(The Associated Press distributed the following article on July 22.)
OMAHA, Neb. — Operation problems and high fuel prices hurt Union Pacific Corp.’s second-quarter results, the company said Thursday as it reported record revenues but earnings that fell 45 percent.
Union Pacific, which owns the nation’s largest railroad, reported earnings of $158 million, or 60 cents per share, on $3.03 billion in revenue for the quarter ended June 30. That compared with earnings of $288 million, or $1.10 per share, on revenue of $2.89 billion during the same period of 2003.
Earnings fell below the consensus estimate of 63 cents a share by analysts surveyed by Thomson First Call.
Union Pacific shares dropped 73 cents to close at $56.65 Thursday on the New York Stock Exchange.
The company has been struggling with a crew shortage and rail congestion since last fall, when the economy began picking up. The railroad also was surprised by the number of engineers and conductors taking retirement under new federal rules.
Union Pacific had warned last month that operation costs, including hiring new crews and efforts to speed and improve services, would reduce profits.
In the year ahead, the company projected that it would be able to solve some of the issues that have plagued it.
Union Pacific will graduate 5,000 trainmen; purchase about 400 new locomotives as well as lease another 350; expand routes; and take other steps to better meet the demands for rail service, said chairman and chief executive Dick Davidson.
“We know we aren’t living up to the potential of this great company, but we remain absolutely focused on resolving the operational issues that have temporarily limited profitability,” he said.
Although Union Pacific reported its fourth consecutive quarter of record volumes, revenues could have been stronger given the increase in demand for the company’s services, Davidson said.
Union Pacific has not yet been able to improve operations to reduce costs, and record high fuel prices also have inflated operation costs, he said.
“Because of these factors, we were unable to convert our record revenue to the bottom line,” Davidson said.
Union Pacific had its best quarter ever for total number of car loads and revenue per car, the company said.
Revenue from chemical products were up 9 percent, revenue for hauling industrial products 8 percent and revenue from agricultural products was up 7 percent. Revenue from moving goods such as television sets, toys and other goods was up 6 percent, Union Pacific said.
“So we are handling a lot of volume, we’re just not handling 100 percent of the demand that’s out there,” said Jim Young, president of Union Pacific Railroad.
The slowness of Union Pacific service has been a constraint for some customers as the railroad enters its peak season moving retail merchandise for Christmas and the latest grain harvest to market.
“Many of our customers have expressed concern with our service and some frustration,” Davidson said. “I think it’s fair to say that they’re very much looking forward to the day that our service improves.”
One issue has been the six-month process to hire and properly train skilled crew members, Davidson said.
Davidson also responded to a New York Times article published two weeks ago that said the company failed to properly report fatal accidents along its tracks. He said he had not been aware of the reporting problems, which have been fixed. Davidson also said crossing accidents have fallen about 80 percent over the last few decades.
Union Pacific’s massive network of railways covers 23 states in the western two-thirds of the country.