- By Region
CSX Corporation, the largest railroad in the eastern US, showed the industry’s continued ability to withstand economic weakness when it reported second-quarter net earnings marginally up despite continuing sharp falls in utility coal demand.
Net earnings at the company, the first of North America’s big six railroads to report second-quarter figures, rose 1 per cent to $512m, while earnings per share rose 7 per cent to 49 cents. Revenue fell less than 1 per cent to $3.01bn.
The figures were achieved despite a 35 per cent drop to 19.9m tonnes in domestic coal traffic against last year’s second quarter as low US gas prices, increasing environmental regulation and low electricity demand all hit power stations’ demand.
Michael Ward, chief executive, said the results were the company’s 10th consecutive quarter of year-on-year earnings growth, despite what he called “significant headwinds” in the coal market.
“The company continues to perform well across a wide range of economic and market conditions,” he said.
North America’s large railroads have withstood recent years’ economic weakness and high fuel prices far better than other transport modes. Because they are more fuel-efficient than some rival modes, railroads have attracted large volumes of “intermodal” traffic – shipping containers and truck trailers – from trucking companies. They have also benefited from continued strong demand outside North America for the continent’s commodities.
However, CSX said after publishing its first-quarter figures that it would need to “sit down” with some of its utility coal customers to renegotiate their long-term contracts if volume declines – then running at 28 per cent year-on-year – continued.
In the second quarter, CSX made up for the fall-off in coal – where revenue fell 14 per cent to $820m – with gains in areas including automotive traffic, which benefited from the sharp rebound in the US car industry. Automotive traffic was up 27 per cent against last year’s first quarter, while revenues rose 34 per cent to $302m. Intermodal volumes rose 8 per cent and revenues rose 10 per cent to $408m.
Even in the troubled coal sector, the slump in domestic demand was partly offset by an increase of 41 per cent to 14.7m tonnes in movements of coal heading for export and an increase of 20 per cent to 2.4m tonnes in demand for high-quality coking coal.
CSX announced its figures after the close of New York trading.