(The Kansas City Star posted the following article by Randolph Heaster on its website on August 3.)
KANSAS CITY — It’s been 10 years since Kansas City Southern acquired a stake in Mexico’s biggest railroad and just more than a year since the company took full control of it.
After reporting second-quarter results, Kansas City Southern’s chairman and chief executive, Michael R. Haverty, said it was time and money well spent.
“We are proud of what has been accomplished to date, and our expectations for future growth far exceed the internal projections we made a decade ago,” Haverty said. “The railroad is running better today than I’ve seen it in all these years.”
Kansas City Southern exceeded analysts’ expectations Wednesday by posting earnings of $19.2 million, or 24 cents a share, on $413.1 million in revenues. That was a big swing from last year’s loss of $27.3 million, or 33 cents a share, on $381.1 million in sales.
Last year’s quarter was affected by charges related to profit-sharing within the Mexican operation and the purchase of what is now Kansas City Southern de Mexico.
Analysts on average expected Kansas City Southern to earn 19 cents a share in the latest quarter. The stock responded favorably Wednesday in heavy trading, rising $2.27 and closing at $25.51.
In addition to higher revenues and lower costs fueled by the integration of its U.S. and Mexican operations, Kansas City Southern said a computer operating system used in the U.S. was implemented in Mexico during the quarter.
That process was completed July 13 with few glitches, said Art Shoener, Kansas City Southern’s president and chief operating officer. When the same technology was installed domestically four years ago, Kansas City Southern’s costs soared and earnings were negatively affected.
“We didn’t have a meltdown during our period of taking over the Mexican railroad,” Haverty told investment analysts Wednesday.
Haverty also discussed the growth that Kansas City Southern expects in its intermodal business. In addition to shipments expected to grow at Mexico’s west coast port of Lazaro Cardenas, Haverty cited several companies that are building or expanding plants in the railroad’s Mexican corridor, including General Motors Corp., Chrysler Corp. and Whirlpool Corp.
“In the next few years, this railroad has more revenue growth opportunities than any other railroad in North America,” he said.