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CSX reports 12% Q3'19 coal revenue decline, 9% volume decrease YOY

CSX Corp.'s coal business suffered from low export coal pricing during the third quarter and executives were not overly optimistic heading into the final months of the year, given recent international metallurgical coal prices.

CSX President and CEO James Foote said on an Oct. 16 earnings call that, while the railroad's merchandise segment was strong during the recent period, it was offset by declines in coal, intermodal and other revenue. Year over year, coal revenue was down 12% on 9% lower volumes, he said, due to low natural gas prices, reduced international demand and lower benchmark prices.

CSX shipped 24.1 million tons of coal in the third quarter, about 8.8 million tons of which were exported, according to its Form 8-K. The coal business generated $516 million in revenue, down from $588 million during the year-ago period.

Mark Wallace, executive vice president of sales and marketing, said the company saw some growth in its shorter-haul business from Alabama mines moving coal to the export market, but there was a decline in longer haul exports.

Metallurgical coal accounts for about two-thirds of CSX's export coal, Wallace said, and that business was softer as global steel markets continued to weaken with the industrial slowdown, which affected benchmark prices. Because the company reprices the majority of those contracts quarterly and current coking coal prices are lower, he expects to see some revenue impacts in the fourth quarter. Benchmark prices in the second quarter were higher, so the company was less affected during the recent period.

On the thermal side, weak pricing on coal being sold into Europe also contributed to a decline in volumes destined for the international market, he said. But the railroad's thermal coal annual contracts this year were set in late 2018 or early 2019 when prices were higher.

Its net earnings totaled $856 million during the period, decreasing year over year from $894 million, while EPS increased to $1.08 from $1.05.