DENVER — Union Pacific Corp. Chief Executive Richard Davidson said the company’s recent 15% increase in its dividend is a “clear message” about the good shape of the company and management’s confidence in its future, reports Dow Jones Newswires.
In a Webcast of a meeting for investors and analysts in Omaha, Neb., Davidson and other executives stressed that the company is performing well partly because of its strategy to improve profit margins and returns though management of price, product mix and volume as well as productivity and asset utilization.
The wide mix of products delivered by Union Pacific Railroad, which makes up about 89% of the company’s revenue base, has helped it perform well in a tough economic environment, the executives said.
“The big picture is that two-thirds of the way through the fourth quarter, our volume is off by only about 1% from last year’s record performance,” said Davidson. “In fact, commodity revenue is actually up slightly, quarter-to-date, reflecting some price improvement as well as a favorable mix shift in several of our commodity areas.”
He noted that the mix of products carried by the company has helped it to ” maintain a relatively even keel despite challenges such as the weak economy and the West Coast port shutdown.”
Automotive has been a strong force all year and has continued to remain strong in the fourth quarter, he said. Industrial products are also ahead of last year, he added, thanks mainly to continued strength in shipments of lumber, plus a pickup in steel and paper shipments.
In chemicals, and especially plastics, Union Pacific is seeing some softness, with traffic down slightly from the second and third quarters, he added. Coal shipments are flat, as predicted. Grain shipments have been soft, although there has been a recent rise in export-wheat shipments, he added.
The 10-day shutdown of West Coast ports in late September and early October have caused intermodal shipments to be down 6% in the fourth quarter versus a year ago, he said.
The backlog at West Coast ports has cleared and a tentative labor agreement has been reached, Davidson said, but Union Pacific still expects to experience a negative impact of 10 cents a share to its fourth-quarter earnings from the West Coast labor problems.