 9.5% 10.0% 8.6% 30 6.4% 4.1% 4.5% 5.0% 15 2.7% 2.7% 0.9% 0.9% 0.0% 0 * Tank barges with 195,000 barrels capacity or less as of March 31, 2018
Slide 8: Diversified Product Mix, Growing Chemicals and Black Oil Niche
Diversified Product Mix, Growing Chemicals and Black Oil Niche Offshore Product Mix by Revenue 100% 80% 60% 40% 20% 0% 2011 2012 2013 2014 2015 2016 2017 Refined Products Black Oil Petrochemicals Analyst Day 2018 7
Slide 9: Well Positioned, Even Against Difficult Backdrop
Well Positioned, Even Against Difficult Backdrop Scale Largest operator of coastal tank barges and towing vessels Diversification U.S. East, West , Gulf Coasts, and Alaska, Hawaii and Great Lakes moves – Refined products, black oil, and petrochemicals Flexibility 195,000 barrel or smaller barg
Slide 10: At the Bottom with Conditions Slowly Improving
At the Bottom with Conditions Slowly Improving Over last 4 years pricing has decreased approximately 30% – Reducing operating margins from 18% to -10% (approximately) Recent spot market stability – Increases in mid-range tankers (330k bbl.) spot rates 80% of revenue under term contracts with a
Slide 11: The Path Back to Balance
The Path Back to Balance Significant capacity is expected to come out of the market over next 2 years Jones Act ATBs/Ships (barges 80K/bbl. or greater) over 30 years old: ATB's SHIPS OSG-192 175,000 B-1979 Chemical Pioneer 213,000 B-1969 OSG-209 205,000 B-1980 Seabulk Challenger 290,000 B-1981 OSG-2
Slide 12: Margins at a cyclical low – significant upside as market improves
Margins at a cyclical low – significant upside as market improves Operating Margin vs. Timing of Acquisitions 18.0% 18% 15.7% 16% 14.8% 14% 12% Allied 9.6% 10% Transp. 10 units $119MM 8% 7.0% 6.1% Penn Maritime 6% 18 units $301MM 4% K-Sea 2% $603MM 0% Seaboats $43MM -2% -4% -6% -6.5% -8% -10.1% -10%
Slide 13: Differentiators for Kirby’s Coastal Business
Differentiators for Kirby’s Coastal Business What makes Kirby stand out amongst competitors? Inland company key relationships Focus on transporting black oil – Working for blue chip refiners and chemicals Younger, more efficient fleet Kirby Ocean Transport – Long term coal contracts – 40 yea
Slide 14: Inland Division
Kirby Marine Transportation Inland Division Analyst Day 2018 13
Slide 15: Scale Allows Better Customer Service – The Kirby Advantage
Scale Allows Better Customer Service – The Kirby Advantage Largest inland tank barge operator 1,009 inland tank barges and 302 towboats* - 27% share 70% of inland revenues under term contracts, of which approximately 50% are under time charters 30.0% 26.6% 25.0% 20.0% 15.0% 11.2% 10.0% 8.1% 6.5%
Slide 16: Flexible Fleet Size Keeps Utilization High
Flexible Fleet Size Keeps Utilization High Better asset utilization through scale advantages Tank Barge Fleet Large fleet facilitates better asset utilization - More backhaul opportunities - Faster barge turnarounds - Diversity of barge products and spot opportunities - Less cleaning Towboat Fleet
Slide 17: Growth through Counter Cyclical Acquisitions while Decreasing Average Age of Equipment
Growth through Counter Cyclical Acquisitions while Strategically Decreasing the Average Age of Equipment Number Kirby’s Inland Barge Fleet Over Time vs. Industry of Barges 4000 Kirby Count Independent 3875 3850 3825 3797 All Others Shipper Owned Fleet 3675 Kirby’s Fleet Average Age (Yrs.) 3475 3500
Slide 18: New Volume Coming to the Waterways
New Volume Coming to the Waterways Black Oil Pressurized Petrochemicals Refined Products Agriculture Product List: Product List: Product List: Product List: Product List: • Crude Oil • LPG • Methanol • Kerosene/Jet • Ammonia • Asphalt • Propane • Ethanol Fuel • Ammonium • Fuel Oil • Butadiene • Refo
Slide 19: Diversified Product Mix with a Growing Focus on Petrochemicals
Diversified Product Mix with a Growing Focus on Petrochemicals Inland Product Mix by Revenue 100% 80% 60% 40% 20% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Petrochemicals Black Oil Refined Products Agricultural Analyst Day 2018 18
Slide 20: Petrochemical Buildout – Projected Production
Petrochemical Buildout – Projected Production Select products that can be transported by barge U.S. Petrochemicals Production (in million lbs./day) 150 Products Toluene +9.2% Xylenes & Heavy Aromatics Benzene 100 Propylene Butadiene & Other C4 2014 Baseline 50 Methanol 0 2012 2013 2014 2015 2016 201
Slide 21: Kirby’s Flexibility Advantage
Kirby’s Flexibility Advantage Unit Tow vs. Linehaul Model Unit –Tow Model Linehaul Model • Non-Stop Transit • Stop-and-Go Transit • Dedicated Boat • Shared Boat • Dedicated Barges • Pre-determined Route • Route Flexibility • Slower Delivery • Quicker Delivery • Lower Cost Analyst Day 2018 20
Slide 22: Safety, Experience, and Efficiency: A Look at Waterway Navigation
Safety, Experience, and Efficiency: A Look at Waterway Navigation • Video Analyst Day 2018 21
Slide 23: Flexible Boat Model Equals Higher Utility and Less Cost to the Customer
Flexible Boat Model Equals Higher Utility and Less Cost to the Customer Vessel Capital Costs Operating Costs $$ • Lower Maintenance & Repair Cost $2.1 – $3.0 million • Paint • Insurance/Tax 30K Barge $$$$ • Crew • Maintenance & Repair • Supplies $4.0 – $5.5 • Technology million • Fuel/Lubes Boat • P
Slide 24: Optimizing Horsepower Utilization to Maximize Operating Efficiencies
Optimizing Horsepower Utilization to Maximize Operating Efficiencies Boat vs. Barge Utilization 100 Towboat Utilization 95 Barge 90 Utilization 85 80 75 70 65 60 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Recession Kirby is able to maximize horsepower util
Slide 25: The Successful Integration of Higman
The Successful Integration of Higman $419 million purchase price – $10-$12 million in cost synergies (originally) Equipment purchased: – 75 boats – 7.3 years (avg. age) – 163 barges – 8.0 years (avg. age) Leveraging the best of both Kirby and Higman Team dedicated to Higman integration Pha
Slide 26: Targa Pressure Barges – Opportunistic and Accretive Acquisition
Targa Pressure Barges – Opportunistic and Accretive Acquisition Kirby purchased Targa’s inland barge business for $69.3 million – Announced May 3, 2018 – Closed May 10, 2018 16 pressure barges with 258,000 barrel capacity Carrying products such as LPG and ethylene plant co-products like propylen
Slide 27: Kirby’s Infrastructure Advantage
Kirby’s Infrastructure Advantage Fleeting & facilities imprint 22 fleets – including locations along the Mississippi River, Intracoastal, Houston, Baton Rouge, etc. – Capacity – over 800 mixed barge spots Tankering services (major operational areas: Houston, Corpus Christi, Beaumont, Baton Rouge
Slide 28: Inland Margins at Cyclical Low – Significant Upside as Market Improves
Inland Margins at Cyclical Low – Significant Upside as Market Improves Operating Operating Margin Over Time Margin (%) 35% 30% 26.3% 26.4% 25.4% 25.2% 25% 23.6% 23.1% 22.4% 21.1% 21.1% 20.3% 20% 18.9% 18.4% 19.0% 17.4% 16.6% 15.7% 14.6% 15.6% 15% 12.9% 10% 5% 0% -5% -10% -15% 2000 2001 2002 2003 200
Slide 29: Kirby Inland Marine Differentiators
Kirby Inland Marine Differentiators What makes Kirby stand out amongst competitors? Safety culture High quality customer portfolio Heavily engrained in the supply chain of many blue chip companies – Acquired Lyondell, Dow, and SeaRiver’s captive fleets Horsepower management Largest tank ba
Slide 30: Key Takeaways
Key Takeaways Safety focused Capital discipline Industry consolidator Invest in the long run Provide essential services both Inland & Coastal Coastal – at the bottom Inland – on the upswing Analyst Day 2018 29
Slide 31: Questions
Questions Analyst Day 2018 30
Slide 32: Appendix
Appendix Analyst Day 2018 31
Slide 33: Near-Term U.S. Ethylene and Derivative Capacity Additions
Near-Term U.S. Ethylene and Derivative Capacity Additions U.S. ethylene derivative capacity is ~40% of new derivatives are products expected to expand ~30% over the that are moved by water next 5 years Vinyl Acetate Ethylbenzene Monomer 4,500 0% 1% Alpha Olefins Ethylene 15% 4,000 Dichloride 4% 3,50
Slide 34: $135+ Billion of U.S. Petrochemical Investments
$135+ Billion of U.S. Petrochemical Investments* Pacific Northwest Cost ($MM) Ohio NW IW - WA 2020 New methanol 3,600 Cost ($MM) NW IW - OR TBD New methanol PTT /Daelin JV 2021 New ethylene 10,000 PBF 2015 Aromatics exp unk Tesoro 2019 New xylene 400 Monaca, PA Iowa Cost ($MM) Cost ($MM) Orascom (OC