Kansas City Southern (NYSE: KSU) saw record revenue of $731.7 million in the first quarter of 2020, a 7% increase from the first quarter of 2019 amid revenue gains for its chemicals and petroleum segments as well as for its intermodal segment.
The revenue increase helped Kansas City Southern’s (KCS) first-quarter net profits jump to $152.3 million, a 47.6% increase from $103.2 million in the first quarter of 2019.
Adjusted net income, which the company says is a “meaningful” reflection of KCS’ performance because it takes into account changes in currency foreign exchange rates and other items, was $188.2 million, or $1.96/diluted earnings per share. For the first quarter of 2019, adjusted net income was $152 million, or $1.51/diluted earnings per share.
First-quarter operating ratio was 60.5%, or 59.7% on an adjusted basis. First-quarter 2019’s operating ratio was 66.2% on an adjusted basis.
An 18% increase in refined fuel products and liquefied petroleum gas shipments to Mexico helped boost KCS’ first-quarter revenue, as did an 11% increase in intermodal revenues due to “strong” cross-border shipments, KCS said. Agricultural and minerals revenues rose by 9%, while industrial and consumer products revenues gained 6%.
But energy revenues fell by 13% as declines in utility coal and frac sand shipments offset gains in crude oil shipments, while automotive revenues fell by 6%.
Meanwhile, first-quarter operating expenses were $442.9 million, compared with $514.5 million in the first quarter of 2019. The first quarter’s expenses included restructuring charges related to precision scheduled railroading of $6 million.
Gross velocity in the first quarter was 15.9 miles per hour, a 26% increase from last year, while terminal dwell, which is the time a train spends at a terminal, fell 9% to 19.8 hours.
In light of the economic uncertainty brought about by the global coronavirus pandemic, KCS is withdrawing its guidance for its revenues, volumes, operating ratio and earnings per share for the year. Capital expenditures for 2021 and 2022 will be at about 17% of annual revenue, or at around $450 million.
“KCS posted a record first quarter, driven by 8% revenue growth and judicious expense management,” stated KCS President and Chief Executive Officer, Pat Ottensmeyer. “This outstanding performance resulted in a record adjusted operating ratio of 59.7%, which reflects the positive impact of PSR-related efficiencies and cost controls.”
He continued, “As pleased as we are with this exceptional performance, we have now turned our full attention to the rapidly changing operating and economic environment. The COVID-19 pandemic presents KCS and companies across the globe with unprecedented challenges and uncertainty. We are responding by prioritizing the safety of our employees and ensuring business continuity. At the same time, we are focusing intently on rightsizing our resources in the face of declining volumes, while remaining prepared for a return to volume growth.”
“KCS is well-prepared to handle this period of challenge and uncertainty. Our employees are dedicated, vigilant and focused. Moreover, our financial profile has never been stronger with ample liquidity and a favorable debt maturity schedule. I am confident that the actions we are taking to accelerate our already successful PSR implementation during this downturn will further strengthen the Company and leave us well-positioned to handle future volume growth,” he said.
