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During the second quarter, high fuel prices and reduced earnings from TFM S.A. de C.V. resulted in a $500,000 net loss for Kansas City Southern compared with $14.5 million in net income during second-quarter 2002.
TFM reported a quarterly net loss of $2.3 million, primarily because of deferred tax expenses tied to the strengthened Mexican peso versus the U.S. dollar and the impact of lower future Mexican corporate tax rates on deferred tax assets.
However, KCS' second-quarter revenue increased 5 percent to $146.3 million compared with the same 2002 period.
"Revenues in almost all of our business groups improved and we are cautiously optimistic that the national economy is strengthening, which we believe will allow us to build on this positive trend," said Mike Haverty, KCS chairman, president and chief executive officer, in a prepared statement. "Two items of concern are stubbornly high fuel prices and the current high price of natural gas that is having a negative impact on the plastics and petroleum industries, key components of our chemical and petroleum business."
KCS' quarterly consolidated operating income of $14.2 million fell $300,000, expenses of $116.1 million increased $6 million and operating ratio of 86.9 worsened 0.2 points compared with second-quarter 2002. However, the Class I's operating ratio improved 6.4 points compared with the first quarter.
During the year's first six months, KCS earned consolidated net income of $13.1 million compared with $26.2 million during the same 2002 period. The railroad also reported $286.5 million in consolidated revenue, rising $3.4 million, and $21 million in consolidated operating income, falling $6.9 million compared with 2002's first half.
"The NAFTA Rail transaction continues to move ahead. During the second quarter, Mexico's Competition Commission ruled that the change in majority ownership would not adversely affect competition," said Haverty, referring to KCS' plan to place The Kansas City Southern Railway Co., The Texas Mexican Railway Co. and TFM under the common control of a Kansas City, Mo.-based transportation holding company. "In August, we expect a ruling from the Foreign Investment Commission, the other Mexican regulatory entity that must endorse the transaction."