(The following report by John R. Pulliam appeared on the website on Galesburg Register-Mail website on August 1.)
GALESBURG, Ill. — Second quarter 2007 BNSF Railway freight revenues increased to a record level, the Fort Worth, Texas-based railroad said.
BNSF is the largest employer in Knox County. The railroad has 1,115 employees here, according to the Galesburg Regional Economic Development Association. The railyard here is the second largest in the railroad’s system.
Freight revenues increased $144 million in the second quarter, or 4 percent compared to the same period last year, to $3.74 billion, a second quarter record.
“We are optimistic about the long-term outlook for the company,” said Matthew K. Rose, BNSF chairman, president and chief executive officer. “We continue to work with our customers to enhance the value of our transportation services, while maintaining our focus on maximizing our return on invested capital.”
John Lanigan, BNSF’s executive vice president and chief marketing officer, presented the freight report. Record increases across the board in products shipped by the railroad drove the record numbers.
Revenue for coal shipped by BNSF was $773 million for the quarter, an increase of $63 million, or 9 percent.
Meanwhile, the ethanol boom received much of the credit for a record second quarter for agricultural products. Lanigan reported “strong growth” in fertilizer shipments because of the “significant” increase in acres planted in corn by farmers due to the demand for ethanol. Ethanol growth was reported to be continuing. In remarks during a public hearing in April before the Surface Transportation Board, Rose illustrated how dramatic that growth has been, from 9,526 units in 2000 to 34,552 units in 2006.
Shipments of soybeans and bulk foods also helped agricultural products revenue increase by 9 percent – $48 million – to $610 million.
Revenue for industrial products over BNSF’s 32,000-mile route in 28 states and two Canadian provinces saw a more modest 4 percent increase – $39 million – to $950 million. While demand continued to be strong for petroleum products, chemicals and plastic products, the weakness in the national housing market led to a decline in shipments of building and construction products.
While consumer products set a record for international revenues of $663 million, the railroad reported total consumer products revenues were “relatively flat” on a 7 percent reduction in unit volumes. While westbound exports were up, what BNSF officials termed a “soft trucking market” was responsible for domestic intermodal shipments falling 4.2 percent.
Operating income was $841 million, down from $864 million the previous year. A $93 million increase in fuel costs was blamed for the decline. Fuel represented 25 percent of the railroad’s second quarter operating expenses, trailing only 31 percent for compensation and benefits.
Quarterly earnings were $1.20 per share, compared to $1.27 per share in 2006, which included 4 cents per share from lower income tax rates.
Coal shipments are expected to remain strong in the third quarter, with continued growth in the fertilizer and ethanol market, “with grain picking up in the fourth quarter.”
BNSF officials reported growth in industrial products depends upon the economy, while softness in volume is expected to contribute to continued flat revenue growth in consumer products.