CSX ends quarter positively despite coal slump

WHILE the challenging coal market was a burden in the third quarter, rail shipper and major coal transporter CSX enjoyed a slight rise in both income and revenue and is looking ahead with optimism.

Donna Schmidt

For the period ended September 30, the Florida-based railroad recorded $US463 ($A485) million in net earnings, up 2% year-on-year from $455 million. Revenue was just under $US3 billion, a 4% increase.

The latter, CSX said, resulted from higher volume and pricing gains in merchandise and intermodal, which together offset the continued downward spiral in its coal business.

Operating income for the railroader was $US854 million and its operating ratio was 71.5%, both helped along by the higher revenues and gains in efficiency company-wide.

It also reaped the benefits of customer contract settlements, according to officials.

"CSX posted historically high financial results as it continued to effectively manage ongoing challenges in the coal market and leverage growth opportunities in merchandise and intermodal," chairman, president and CEO Michael Ward said.

“The third quarter performance is an ongoing reflection of the company's ability to capitalise on the modest improvement in the economy with a relentless focus on customer service and asset efficiency."

Coal was, of course, the shadow over the sun in the financial quarter. Volumes were down 7% and coal revenue was down 9% for the quarter and year-to-date, volumes were down 8% while revenue slumped 9%.

Domestic utility coal shipments were 17.3 million short tons in the September quarter, down from 18.7Mt year-on-year, and export volumes of both met and thermal coal slipped about 9% each.

“Export declines were driven by decreased shipments of US thermal and metallurgical coal, as a result of global oversupply and lower coal prices,” the company said.

“Shipments of domestic coal declined due to decreased electrical generation and utility stockpiles above target levels.”

As it looks to the remainder of 2013, CSX said its whole-year projections are bright overall.

Earnings per share, it said, would be slightly up from 2012 levels and it also remains on target to achieve its goal of sustaining a high-60s operating ratio by 2015, while remaining focused on attaining a mid-60s operating ratio longer-term.

However, while it had a positive outlook with all things considered, CSX was aware that the headwinds of coal were likely to continue.

According to sales and marketing executive vice president Clarence Gooden, that slump will go into 2014, while its utility business in the southern states will particularly suffer due to high stockpiles.

Gooden said the demand among southern utilities for Illinois Basin coal remains strong.

“Illinois Basin and Powder River Basin [coal] is accounting for nearly half of the coal burned on CSX,” he said, adding that export of thermal coal would also be weak into next year as well.

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Coal accounts for 18% of CSX’s volumes, and its coal business makes up 26% of revenues.

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