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At Savage, we provide a variety of railroad related services such as: track maintenance and construction, rail infrastructure design and engineering services, rail switching, transloading, direct-to-locomotive fueling and mechanical services for Class I railroads, and other rail related services. We believe there will be some softness in industrial infrastructure investment for most segments with the exception of the petrochemical and chemical industries, where we believe we will continue to see growth due to the abundant and competitively priced natural gas and ethane feedstocks. We believe there will be continued moderate growth in the transload sector in 2016.
Going into 2016, Savage will continue to focus on areas where we can provide rail related services to support the unique challenges and growth of our current and potential customers.
As for the longer term ... We expect continued long-term growth in rail contracting. As we continue to see softening in certain segments, contractors need to be nimble to adjust their strategy to focus on areas where growth is occurring. Long term, we believe due to truck driver shortages that we’ll continue to see more truck-to-rail conversions and the competitiveness of rail will increase as the miles truck drivers are willing to travel shorten. At Savage, we are looking to take advantage of the rail-to-truck conversions given our transload network, and looking at how we can better provide a door-to-door service for customers that aren’t rail served.
We say that “nothing trumps safety at Savage,” and believe that having a safe and reliable rail infrastructure will continue to be important as industries hold themselves to higher standards to maintain their track, especially given the additional scrutiny of certain commodities. This should bode well for track maintenance and construction providers. Also, we see a continued growth in the petrochemical and chemical markets as long as there continues to be a low-cost feedstock. Relative to the third-party switching services we provide to our customers, we believe from a safety standpoint that industries will look to outsource this service that isn’t core to their business. Savage will continue to look at opportunities to grow our customer base with the in-plant services we provide.
As 2015 comes to a close, we are pleased to look back on a year of unprecedented growth while managing a strong commitment to safety and excellence. 2016 is shaping up to be another year of growth in all sectors of our rehab and repair capabilities portfolio, including rails, ties, welding and bridges. Our plan is to continue growing our involvement in all of those sectors, in addition to aggressively increasing our growth in new major construction projects and design-builds. We are optimistic about a couple of 2016-2017 projects in those latter categories.
We are fully prepared to face the challenges of robust growth through our continued dedication to holistic and strategic investments into each and every one of our capabilities. Our 2016 plan includes another significant investment in our growing fleet of specialized equipment. Furthermore, we expect to retain, recruit and train the very best labor force. Our commitment to growth will enable us to better serve our current clients, and enable us to expand our services to additional clients. R. J. Corman Railroad Construction will continue to be a leader in providing new and more effective ways to better serve the railroad industry.
We will work hard to accomplish all of these things by adhering to the principles of our founder. We will strive to provide high quality work through brilliant execution. Safety will always be a condition of employment. With those principles in mind, and with the hard work and dedication of our enthusiastic and knowledgeable employees, our construction company will continue to unlock additional growth and expand our capabilities, both in 2016 and beyond. This is a time of dynamic growth in our company, and an exciting time to be in our industry.
We are bullish on our opportunities in 2016. RailWorks has solid backlog across all our markets, with Class Is and short lines, industrial customers and transit agencies.
The transit outlook continues to be promising. We’re seeing more contracting opportunities out there than we’ve ever seen before.
Although there is some uncertainty about Class I budgets for next year, we’ve got momentum and expect to continue to see outsourcing among all the railroads. Greater certainty about funding sources should generate some new work and help offset any potential budget decreases by the Class Is.
Action by the Senate last summer and more recently by the House to pass a multi-year surface transportation bill is good news. For contractors, such as RailWorks, this legislation will translate into funding for new and existing programs for rail infrastructure improvements, particularly for intermodal, multimodal and grade crossing projects. That will mean more work and more jobs for our employees who perform track, signal, wayside and systems projects for freight railroads as well as new transit lines and extensions.
RailWorks is gearing up for more work with some fundamental initiatives to increase productivity and drive safety improvements. By implementing best practices to better analyze and plan our work, we anticipate gaining both manpower and equipment efficiencies. We expect to make smarter decisions when it comes to leasing and purchasing equipment and better utilizing it across RailWorks. We also are investing in updated technology, including mechanized equipment and tools, to make our operations safer and more productive.
Safety has never had more attention and scrutiny. Rules have existed for a long time, but the Class Is are reinforcing safety measures to a greater degree than ever before. As a contractor for all the Class I railroads, we are held to the same FRA/Transport Canada standards as the railroads and must comply with all the different standards for each property, We also are under increased scrutiny by the agencies. That’s a high standard. We are better preparing our people for the work we do with a significant investment in training and ongoing education. We’re focusing on earning necessary operator certifications and acquiring the skills necessary to consistently perform to higher standards.
As for the longer term ... We are upbeat about the contracting segment’s long-term prospects, so we are continuing to invest in our business and position RailWorks for further growth.
A few years ago RailWorks acquired a field welding company and established RailWorks Maintenance of Way. This past year we introduced additional maintenance-of-way services, including track geometry testing, ground penetrating radar and switch and crossing grinding, and production work. Demand for these services has been strong so we will be adding more MOW services.
We also continue to be interested in acquisitions, but they must fit strategically. Acquisitions are clearly a business strategy for RailWorks, but we will take a disciplined approach.
One of the more significant challenges facing not only contractors but the entire industry is recruiting quality and qualified employees. And once you’re recruited them, how do you train them more effectively to be safe and productive? RailWorks is adopting some new approaches to attract the next generation of railway workers. We’re looking at ways to educate and advance employees so they can grow at RailWorks and build their career with us.
Contracting is one of the North American rail industry’s most vital segments. For a comprehensive list and links to rail-industry contract service providers, visit: www.progressiverailroading.com/railproducts/contractservices.asp
The listing also is featured in Progressive Railroading’s 2015-16 Track Yearbook & Buyers’ Guide, which was published this fall. To purchase a copy of the Yearbook, visit: www.tradepressmedia.com/yearbook