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Coal burdens CSX revenue in quarterly earnings


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Coal burdens CSX revenue in quarterly earnings

Dropping revenue from the coal industry continues to take a bite out of railroad earnings, according to a fourth-quarter financial report from CSX Corp.

"In an environment where the company lost almost $470 million of coal revenue and experienced weakness across most of its markets, CSX delivered nearly $430 million of productivity savings in 2016, while improving customer service," said Michael Ward, chairman and CEO of CSX, in the company's quarterly earnings report.

The rail company reported net earnings of $458 million in the fourth quarter ended Dec. 30, 2016, down from the $466 million reported in the fourth quarter ended Dec. 25, 2015.

Despite the drop in revenue from coal shipments in the full year, the commodity actually increased in shipment volume year over year with the company. CSX reported $551 million in revenue from coal in the fourth quarter of 2016 compared to $449 million in the fourth quarter of 2015, a 23% increase, though 2016 had an extra week in these comparisons.

When comparing the recent period that ended Dec. 23, 2016, to the one that ended Dec. 25, 2015, a 13-week-versus-13-week comparison, the increase in revenue only jumped 16%.

Domestic utility coal continues to occupy the bulk of CSX's market at 51% of the overall share, though overall volumes declined slightly since utilities continued to rely on existing stockpiles. Export metallurgical coal occupies an 18% share, while export thermal coal occupies 13% of CSX deliveries. The company noted that both types of coal increased in volume as U.S. producers capitalized on the drop in China's coal production days. Domestic coke, iron ore and other take up 18% together, reflecting the weak domestic integrated steel market, according to CSX.

In terms of revenue per unit, the number has increased 13%, going from $2,060 in the last quarter of 2015 to $2,321 in the last period of 2016.

Last year at an industry conference, coal advocates urged railways, coal producers and utilities to work more closely in concert to increase the base earnings and stability of all three sectors.