Wednesday, November 08, 2017

Improved volumes power BNSF earnings

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Third quarter earnings at BNSF Railway reflected gains in most carload categories that boosted revenue and income, but some moderation in growth through the first nine months of the year led the railroad to scale back its projected capital expenditures.

Revenues grew 3% to $5.3 billion for the quarter ended Sept. 30, up from $5.17 billion for the same quarter in 2016, the Fort Worth-based company, a unit of Berkshire Hathaway Inc., said. Net income was $1.04 billion, up 2% from $1.02 billion.

The operating ratio improved to 62.2% from 62.7%.

Fuel costs were 12% higher and surcharges totaled $595 million in the quarter, up from $533 million. Total operating expenses increased to $3.36 billion from $3.29 billion. Operating income was $1.95 billion, up from $1.88 billion.

The company reduced its 2017 planned capital commitments by $100 million to $3.3 billion “as we completed certain projects at a lower cost, delayed the timing of certain projects, and made modifications to equipment acquisitions.”

In comments, the company said that revenues improved on higher fuel surcharges, although unit volume that was up by 3% in the quarter fell short of the 6% growth for the first nine months of the year, and better average revenue per car/unit through September. Consumer Products volumes growth of 7% in the quarter outpaced the 6% growth of the first nine months on higher domestic intermodal, international intermodal, and automotive volumes primarily due to improving economic conditions, normalizing of retail inventories, new services, and higher market share.

“Industrial Products volumes increased [2% in the quarter and nine months] primarily due to higher sand and other commodities that support [gas] drilling. In addition, broad strengthening in the industrial sector drove greater demand for steel and taconite. The volume increase was partially offset by lower petroleum products volume due to pipeline displacement of U.S. crude rail traffic as well as lower aggregates and plastics volume.

“Agricultural Products volumes fell 12% in the quarter after gaining 1% through nine months, due to higher shipments of domestic grain as well as ethanol and other grain products, partially offset by lower grain exports.”

After climbing 12% through nine months coal volumes moderated to 2% growth in the third quarter “due to continued effects of higher natural gas prices, which led to increased utility coal usage. This was partially offset by the effects of unit retirements of coal generating facilities, increased renewable generation, and coal inventory adjustments at customer facilities.”







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