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Kansas City Southern today reported record revenue of $731.7 million for the first quarter, an 8 percent increase from first-quarter 2019. Overall carload volume rose 4 percent compared to the same period a year ago.
KCS officials said the Q1 revenue growth was led primarily by an 18 percent increase in its chemicals and petroleum business, which was boosted by higher refined fuel products and liquid petroleum gas shipments to Mexico.
Intermodal revenue climbed 11 percent, driven by strong cross-border shipments. The Class I posted a 9 percent increase in agriculture and minerals and a 6 percent increase in industrial and consumer products revenue. Those revenue increases were partially offset by revenue declines in two commodities: energy, which fell 13 percent; and automotive, which decreased 6 percent.
Operating expenses for the quarter were $442.9 million, including $6 million of restructuring charges related to precision scheduled railroading (PSR) initiatives. A year ago, KCS reported operating expenses of $514.5 million for Q1.
Operating income in the quarter climbed to $288.8 million versus $160.3 million in the same period last year. KCS posted net income of $152.3 million, or $1.58 per diluted share, compared with $102.8 million, or $1.02 million per share a year ago.
The Class I reported an operating ratio of 60.5 percent, or a best-ever 59.7 percent on an adjusted basis, for the quarter. That compares with 76.2 percent, or 66.2 percent on an adjusted basis, in Q1 2019.
"KCS posted a record first quarter, driven by 8 percent revenue growth and judicious expense management," said President and Chief Executive Officer Patrick Ottensmeyer in a press release.
However, the company is now focused on a rapidly changing operating and economic environment, and has pulled its full-year earnings forecast on concerns over the coronavirus pandemic.
"The COVID-19 pandemic presents KCS and companies across the globe with unprecedented challenges and uncertainty," Ottensmeyer said. "We are responding by prioritizing the safety of our employees and ensuring business continuity. At the same time, we are focusing intently on rightsizing our resources in the face of declining volumes, while remaining prepared for a return to volume growth."
The company is prepared for the challenge, Ottensmeyer added.
"Our financial profile has never been stronger with ample liquidity and a favorable debt maturity schedule," he said. "I am confident that the actions we are taking to accelerate our already successful PSR implementation during this downturn will further strengthen the company and leave us well-positioned to handle future volume growth."
KCS also announced it reduced 2020 capital expenditures from about $500 million — or 17 percent of annual revenue — to about $450 million. The Class I might further cut capex by another $50 million. The railroad expects to make a decision on the additional decrease on or about June 30.