(The following story by John D. Boyd appeared on The Journal of Commerce website on July 27, 2010.)
WASHINGTON, D.C. — Kansas City Southern, the smallest of North America’s Class I railroads, powered back from tough recession financials to post a $37.4 million profit for the second quarter that was up 527 percent from the 2009 period.
The company operates two railroads of about equal size in its network — KCS Railway in the central-southern U.S. and KCS de Mexico that sprawls across that country. It was also the hardest hit of the Class Is by the 2008-2009 recession, as its normally strong KCSM automotive traffic plunged after the credit crisis shut down much U.S. auto production.
Another factor was that in the 2009 second-quarter, KCS was spending to finish a costly construction project to open its own rail segment between the towns of Rosenberg and Victoria, Texas. That project eliminated a need to pay Union Pacific Railroad to use its track in the area, gave KCS a more direct route between Houston and Laredo at the border and allowed KCS to build an intermodal ramp near Houston.
With that segment running and the auto business up sharply with the recovery, KCS reported a 24 percent gain in freight traffic from last year and said volume now slightly exceeds the period in 2008 before the credit crisis triggered a sharp recession.
Revenue surged 35 percent to $462 million as KCS added price increases to the stronger volume, like other railroads. Its per-shipment average revenue rose 11 percent to $952.
“Automotive and intermodal traffic trends have been encouraging, and we continued to deliver strong increases in our cross border revenues,” Chairman and CEO Michael R. Haverty said.
The latest quarterly profit was 8.1 percent of receipts, and while up sharply from a 2 percent margin a year earlier, it compares with double-digit profits that the top railroads are delivering. KCS’s net income available to common shareholders was $34.6 million.
Haverty steps down from the CEO post on Aug. 1, to make way for David L. Starling to move up from his current role of president and chief operating officer.
Haverty will remain with KCS with a new title of executive chairman.