Kirby Corp
NYSE:KEX
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
72.79
130.55
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Kirby Corp
Earnings Call Analysis
Q4-2023 Analysis
Kirby Corp
Kirby Corporation closed the fourth quarter with a bang, reporting a robust revenue of $799 million and a hearty earnings per share of $1.04, a significant hop from the last year's figures of $730 million in revenue and $0.62 EPS. The driving force behind this upward trajectory was a solid demand that kept business firing on all cylinders despite the chilly bite of winter weather, which nibbled at their efficiency.
Inland Marine was the beacon of strength, holding its utilization steady in the low 90% range, with spot market prices notching up every quarter and soaring mid-teen percentages year-over-year. The term contract renewals enjoyed a healthy uptick too, averaging high single-digits annually. In the face of operational challenges brought on by the winter, Inland Marine remained unshaken, maintaining flat operating margins from the previous quarter and navigating the final month with impressive high teen margins.
Over at Coastal Marine, a 4% sequential revenue rise and sustained utilization at mid-90% showcased resilience, despite time off for maintenance and installations. This segment wrapped up with operating margins in the low single digits for the quarter. On another front, the Distribution and Services sector also witnessed a year-over-year leap of 13% in revenue, maintaining high single-digit operating margins and promising stability and growth in both areas as they weathered supply chain and seasonal shifts.
Looking beyond the horizon, 2024 holds the promise of strong growth. With Inland Marine standing firm in high demand and rising rates, along with a favorable industry-wide supply and demand dynamics for Coastal revenue, Kirby projects a stable market outlook. Notably, the Company plans to grow its fleet slightly to 1,078 Inland barges by the end of next year, hinting at cautious optimism and readiness for continued expansion.
Marine Transportation was a juggernaut with $453 million in revenue and a 15% operating margin, climbing 7% in revenue and a staggering 46% in operating income from the prior year. Meanwhile, the Distribution and Services segment heralded in $347 million in revenues with operating income at $29 million, translating to an 8% operating margin. While an increase in revenue by 3% from the third quarter indicates sustained demand for Commercial and Industrial services, a 14% drop in operating income reflects a shift in the product mix and seasonal dips.
You don't have any saved screeners yet
Good morning, and welcome to the Kirby Corporation 2023 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Kurt Niemietz Kirby's VP of Investor Relations and Treasurer. Please go ahead.
Good morning, and thank you for joining the Kirby Corporation 2023 Fourth Quarter Earnings Call. With me today are David Grzebinski, Kirby's President and Chief Executive Officer; and Raj Kumar, Kirby's Executive Vice President and Chief Financial Officer. A slide presentation for today's conference call as well as the Earnings Release, which was issued earlier today can be found on our website. .
During this conference call, we may refer to certain non-GAAP or adjusted financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our Earnings Press Release and are also available on our website in the Investor Relations section under Financials. As a reminder, statements contained in this conference call 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, and our actual results could differ materially from those anticipated as a result of various factors. A list of these risk factors can be found in Kirby's latest Form 10-K filing and in our other filings made with the SEC from time to time. With that, I will now turn the call over to David.
Thank you, Kurt, and good morning, everyone. Earlier today, we announced fourth quarter revenue of $799 million and earnings per share of $1.04. This compares to 2022, fourth quarter revenue of $730 million and earnings per share of $0.62. During the fourth quarter, continued strong fundamentals in both our businesses resulted in significant year-over-year growth in our revenue and earnings. In Marine Transportation, pricing on spot and term contracts benefited from strong demand and limited availability of barges, while the onset of winter weather conditions proved to be a headwind to our efficiency in the quarter.
Distribution and Services delivered higher revenues sequentially, but margins were down slightly from the third quarter as a result of lower demand in our Power Rental business and typical seasonal impact. We ended the year on a good note, and we anticipate strong growth in 2024. In Inland Marine, we continue to experience strong demand and high barge utilization with our barge utilization rates in the low 90% range. Spot market prices continue to push higher, and we were up in the low to mid-single digits sequentially and then mid-teens year-over-year.
Pricing increases on term contract renewals were up year-over-year on average in the high single digits during the quarter. While the efficiency of our operations was challenged during the quarter with the [ late ] days up 86% sequentially, strong pricing and utilization mostly offset this, allowing for inland marine margins to remain flat sequentially with operating margins remaining in the high teens on average.
In our Coastal Marine business, we saw consistent customer demand during the fourth quarter that helped maintain barge utilization in the low to mid-90% range. Overall, Coastal Marine revenues were up 4% sequentially, as improved spot and term contract pricing more than offset planned maintenance and ballast water treatment installations, which reduced equipment availability. As a result, the Coastal business was able to finish the year with operating margins in the low single digits for the quarter.
In Distribution and Services, demand in the fourth quarter remained steady throughout much of the segment, marked by a sequential increase in revenues, increases in new orders and steady backlog. In Oil and Gas, revenues and operating income were up sequentially and year-over-year, as solid execution on our backlog and deliveries were partially offset by lingering supply chain delays.
In Commercial and Industrial, while revenues were up sequentially, the seasonal falloff in our Power Rentals business led to a sequential decline in operating income. Despite supply chain issues and seasonal weaknesses -- the weakness, the business segment overall concluded the year very strong. Overall, segment revenues were up 13% year-over-year and operating margins were in the high single digits. In summary, our fourth quarter results reflected ongoing strength in market conditions for both segments. Despite the temporary headwinds of seasonal winter weather in the quarter, the Inland market is strong and rates continue to push higher, helping to offset lingering inflation.
While our Coastal revenue was challenged near term by planned shipyards, industry-wide supply and demand dynamics remain very favorable. Our utilization is good, and we are realizing healthy rate increases. Steady demand in Distribution and Services is contributing to further growth in the segment. And while supply chain bottlenecks are expected, the outlook for the market is stable. I'll talk more about our 2024 outlook later. But first, I'll turn the call over to Raj to discuss the fourth quarter segment results and balance sheet in more detail.
Thank you, David, and good morning, everyone. In the fourth quarter of 2023, Marine Transportation segment revenues were $453 million and operating income was $68 million with an operating margin of 15%. Compared to the fourth quarter of 2022, total Marine revenues increased by $30 million or 7% and operating income increased $21 million or 46%. Increased pricing and utilization in the Inland market were partially offset by weather-related inefficiencies and coastal shipyards.
Compared to the third quarter of 2023, Total Marine revenues, Inland and Coastal together, increased 5%, while operating income increased by 7%. Now looking at the Inland business in more detail. The Inland business contributed approximately 82% of segment revenue. Average barge utilization was in the low 90% range for the quarter. Long-term Inland Marine Transportation contracts, or those contracts with a term of 1 year or longer, contributed approximately 60% of revenue, with 62% from time charters and 38% from contracts of affreightment.
Tight market conditions contributed to spot market rates increasing sequentially in the low to mid-single digits and in the mid-teens range year-over-year. Term contracts that renewed during the fourth quarter were on average up in the high single digits compared to the prior year. Compared to the fourth quarter of 2022, Inland revenues increased by 11%, primarily due to higher term and spot contract pricing. Inland revenues were up 6% compared to the third quarter of 2023, due to higher pricing and the reopening of the Illinois River locks.
While Inland operating margins remained on average in the high teens, we did exit at 20% in the final month of the quarter. Now moving to the Coastal business. Coastal revenues decreased 7% year-over-year and were up 4% sequentially, as downtime from planned shipyards was partially offset by higher contract pricing. Overall, Coastal had low single-digit operating margins as improved pricing was partially offset by increased shipyard pace. The Coastal business represented 18% of revenues for the Marine Transportation segment.
Average coastal barge utilization was in the mid-90% range, which was in line with the fourth quarter of 2022. During the quarter, the percentage of Coastal revenue under term contracts was approximately 95%, of which approximately 94% were time charters. Average spot market rates were up in the mid-single digits sequentially and in the mid-30% range year-over-year, and prices on term contract renewals were up in the 20% range year-over-year.
With respect to our tank barge fleet for both the Inland and Coastal businesses, we have provided a reconciliation of the changes in the fourth quarter, as well as projections for 2024. This is included in our earnings call presentation posted on our website. At the end of the fourth quarter, the Inland fleet had 1,076 barges, representing 23.7 million barrels of capacity. On a net basis, we currently expect to end 2024 with a total of 1,078 Inland barges, representing 23.8 million barrels of capacity, driven by a modest number of additions in the year.
Now I'll review the performance of the Distribution and Services segment. Revenues for the fourth quarter of 2023 were $347 million with operating income of $29 million and an operating margin of around 8%. Compared to the fourth quarter of 2022, the Distribution and Services segment saw revenues increase by $39.2 million or 13%, with operating income increasing by $11.6 million or 6%. When compared to the third quarter of 2023, revenues increased by $12 million or 3% and operating income decreased by $4.5 million or 14%, with the decline in margins related to product mix.
On the Commercial and Industrial markets, strong activity contributed to a 24% year-over-year and 5% sequential increase in revenues with improved demand for equipment, parts and service in our marine repair and on-highway businesses. Power generation was also up year-over-year. Overall, the Commercial and Industrial business represented approximately 64% of segment revenue and had an operating margin in the mid- to high single digits in the fourth quarter.
In the Oil and Gas market, revenues were down 3% year-over-year and up 2% sequentially, as solid execution on our backlog was partially offset by lingering supply chain delays. While we saw slowing trends in our conventional remanufacturing business, we experienced continued favorable trends in new orders and backlog driven by our e-frac units and associated power generation equipment. Overall, Oil and Gas represented approximately 36% of segment revenue in the fourth quarter and had operating margins in the low double digits.
Now I'll turn to the balance sheet. As of December 31, 2023, we had $33 million of cash with total debt of around $1 billion. During the quarter, we decreased our debt balances by $51 million, and our debt-to-cap ratio improved to 24.2%. We achieved cash flow from operating activities of $216 million for the quarter. We used cash flow and cash on hand to fund $127 million of capital expenditure or CapEx, of which $56 million was related to maintenance of equipment and the remainder was directed to growth CapEx in Marine and e-frac.
We continue to return capital to shareholders in the quarter and repurchased $52 million of stock, at an average price of $77.8. As of December 31, we had total available liquidity of approximately $491 million. For 2024, we expect to generate cash flow from operations of $600 million to $700 million on higher revenues and EBITDA. We still see supply chain constraints posing some headwinds to managing working capital in the near term.
Having said that, we expect to unwind most of this working capital, as orders shipped, as 2024 progresses and beyond. With respect to CapEx, we expect capital spending to range between $290 million and $330 million for the year. Approximately $190 million to $240 million is associated with Marine maintenance capital and improvements to existing Inland and Coastal Marine equipment, including the remaining ballast water treatment system on some coastal vessels and some facility improvements. Up to approximately $90 million is associated with growth capital spending in both of our businesses.
The net result should provide approximately $300 million of free cash flow for the year. We are committed to a balanced capital allocation approach and will use this cash flow to opportunistically return capital to shareholders and continue to pursue long-term value-creating niche investment and acquisition opportunities. I will now turn the call back to David to discuss the remainder of our outlook for 2024.
Thank you, Raj. We had a good quarter in both our businesses, despite some temporary headwinds. Refinery activity remains at high levels. Our barge utilization is strong in both Inland and Coastal, and rates are steadily increasing. While we expect typical seasonal weather conditions to post some near-term headwinds in the first quarter and some high shipyard activity in our Coastal business, our outlook in the Marine segment remains strong for the full year.
In Distribution and Services, despite supply chain constraints that we've discussed, demand for our products and services is good, and we continue to receive new orders. Overall, we expect our businesses to deliver improved financial results in 2024. While all this is encouraging, we are mindful of challenges related to a slowing global economy and additional economic weakness due to interest rates. However, even with these uncertainties, we remain very positive and expect to drive strong earnings and strong cash flow from operations going forward.
In Inland Marine, our 2024 outlook anticipates positive market dynamics with tight conditions due to limited new barge construction in the industry and many units going in for maintenance, combined with steady customer demand. With these market conditions, we expect our barge utilization rates to be in the low to mid-90% range throughout the year. Overall, Inland revenues are expected to grow in the mid- to high single-digit range on a full year basis.
Normal seasonal winter weather has started and is expected to be a headwind to revenues and margins in the first quarter as usual. With respect to operating margins, we expect to gradually improve during the year with the first quarter being the lowest and averaging around 20% for the full year, what will be a 300 to 400 basis point improvement from the 2023 average.
In Coastal, market conditions have tightened considerably and supply and demand are balanced across the industry fleet. Strong customer demand is expected throughout the year with our barge utilization in the low to mid-90% range. With major shipyards and ballast water treatment installations concluding in the first half of the year, revenues for the full year are expected to increase in the high single to low double-digit range, when compared to 2023.
And Coastal operating margins are expected to be in the mid- to high single-digit range on a full year basis with the first quarter the lowest, due to weather and shipyards. In the Distribution and Services segment, despite the uncertainty from volatile commodity prices, we expect to see incremental demand for OEM products, parts and services within the segment.
In Commercial and Industrial, strong demand for power generation and stable marine repair is expected to help drive full year revenue growth in the high single-digit to low double-digit percent range. In Oil and Gas, our manufacturing backlog is expected to provide stable levels of activity through most of 2024, but will be somewhat offset by lower activity levels in the oilfield market. We anticipate extended lead times in the near term to continue contributing to volatile deliveries, with respect to the schedule of new products in 2024.
Overall, the company expects segment revenues to be flat to slightly down on a full year basis with operating margins in the mid- to high single digits, but slightly lower than year-over-year due to mix. To conclude, we ended 2023 in a position of strength in both of our segments. In Marine Transportation, barge utilization and customer demand remained strong and rates continue to increase. In D&S, demand for our products and services remain strong, and we continue to receive new orders in manufacturing.
Overall, we anticipate our businesses to deliver 30% to 40% earnings growth in 2024. Key risks putting us at the lower end of that range would be the impact of a recession -- a potential recession or lingering inflation. While achieving the higher end of this range would be driven by stronger-than-expected chemical markets for Marine and stronger-than-expected Oil and Gas markets in D&S. As we look long term, we remain confident in the strength of our core businesses and our long-term strategy.
Our Marine businesses are in the early innings of a multiyear up cycle and demand remains solid in D&S. We intend to continue capitalizing on strong market fundamentals and driving value for our shareholders. Operator, this concludes our prepared remarks. We are now ready to take questions.
[Operator Instructions] Our first question will be coming from Jack Atkins of Stephens.
So David, I guess I'd like to -- maybe if I can start with the CapEx guidance for a second. The $90 million, I think, in growth CapEX, can you kind of give us a little more color how that's between the cost -- excuse me, the Marine versus the Distribution businesses? And I guess as I look at the 39, if I'm reading this right, 39 new -- I guess, how many barges are you planning on adding in 2024? I'm just trying to get that correct. As we think about next year, are you building barges for 2024 in Inland?
No. What happened, Jack, is we stepped into a competitor's shipyard contract. They were building some barges in some boats. They they needed to not do that. And we were able to step in and get a good deal with the shipyard. So those boats and barges, it's basically 2 boats with a bow thrusting units that go with those and then 4 barges. So we stepped into those -- that contract for them. It was kind of underway and the competitor couldn't finish it. So we stick into it. And it's a good price. We were happy with it.
Do we want building? No. New construction doesn't make sense now. We were able to get a decent price on the East. And so we stepped into it. So that's part of that growth CapEx. And then we're doing some things in C&I for KDS, it's helping a little bit. But the biggest part of our CapEx, as you know, is maintenance CapEx. We've talked about the maintenance bubble. It's real -- it's real for the industry, it's real for us. So our CapEx is still pretty elevated with the maintenance side of things.
Okay. No, that makes total sense. And then I guess, maybe just to that last point, I guess, as you think about new builds in 2024 for the industry relative to maybe anticipated retirements. Can you walk us through that? And then I know that a lot of the industry is going to be down for maintenance on the Inland side in 2024. How much of your fleet do you think will be out for maintenance, relative to your normal maintenance schedule in 2024?
Yes. It's significant. It's -- in any given day, we'll have 80 barges out. And I think for the industry, this is going to be a big year. It could be on the order. Well, I know it's north of 600 and maybe as high as 1,000 for this year. So it's a big number. I actually think this is positive for a number of reasons. One, it helps tighten up utility. But more importantly, people are busy maintaining their fleet. They're going to put their cash to that, instead of going and build new. It doesn't make sense to build new. So I think it actually helps the whole supply picture quite a bit. But it's a known bubble. And the good news is our customers understand that they're sophisticated. They get it. They know what's going on. And inflation is not helping this either, as you might imagine.
Shipyards used to be, Jack, they'd run 3 ships -- 3 shifts now a number of them can only crude 2 shifts. And shipyard costs have gone up, steel costs are going up. Labor costs are very high. So all that's factoring into keeping that supply in check. And I think that continues through '25 to be honest.
And just on that first part of the question, as you think about new builds for the industry relative to retirements, would you expect net capacity attrition in '24?
Absolutely. I think what we've heard, there's only about 20 barges, maybe 25 on dock for 2024. I would imagine, I don't have good data on retirements, but I could imagine you bring something into the shipyard and you see it's going to cost you a heck of a lot. You just soon retire it. if it's only got 5 years left of its life. So we should see attrition of -- my guess is 50 to 150 barges this year. So we should have a net decline this year in supply.
And our next question will come from Ben Nolan of Stifel.
Thank you. David, Raj, good numbers. So my first question is on the D&S side, specifically on the Industrial side. It seems like that business is just really grown well over the last number of years. And as I'm looking forward and trying to sort out, how sticky that is. I'm just curious if you maybe talk to on the Industrial side, how do you think of that with respect to whether it's cyclical or maybe structural and you've changed your business mix and it's just resulted in more growth? Or have you captured share? How are you thinking about that Industrial side of the business?
Yes. No, thanks for the question, Ben. Look, on the C&I side, there's really 3 parts to it. There's on-highway and marine repair and then there's power generation. So I'd say the first 2, marine repair and on-highway really are going to move with the economy, right? We see -- we saw a little pullback in the on-highway trucking space.
You saw one of the truckers go bankrupt last year. We have seen a little pullback. That's in our guidance for 2024. On Marine repair, we do both commercial marine and pleasure craft, with being an election year, we're seeing a little pullback in pleasure craft, but commercial marine repair is pretty strong. As you would expect, as you hear us talk about maintaining our our vessels.
And then -- but the real secular growth story is in power generation. I think it's pretty obvious. Everybody needs power 24/7 now. Every business runs using computing power. I think AI and machine learning is only adding to that demand. So we're seeing secular growth in our -- on our power generation side. As you know, we provide backup power to places like the New York Stock Exchange, JPMorgan and others as well as retail environments like Walmart, Costco, Target and the like, as well as rentals, we rent power out. So it's -- we're seeing a lot of growth there. We manufacture some of that equipment. So it's -- it helps the manufacturing as well as the distribution side, and that's more of a secular growth story.
Okay. So all in, if you were just to sort of take a high-level approach to it, does it feel like the business is less cyclical than it used to be 2 or 3 years ago, as a function of that power business?
Absolutely. Yes, absolutely. Oil and Gas is still going to cycle. Overall, you'll see '24 versus '23. We're seeing that revenue in D&S is going to be down to flat to slightly down, and that's really all based on Oil and Gas. C&I is offsetting it. But you -- I'm sure you heard calls on the oilfield side, whether it's pressure pumpers or E&P or service companies, they're all looking for a down year, '24 over '23. That that's in our guidance, and that's why you're seeing kind of flattish revenue for D&S. Really, the strength of C&I is making that look not as bad.
Okay. And then for my second question, shifting gears a little bit. The Coastal business looks like it's finally going to be in for a pretty good year. Although as I was looking at it, I mean, you're down to, I think, like 28 Coastal barges, I mean, there was a point which you were at 80. I know that has not been obviously a focus of growth for you. And you've said it, at least in the past, it hasn't been. But is there a point where you just need sort of critical scale? Or is there a point at which you maybe think about adding to that? Or it remains sort of not the primary focus?
Yes. Well, I mean, you know our preference would be Inland Marine. If we're going to grow anywhere, it would be an Inland Marie, would be our preference. That said, Coastal is going to be a great 5-year story here. We are supply and demand, are in balance now. We're -- as you saw in our prepared remarks, we saw spot prices up year-over-year in the mid-30% range and term contracts up in the mid-20 -- low 20% range. That's going to continue in '25, '26, probably into '27 easily. We need it.
The rates have been low. We've been balancing along in our Coastal business is break-even, this year for '24, we're going to be kind of mid-single digits, maybe even get to the high single digits in terms of operating income margins. And really, that should continue because the supply picture. As you know, these vessels are very expensive, 185,000 barrel unit, we built 5 years ago for $80 million. Right now, if you were to build that, it would be $130 million, $135 million to build it. And nobody's got one on the books. And even if they did, you wouldn't get it until 2027.
So we're very enthusiastic about the Coastal business. Does that mean we want to go out and speculative build? Absolutely not. I mean we're -- there may be some contracts coming from customers that would get that. But we're not going to go about. And just to comment on our fleet, our actual high, I think, was 59 barges, not 80. But we took out a lot of wire barges, wire -- the customer demand for wire barges was low. They were older we've got a much higher quality fleet now. And the other thing just in terms of construct there, what happened to that business was the ban on exporting crude was lifted.
So at one point, we had 17 barges moving crude in the coastwise business. Now we got 0. And that happened all across the industry. And that's why we've been in a protracted downturn in that business. And all that all that excess supply has been retired and it's in balance now, and we're pretty excited about it.
Okay. And there's -- you don't think there's any critical mass issues or economies of scale issues or anything, where you are -- is planning large enough?
Yes. No. I think we're still one of the largest players in the space on a barrel volume basis. We're probably 1 or 2. There is -- 2 of our competitors are trying to get together in a joint venture, so that we'll see what that brings. But we're still 1 or 2 in the market, in terms of size. So we've got the critical mass. And as you know, it's the same customers that we deal with on the Inland side. So we have that scale just because our Commercial team deals and our Vetting team deals with the major customers every day. It's the same group, whether it's Coastal or Inland.
Got you. I appreciate it. And lastly, just congratulations to Joe Pine. It's a heck of a career.
Yes. Thanks for saying. I mean, Joe, he's an institution. He's basically been the father of our business for 46 years, he grew it from nothing into what it is today. He'll be missed. Thanks, Ben.
Our next question will come from Ken Hoexter of Bank of America.
David, Raj, so just -- by the way, first, let me throw it in as well, just long career, a long time working with Joe. So best of luck as he moves on. And thanks for all the help over the years. Your Inland barge segment, right? If 4Q exits at 20% and most contracts renew in -- or near 20%, sorry, and most contracts were renewed in the fourth quarter. Has pricing stalled at Inland and thus, we're not seeing accelerating acceleration in your margin target from basically fourth quarter run rate levels? I'm just trying to guess maybe where are spot levels now, is it possible to reachieve the mid-20s kind of that you talked about if pricing keeps accreting given your cost hopefully have decelerated on an inflation basis?
Yes. The short answer is, yes, we'll definitely get to the mid-20s. But let me give some color, Ken. I think it's a great question. The average for the fourth quarter was in the high teens. December was an okay weather month. So we touched that 20%. First quarter is always the worst weather. So we're anticipating margins will dip back down into the high teens in the first quarter because of the weather.
By the second and third will be probably north of 20%. Fourth quarter, we'll have to see. That's always a tough weather month. The way I look at margins, Ken, is, look, we will be up year-over-year, 300 to 400 basis points in margin. Because of weather, high water, low water, hurricane, lock closures, it's just hard to get any one course to too specific. But my view is that the whole entity will be up 300 to 400 basis points.
And more importantly, we anticipate the same kind of improvement in that order of magnitude in '25. It's -- this is a runway, and it should take several years to play out. Now in terms of pricing, rolling over or even flattening, we didn't see that. Spot prices year-over-year in Inland, we're up 15% to 18%. Term pricing was up 7% and 9% year-over-year. So there's actually a healthy gap between spot and term. You want to spot above term, which we see. It's a pretty good gap. And then even sequentially, we saw from third to fourth quarter, spot pricing was up 2% to 5%. So we didn't see any flattening.
Look, pricing needs to continue to go up. We're offsetting inflation. We're trying to get returns back up to where we can get a return on our invested capital. And we're still a long way away from justifying new builds. So it's very constructive. I think you'll see the margin progression of 300 to 400 basis points up this year. And then perhaps something similar in 2025.
So really, the best way, I guess, to take away from that is you can't look at the fourth quarter as the exit rate -- run rate, you got to look at the annual as far as the improvement, given the seasonality and repricing.
I think that's fair. We -- I mean, you heard our term contracts were up in the high single digits, 7% and 9%. So that's going to roll through this year. And it will progress.
And then did you mention where spot rates are now for [indiscernible]?
No, I didn't. -- better -- I shouldn't or my attorney will kick me.
And then going to the ONG side, you keep mentioning supply chain delays. I just would imagine we're well past everything post COVID and supply chain issues. I mean maybe Red Sea is now popping up now with rerouting, but what are the issues that you're still dealing with on the supply chain?
Yes. No, it's gotten a lot better, Ken. For sure, you saw our deliveries, when -- probably infer -- our deliveries in the fourth quarter were pretty good out of our manufacturing facility. We were having problems with electronic componentry and one-off items holding up a whole series of equipment, that's kind of worked its way out. What's really happening now is long lead time, engine packages for example.
If we were to order engines today, we wouldn't get them until kind of mid '25. So that's -- the big componentry is the problem. The lead times on engines, in particular, have been a problem, and it's really about boundary constraints in the engine world. But yes, it's just long lead times. So we're still dealing with that. If that was compressed, we would deliver better results. If we could get engines quicker, particularly on C&I, for power generation, can we -- we're seeing a lot of demand for backup power. And if the engine packages could flow quicker, we'd have better numbers in D&S for 2024.
David, I just want to clarify 2 things, one real quick, if I can, on the first answer on the margins. So just the 300, 400 basis points, if December exited close to 20%, does that mean December '23. Does that mean December '24, could exit close to 24% for that month, just given that seasonality. Is that kind of conceptually, how we should think about it? And then do we need to change the supply chain in any way to affect that change?
Yes. On the margins, it depends on weather in December, right? But yes, I mean, directionally, if we saw a mild December, I think absolutely, we'd be close to that. .
That's great.
Yes. On the supply chain, look, we use -- it's best for me not to name different engine companies, but we use all kinds of different engines. And they're seeing it, whether it's a German-based engine company or a U.S.-based engine company, they all have the same issues in terms of foundries producing blocks and getting it through. There's not much we can do. It's their supply chain. We're working with them trying to preorder stuff and work that side of the thing. But look, they're working hard to get the engines. They want to sell as many as they can as well. So we're working on it with them. Some of it is out of our control. we're trying to do better job planning, as you would expect.
Our next question will be coming from John Chappell of Evercore ISI.
David, I'm going to ask you bit of a longer-term question, but it ties together, I think a lot of things we've been talking about for the last couple of years or so. When you lay out a path for 300, 400 basis points, both this year and next, that kind of gets us close to the mid-20s. We had spoken maybe years ago now at this point about inflation really kind of pinching you, potentially precluding the inland margin from getting back to the cyclical peaks of 10-plus years ago. Is inflation easing at all now? And when you talk about the early innings, I would assume that would mean this has a couple more years of runway. Can we revisit then those kind of mid- to high percent Inland margins barring an extraordinary event?
Yes, I'll take those in kind of reverse order. I do believe we could get to the high 20s in margin, we'll see. But inflation is real. We're seeing it even when you listen to the pundits out there, we're still seeing inflation, not deflation. I would tell you, maintenance is -- maintenance inflation has gone up a lot. We talked a little bit about the shipyards having a hard time getting labor. Steel prices haven't abated at all.
In our ecosystem, mariners are short, critically short, across the entire industry. Fortunately, we have our own school where we train mariners. But we're still really tight on crewing. So we're seeing labor inflation. Everybody is seeing it. Things like paint and steel and all of that, we're still seeing inflation, believe it or not rental cars. We do a lot of crew moves in rental car, inflation has hit us. So we're still offsetting that. I think everybody has been a little frustrated with the pace of our margin improvement, certainly us, we would like to improve it faster.
But it's really about this inflation and trying to offset it. Look, our customers are experiencing the same thing. They have inflation in their refineries, in their chemical plants. They're fighting steel costs, supply chain issues and, of course, labor costs. So our sophisticated customers definitely understand it. They understand we're fighting inflation. We are getting some real price increases, but we needed to get to prices that could justify replacement capacity. So it's a long rambling response, John, sorry, but inflation is there. But the fundamentals are such that we're going to get to the mid-20s at some point and barring anything unforeseen, we should get to the high 20s.
That's great. For my follow-up, maybe a tag team here, tying 2 things together. So David, you're able to pick up, those barges that your competitor had to walk away from conceivably. And you're at obviously at a great balance sheet position to do that. When I look at your buybacks in '23, as far as I can find, it's the second highest year for at least 15, 16 years after 2015.
And and a ton of free cash flow per year guidance for '24. So I guess the question is picking up barges in the orders or, I think, a one-off event. But is the M&A market kind of bubbling up a little bit now where you're off the bottom, no one wants to sell at the low, so maybe there's some activity brewing there? And how much dry powder do you want to keep for that vis-a-vis maybe using all this free cash flow to continue to ramp the buyback pace? So for David and Raj.
Yes. I'll let Raj chime in here a bit, too. We still have liquidity available on our revolver and our debt-to-EBITDA is fine. We've got plenty of borrowing capacity. And to your point, we do -- we're going to have a lot of free cash flow this year, and we've been aggressive buying our stock. We like our stock where it's at, particularly when we look at the next 3 to 5 years, it's going to be -- it's going to be a good run. So we're happy to buy back our stock.
That said, we always like those inland acquisitions, but we're not going to lose our price discipline. We'll be very disciplined or hard to predict. We did pick up. We bought some barges from a competitor last year as well. We'll look for those one-offs predicting a big deal, that's a lot harder. I would just tell you, we're going to stay disciplined. We think we've got good borrowing capacity in any event. And we also like our stock. But Raj, do you want to add anything?
Yes, David. Thank you. Thanks, Jonathan. I think you saw last year in '23, we dedicated about 80-plus percent of our free cash flow towards share repurchase. And to David's point, it's very difficult to predict any M&A. We always look at it. We're very, very -- we have a rigorous approach towards looking at projects and M&A opportunities. But barring anything that's attractive, I think you can continue to see us progressing that trend of share repurchase similar to what we did in 2023.
Our next question coming from Greg Lewis of BTIG.
David, and I guess this is for Raj, too. I did want to ask about, I guess the decision to kind of reintroduce full year earnings guidance, I mean, like it seems like we pulled it away a couple of years ago. I mean, David, you're talking about, I guess, a multiyear run, in terms of the operating environment. Is that kind of the genesis for what drove the full year earnings guidance back into the equation?
No. I mean we -- you notice it's not numeric, and we're not giving quarterly. We debated a long time about whether we should give a number. But I think in the kind of the environment that there's a lot of moving pieces. We thought it would be good to give a little more specificity on it. Just at the outset of this year, I don't think we're going to give quarterly guidance or anything like that or even an numeric EPS, it's just kind of -- we wanted to set kind of the range for the year, given given everything we're seeing both at D&S and Marine.
Okay. And then and then we kind of changed -- I guess, we reported the late days, I guess they're obviously up sequentially because of weather. Any kind of way to quantify that EPS impact? I mean was that a couple of pennies? Was it more? Any kind of color around that? Or do we -- yes.
Yes. I mean, delay days were up a lot as you heard sequentially. It's hard to quantify. It's -- there's so many moving pieces. So far in January has been brutal at the same -- you'll remember, first quarter of '23 was a really tough quarter from weather delay January is as bad as last year. We'll see what February brings, it's hard to predict. But it has a real impact. I mean you see our margins dip down in -- usually in the fourth quarter and the first quarter because of weather. It could be anywhere from a couple of hundred basis points in that range.
But it's really hard to say. As you know, Greg, we have time charters and we have contracts of affreightment. And those contracts of affreightment, hurt us a little bit in the winter weather, but they help us a lot in the summer weather. I would also say that as -- with respect to the first quarter, one of the things we did see, and that's reflected in our guidance here, is there was a freeze and it impacted some of the refineries and chemical plants in January, and they're still coming out of that.
So that -- it's all in there.
But still multifaceted.
And that's why we kind of look at it trying to rebase everybody here to look at it from a year-over-year for the whole year average because there's so many moving parts with weather, lock delays, hurricanes. Hopefully, we don't have a hurricane this year, but lots of moving parts. I hope that helps, Greg. I wish I could...
Like I said, yes, I guess, I mean, it's just interesting because I think it kind of needs to be quantified with those numbers. And then I did -- just in terms of the guidance, you mentioned the potential opportunity in chemicals. Is that a function of -- and I don't follow the Chemicals industry maybe as closely as I should. Is that a function of -- could you kind of talk a little bit about broad strokes, why we could see maybe chemicals be a little better then why that could help drive some upside at the high end of the range?
Yes. Look, in the fourth quarter, we saw the Chemical industry pull back a little bit. The volumes pulled back a little bit. We haven't seen China reemerge in terms of chemical demand back to where they used to be. So if that started in earnest begin it would just help volumes. As you know, we move a lot of chemicals on the inland waterways and it'd just be very constructive for us to see growth in that.
And if it came back, now we are seeing in January a little uptick in chemical movements. But it's kind of one of those things on the margin that could help us and get us closer to that high end of the range.
[Operator Instructions] Our last question will come from Greg Wistakowski of Webber Research & Advisory.
So I wanted to ask you, David, what are you seeing out there on the order book right now on the Inland side of things? And I know rates are still ways off of making that equation makes sense to build new. But the movements that you're seeing out there, does it give you any sense of concern at all? Or do you think it's kind of widely understood throughout the industry that any chunks of orders here would be a function of either owners biting the bullet for the sake of customer satisfaction or customer retention and/or fleet renewal? Is there -- where are we in terms of not necessarily for the economics, but in terms of sentiment and making sure that nobody panics?
Yes. No, this isn't precise, but we think there are only 24 -- 25 liquid barges on order for 2024 delivery. Certainly, nobody is panic. I think referenced this in some earlier comments, but most of our competitors and including us, we're very busy just trying to maintain our fleet with this maintenance bubble to fitness. So that's soaking up a lot of capital for -- in finances for a lot of our competitors, including us. I mean we're spending a lot more. You heard our maintenance CapEx is up. a lot in the last couple of years. And so nobody is really panicking and trying to go out and build any new equipment right now. It's -- everybody's pretty absorbed and disciplined right now just trying to keep their current fleet running.
Okay. Great. That makes sense. And then you kind of alluded to this before on labor and mariner's availability. But could you remind us how many or what percentage of tugboats you guys are chartering in currently or expect to for the coming year? And then any commentary on labor constraints and wage increases kind of affecting the availability and cost of chartering in?
Yes. Look, mariners are short across the board, whether it's in the charter fleet or owned fleet. We operate probably 290 inland tugboats and 28, 27 offshore, our charter fleet, we don't get too specific on it, but it's in the 60% range. We're -- we're seeing labor pressure across the Board and just getting qualified mariners, I think what happened is kind of interesting, people there was a trucker shortage, and there was a lot of shortages of labor.
And a lot of people kind of moved away from maybe the marine side. They may be moving back now, but it's tough to find qualified mariners. That's why we have our own school. It -- it's a very skilled set of -- well, it's a high set of skills to push a football field full of barges with a tugboat on on a river that's moving with wind blowing, these are highly skilled individuals, including the tankerman and the deck hands. So Yes. I'm rambling a bit here, Greg, sorry about that. But we are seeing labor pressure, both on the charter side and the owned side. It's just -- there's just a shortage of them. We're trying to train them as fast as we can, but it takes a while to train for these very specific very specific tests that are very highly skilled.
Okay. Yes, I appreciate that. How do you think it -- how do you think the industry kind of solves that problem? I mean I know you guys have your school and have a method, but just industry-wide, is it simply a function of rates getting to a place where wages can increase enough to attract additional labor back into the industry? Or do you think is it a solvable issue? Do you see it getting solved over time? Or do you think it's just a necessary evil in the future?
No. I mean crewing is always a bit of a challenge. Look, I mean, living on a boat is -- it's a different lifestyle, right? I mean, some of our guys worked 30 on and then 30 off for 2 weeks on, 1 week off, not being home every night is a challenge. So it's a specific lifestyle that's hard to fell, just because you're away from home and family a lot. So there's that natural tension away from it from a kind of a life balance standpoint.
That said, we do pay well. I think our industry plays really, really well. We recruit in high schools, last year, we hired 300 new deck mariners. And we're doing everything we can. I think it solves itself. We'll keep running as a business, but that is part of the reasons rates have to go up, Greg, to your point.
With all the inflation and the training facility that we have, Greg, helps us a lot. And it's a differentiator for us.
And this concludes our Q&A session. I would now like to turn the conference back to Mr. Kurt Niemietz for closing remarks.
Thank you, operator, and thank you, everyone, for joining us. Any follow-up questions, please reach out to me directly.
This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.