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CSX reports 22% Q4'19 coal revenue decline YOY, 8% drop in 2019 from 2018

CSX Corp.'s coal revenue in the fourth quarter of 2019 fell 22% year over year as volumes sank 17% amid difficult market conditions.

The railroad's coal revenue declined to $459 million in the recent period from $586 million in the final quarter of 2018 due to low natural gas prices as well as declines in the export and domestic markets, according to a Jan. 16 Form 8-K filing.

In 2019, CSX's coal revenue fell 8% from 2018 to about $2.07 billion, while total revenue per unit sank 3%.

The company hauled 21.6 million tons of coal last quarter compared with 25.9 million during the fourth quarter of 2018. Over the year, CSX hauled 94.8 million tons of coal, a 6% decline from 2018. The company's export coal business saw a larger percentage decline than its domestic market during the fourth quarter and the full year. Fourth-quarter 2019 export coal tonnage plummeted 20% year over year to 8.3 million tons.

CSX President and CEO James Foote said on a Jan. 16 call that the company's overall fourth-quarter 2019 revenue dropped 8% year over year to about $2.89 billion, partially due to headwinds in the coal industry. Foote projected that industrial activity may take some time to "heat back up," with the company expecting full-year 2020 revenue to be flat or potentially decrease by up to 2% from 2019. That forecast includes more than $300 million in coal business headwinds due to reduced export volumes and weak pricing.

"Unfortunately, all four discrete segments of the coal business are getting hit simultaneously, which is difficult for us to overcome," Foote said.

Mark Wallace, executive vice president of sales and marketing, expects the railroad to see a "step down" in revenue per coal unit in the first quarter but does not expect it to worsen through the rest of the year.

The company expected to ship 40 million tons of coal destined for international markets in 2019 but fell short of that goal, Wallace said. In 2020, Wallace expects export volumes to reach somewhere in the range of the low 30 million tons amid projected declines in metallurgical and thermal coal, though more heavily in the latter segment. Low natural gas prices coupled with a mild European winter have resulted in a weakened thermal coal pricing benchmark on shipments into Europe, Wallace said.

On the domestic front, thermal coal prices would need to increase along with utility demand for the fuel's prices to increase.

"For 2020, we do see and we do expect that our utility tonnage will be relatively flat as we have had some wins offsetting some market declines," Wallace said.

CSX's net earnings sank to $771 million in the fourth quarter of 2019 from $843 million in the comparable 2018 period.