Thursday, November 07, 2013

CSX CFO outlines railroad’s intermodal strategy

Written by  William C. Vantuono, Editor-in-Chief
CSX Executive Vice President and Chief Financial Officer Fredrik Eliasson, in a presentation at the Baird Industrials Conference in Chicago, said that intermodal, “a key driver of growth,'’ now represents 40% of CSX’s overall volume and is expected to increase further, reflecting “the attractive economic value of converting freight from highway to rail.”

Eliasson highlighted the sustained growth in CSX’s merchandise and intermodal businesses, which now comprises more than 80% of the company’s volume. CSX expects that business to continue growing at a rate above the general economy, he said.

“CSX employs a dual intermodal strategy that includes both high-density corridors and a hub-and-spoke philosophy that also creates service density to open new small and medium-sized markets—a strategy the company believes is a differentiator in the intermodal marketplace,” Eliasson told conference attendees Wednesday, Nov. 6, 2013.

CSX also recently completed the first phase of doublestack clearances in its National Gateway initiative, which will create a more efficient rail route to link Mid-Atlantic ports with Midwestern markets. When the National Gateway is complete in 2015, roughly 95% of the railroad’s intermodal traffic will be moving in doublestack lanes. To prepare for long-term growth, CSX is building new terminals to expand its reach in markets such as central Florida, Pittsburgh, and Montreal. In addition, the railroad continues to invest in existing terminals to further increase efficiency throughout its network, such as an expansion of its Northwest Ohio hub, which opened in 2011 and has helped alleviate congestion in Chicago while opening up connectivity to markets in the Midwest.

Eliasson also reiterated expectations for 2013 earnings-per-share growth that will be slightly up from last year, “despite continued headwinds in both the export and domestic coal markets.”

“The CSX team continues to overcome significant headwinds as the energy markets evolve in favor of natural gas and away from coal,” said Eliasson said. “During this transition, we have still been able to generate EPS growth and value for shareholders as we quickly adapt to market changes and carefully manage the things we can control the most. We are confident that CSX will emerge an even stronger, more vibrant company as the operating environment stabilizes and the economy improves.”

Underscoring expectations for growth, Eliasson reaffirmed the company’s long-term EPS guidance, which are expected to grow over a two-year period at an average rate of 10% to 15% through 2015 off the 2013 base, “although that is more challenging in the near term given the coal environment.” He said that CSX “remains focused on sustaining an operating ratio in the high 60s by 2015, and the mid-60s longer-term.”