A reduction in operating expenses helped the Western United States Railroad BNSF achieve a 4% increase in net profit in the fourth quarter and a 5% increase in annual net profit despite declining revenues on a quarterly and annual basis.
Fourth-quarter net income totaled $ 1.42 billion, compared to $ 1.37 billion for the fourth quarter of 2019, BNSF said on Monday. On an annual basis, BNSF reported net profit of $ 5.48 billion in 2019, an increase of 5% from $ 5.22 billion in 2018, with lower operating expenses offsetting a decline of 1.4% of income.
BNSF is a subsidiary of Berkshire Hathaway (NYSE: BRK).
Total fourth quarter revenue fell 6% to $ 5.84 billion amid a 6% decline in unit volumes, but a 1% increase in average revenue per car / unit was helped offset the drop in income, BNSF said.
On an annual basis, BNSF’s revenue totaled $ 23.5 billion in 2019, up from $ 23.9 billion in 2018. Average revenue per car / unit increased 3.6% year-over-year thanks to rising prices per car / unit and favorable outcome of arbitration hearing, Berkshire Hathaway says Annual report 2019 released on Saturday. Factors that negatively affected revenues were harsh winter conditions and flooding on parts of the BNSF network.
Breaking down revenue by segment, revenue from consumer products fell 4% to nearly $ 2 billion in the fourth quarter, as volume fell 5% on lower intermodal volumes. But on a year-over-year basis, income from consumer products fell only 0.5% to $ 7.9 billion, against a backdrop of higher average incomes per car / unit and volume declines of 4. 6%. Decreased truck capacity and lower imports along the West Coast contributed to the drop in volumes in 2019.
Industrial products revenue fell 8% to $ 1.43 billion in the fourth quarter of 2019. But on an annual basis, industrial products revenue increased 1.7% to 6 , $ 1 billion, again against a background of higher average revenue per car / unit and lower volumes. The “overall softness” in the industrial sector, lower volumes of fracturing sand and unfavorable weather conditions contributed to a 3% drop in volumes. But higher demand for petroleum products and liquefied petroleum gas helped offset the decline in industrial volumes.
Fourth-quarter farm product revenues fell 1% to $ 1.2 billion from the same period in 2018. But farm product revenues were roughly flat for 2019, sliding 0.3% at $ 4.7 billion, against a backdrop of 5.1% lower volumes due to competitive global markets. for non-US goods, international trade policies and harsh weather conditions.
Coal revenues experienced the largest decline on a quarterly and annual basis. Coal revenues fell 11% to $ 967 million in the fourth quarter. Year over year, coal revenues fell 7.4% to $ 3.7 billion amid adverse weather conditions and lower prices for natural gas, a competitive production fuel for power plants.
Meanwhile, fourth-quarter operating expenses were $ 3.73 billion, down 10% from the same period in 2018. Annual operating expenses fell 4% to $ 15.4 billion due to lower volume costs and fuel surcharges, along with cost control initiatives, and a pension plan cut again helped offset costs due to weather conditions unfavorable.
Among operating expenses, fuel expenses fell 18% in the fourth quarter to $ 733 million, and 12% for the year to $ 2.9 billion.
Spending on purchased services also fell 18% in the fourth quarter to $ 613 million, while on an annual basis, spending on purchased services declined 5.9% to $ 2.7 billion due to lower transportation costs purchased from BNSF’s logistics services business, lower billing and service expenses, and higher insurance recoveries, the company said.
BNSF’s operating ratio, defined as the ratio of operating expenses to revenues, was 62.8% in the fourth quarter of 2019, compared to 65.6% in the same period of 2018. For 2019, the BNSF’s operating ratio was 64.5%, compared to 66.2% for 2018.
Annual railcar loadings decreased 4.5% to 10.2 million cars / units in 2019, from 10.7 million cars / units in 2018. In 2019, consumer products accounted for about 35% of revenue. BNSF freight, while 27% came from industrial products, 21% came from agricultural products. and 17% came from coal.
In perspective for 2020
BNSF plans to spend $ 3.4 billion on capital improvements in 2020, compared to $ 3.6 billion for capital spending in 2019.
Of this amount, the railway plans to spend $ 2.55 billion on maintenance and replacement, including replacement and upgrading of rails, railway ties and ballast, and equipment maintenance. rolling.
BNSF also plans to spend $ 581 million on expansion and efficiency projects, including projects that support improved capacity and performance on BNSF’s Southern Transcon route, routes to and in from Texas and intermodal facilities. The railroad also plans to spend around $ 270 million on equipment purchases.