Coal crunch continues to crimp financial performance, CSX says

CSX Corp. expects financial performance in the year's second half to continue to be more challenging given intensifying headwinds in coal markets, said CSX Executive Vice President and Chief Sales and Marketing Officer Fredrik Eliasson at Cowen and Co.'s 8th annual Global Transportation Conference held yesterday in Boston.

The railroad is projecting earnings growth despite domestic coal revenue declines that might exceed $400 million for the year, said Eliasson, CSX's former chief financial officer who became CMO earlier this week. The company forecasts flat earnings in the third quarter, but achieving that projection will be difficult given weaker-than-expected volumes, he said.

"In the third quarter, we see strong pricing that reflects the value of our service, and we continue to drive greater asset utilization and reduce costs as we match our resources with demand while improving our service product," Eliasson said. "At the same time, overall volume to date is down about 2 percent, with both our domestic coal and merchandise markets tracking slightly below the company's original third-quarter expectations."

Nonetheless, CSX now expects full-year earnings growth in the mid-single digits range. The railroad continues to focus on growing merchandise and intermodal business, value pricing and efficiency savings. Those efforts should help drive meaningful full-year margin expansion as the company progresses toward a longer term goal of achieving a mid-60s operating ratio, Eliasson said.

CSX also announced yesterday that it agreed to donate 130 acres of undeveloped land in southwestern Pennsylvania to the September 11th National Memorial Trail Alliance, a nonprofit organization formed to establish a trail to link the memorial sites at the World Trade Center, the Pentagon and the Flight 93 National Memorial. The donated land will help the alliance build a seven-mile portion of a multipurpose trail between the Great Allegheny Passage Trail in Garrett, Pa., and the Flight 93 memorial in Shanksville, Pa.