The Surface Transportation Board will receive an updated report on the state of rail-industry competition this fall. The agency is paying Madison, Wis.-based economic consulting firm Christensen Associates $125,000 to feed data from 2007 and 2008 into a revision of the report, "A Study of Competition in the U.S. Freight Railroad Industry and Analysis of Proposals that Might Enhance Competition," that it released last fall.
In an announcement Thursday, the STB noted that "Christensen was chosen by the Board in September 2007 to provide a comprehensive analysis of a wide range of issues in the freight rail industry, including competition, capacity, and the interplay between the two. In addition to incorporating the latest economic data, the update will also make some technical corrections to the report."
The Association of American Railroads on Thursday reported continued "slight" improvement in U.S. rail carloadings for the week ended July 25, though traffic remained down from the same period last year.
Railroads originated 273,943 carloads in the latest week, down 17.4% from 2008. Intermodal loads added up to 193,332 trailers or containers, down 17.9%. Total volume for the week ending July 25 was estimated at 29.3 billion ton-miles, down 16.3%.
U.S. carriers reported cumulative volume for this year's first 29 weeks of 7,610,311 carloads, down 19.1% from 2008; 5,376,118 trailers or containers, down 17.2 %; and total volume of 809.7 billion ton-miles, down 18.1%.
Canadian railroads reported 61,503 carloads for the latest week, down 18.4% from last year, and 41,902 trailers or containers, down 17.1%. For the year to date, Canadian roads reported volume of 1,728,034 carloads, down 23.8% from 2008, and 1,163,185 trailers or containers, down 16.2%.
Mexican railroads originated 11,541 carloads, down 13.8% from the same week last year, and 5,779 trailers or containers, down 15.0%. Cumulative volume for the first 29 weeks of 2009 was 329,211 carloads, down 14.7%, and 139,425 trailers or containers, down 21.8%.
Total North American rail carload volume for the first 29 weeks of 2009 on 14 reporting railroads was down 19.8% from last year, and intermodal traffic was down 17.1%.
Canadian Pacific Thursday noted a one-time gain from the sale of a share of the Detroit River Tunnel Partnership boosted it second-quarter net income. Net profit rose to C$157.3 million ($145 million), or 93 Canadian cents a share, for the quarter, compared with C$154.7 million, or C$1, in the comparable 2008 quarter.
Excluding items, earnings dropped to 59 Canadian cents a share from 97 Canadian cents a share a year earlier. That still beat analyst EPS expectations of 38 Canadian cents, before exceptions.
"The recession continues to have a significant impact on our business and although freight volumes appearto have stabilized, we have not yet seen a sustained recovery in traffic," Chief Executive Fred Green said in a statement. Freight volume fell 18%, CP said. Offsetting that to a degree were lower operating costs, down 10% to C$225.8 million compared with the second quarter of 2008.
CP said it would increase its 2009capital program spending to between C$800 million and C$820 million, up substantially from the previous outlook of C$720 million to C$740 million. CP shares climbed 9% in Thursday morning trading.
Kansas City Southern Thursday reported that second-quarter net income declined more than 86% to $6.7 million, 7 cents per share, compared with $50.5 million, or 56 cents a share, in the second quarter of 2008. That fell short of Wall Street analyst projections of 8 cents a share.
Revenue also fell short of projections of $357.9 million for the quarter; KCS notched revenue of $341.3 million, down from $486.2 million in the year-ago period. The railroad attributed some of the decline to lower fuel prices, resulting in a 72% drop in fuel surcharges.
Wall Street traders ignored the missed projections, sending shares of the company up 4.4% to $20.52 in late morning trading; KCS stock was up more than 6% Thursday afternoon.
“In the second quarter, KCS continued to demonstrate its ability to combat declining volumes with persistent efforts to improve operating efficiencies and to keep costs down," said Dahlman Rose & Co. analyst and <i>Railway Age</i> Contributing Editor Jason Seidl, who called the railroad’s long term prospects “attractive.” Siedl also said KCS’s new Victoria-Rosenberg line in Texas “will eventually lead to solid long term growth.”
“With the rail industry still trying to cope with the most drastic volume declines in recent history, we believe management will continue to focus its efforts on cutting costs and reducing capital expenditures,” Seidl added. “However, despite the significant spending reduction, KCS announced that it did complete its Victoria-Rosenberg line in the second quarter as it had projected. While many may question the need for expansionary capital in a recessionary environment, this line should help reduce costs and improve service for the railroad’s burgeoning cross border intermodal business.”
Greenwich, Conn.-based Genesee & Wyoming Inc. Thursday reported second-quarter net income of $7.4 million, or diluted earnings per share of 20 cents, less than half the net income of $15.4 million, or 42 cents per diluted share, in the second quarter of 2008.
GWI's income from continuing operations in the second quarter was $8.1 million compared with income from continuing operations of $16.2 million, in the second quarter of 2008.
The company said revenue fell $22.7 million, or 14.8%, to $130.1 million, compared with $152.7 million in the second quarter of 2008. Same-railroad revenue decreased $37.7 million, or 24.7%, partially offset by revenue of $15.1 million from acquisitions.
GWI announced last month that subsidiary Huron Central Railway Inc. intended to discontinue operations in October. As a result, GWI said its results in the second quarter included a non-cash write-down of HCRY's non-current assets of $6.7 million as well as restructuring and related charges of $2.3 million (net after-tax impact of $5.4 million, or $0.15 per diluted share).
John C. Hellmann, GWI president and CEO, said, "Our financial results for the second quarter were consistent with the revised guidance that we provided in early June. Our revenues in the second quarter of 2009 proved to be 6% weaker than the first quarter of 2009, and we consequently implemented additional cost reductions. We now have 13% of our locomotive fleet parked and 10% of our employees furloughed. These and other cost-cutting initiatives have enabled us to maintain a core operating ratio in line with last year."