G&W absorbs 1Q2019 losses

Written by Andrew Corselli, Managing Editor
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Genesee & Wyoming (G&W) recently reported its 2019 first-quarter results, which show year-over-year declines in operating revenues, operating income and diluted EPS.

Although G&W’s operating revenues (down 2.9% to $558.1 million), operating income (down 8.3% to $79.7 million) and diluted EPS (down 42.9% to $0.68) all decreased, its adjusted operating income increased 0.5% to $87.8 million “despite severe winter weather and flooding,” and adjusted diluted EPS rose 11.4% to $0.78.

G&W also reported that its 1Q2019 reported net income and diluted EPS included $5.4 million ($.10 per share) of restructuring and related costs. The same categories for 1Q2018 “included a $31.6 million, or $0.50 per share, income tax benefit associated with the U.S. (45-G) Short Line Tax Credit for fiscal year 2017 that was enacted retroactively in February 2018.”

“In the first quarter of 2019, we implemented cost reduction initiatives in each of our three geographic segments,” said Jack Hellmann, President, Chairman, CEO, G&W. “In North America, we consolidated our Central Region into our Midwest and Southern regions. In the U.K./Europe, we continued to make reductions in our overhead cost structure and to invest in technology, and in Australia, we streamlined rail operations concurrent with the termination of grain operations on the Eyre Peninsula narrow-gauge network.”

Segment Highlights

North America: Operating revenues from G&W’s North American operations increased 2.1% to $332.4 million. Operating income from this region, “which was negatively impacted by severe winter weather in the United States and Canada and flooding in the Midwestern United States, decreased 5.3% to $69.3 million; adjusted operating income decreased 4.2% to $70.3 million.”

Australia: Operating revenues from Down Under decreased 13% to $65.1 million. Reported operating income from Australia decreased 21.7% to $12.5 million; adjusted operating income decreased 11.9% to $14.1 million; operating income was “negatively impacted by $1.5 million from foreign currency depreciation and $1.5 million from drought conditions in South Australia and New South Wales, which were partially offset by a decrease in expenses.”

U.K./Europe: Operating revenues from this region decreased 7.8% to $160.5 million and “reported operating loss … remained relatively flat at $2.1 million, [while] adjusted operating income … increased to $3.4 million from an adjusted operating loss of $2.0 million in 2018.”

“In the first quarter of 2019, our adjusted diluted EPS increased more than 11%, despite severe winter weather and flooding in North America that impeded shipments from connecting Class I railroads to our Midwest and Canada regions,” Hellmann said. “These weather impacts resulted in a $0.09, or 10%, reduction in diluted EPS compared with our first-quarter guidance. We expect to recover a portion of the winter-affected traffic in the coming months. Our outlook for North American rail shipments remains positive, and our 2019 annual guidance remains unchanged.”

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