Kirby Eyes Shipping M&A, Sees Some Sector Recovery

The head of Kirby Corp. (KEX) said Thursday that the U.S. barge industry was ripe for consolidation, with overcapacity still depressing shipping rates despite signs of optimism among its customer base.

The Houston-based group has been a leading indicator of economic conditions, transporting bulk petrochemicals and other commodities, but business lagged in the December quarter compared with the prior three months.

"The customers are maybe a little more optimistic about their business," said Chief Executive Joe Pyne on a post-earnings conference call.

He said that while chemicals business was down in the fourth quarter, this reflected "fine-tuning" of inventories by customers. Pyne expected the fertilizer business to be stronger in 2010.

Kirby has been retiring vessels, cutting costs and shifting more resources toward the spot market from longer-term contracts amid continuing volatility in demand from its core customers.

While he declined to comment on speculation that some rivals were seeking buyers, Pyne noted that "a difficult year may spring forth some opportunities."

Pyne said the industry pricing was close to the bottom, but expected weakness to continue through the first half of the year, with utilization around 80% to 85%.

Kirby is tying up or scrapping older vessels as it takes deliveries of tugs and barges ordered in more buoyant conditions three years ago.

Pyne also said he believed Kirby wasn't at fault for a collision on Jan. 23 near Port Arthur, Texas, which closed the Intracoastal Waterway, a key transit route on the U.S. Gulf coast. He said it would be two weeks before the financial impact of the incident was known.

Kirby reported a fourth-quarter profit of $29.2 million late Wednesday, down from $38.4 million a year earlier, and its full-year forecast fell short of analysts' expectations. Its shares were recently down 4.7% at $34.29.

-By Doug Cameron, Dow Jones Newswires; (312) 750 4135; doug.cameron@dowjones.com

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