Coal news and updates

BNSF’s coal revenues

In the earlier article, we discussed Burlington Northern Santa Fe’s (BRK-B) agricultural revenues. Here, we’ll review the coal business segment’s 1Q16 performance. BNSF’s 1Q16 coal revenues were $779.0 million, down 38.6% from $1.3 billion in 1Q15.

Volumes in 1Q16

In 1Q16, the coal volumes dropped by 33.2% to 401,000 carloads against 600,000 carloads on a year-over-year basis. The decline was mainly due to reduced utility demand for coal. Higher coal inventories with customers and low natural gas prices (UNG) impacted the utility coal demand. Plus, reduced power generation partially due to historically mild winter weather also impacted coal volumes. In contrast, coal volumes in 1Q15 rose from higher demand as customers restocked coal inventories. The average revenue per car for the coal segment went down 8.1% from $2,115 in 1Q15 to $1,943 in 1Q16.

Outlook

According to BNSF, utility coal inventories are comparatively high. The company expects increased usage of alternative fuel sources in power generation. BNSF anticipates a further decline in coal volumes over the remainder of 2016.

Peer group coal business

Coal formed 36.9% of total tons originated and hauled by all Class I railroads in 2015, which explains why railroads are so worried about falling coal transportation. Railroads like Norfolk Southern (NSC), Union Pacific (UNP), and CSX (CSX) have started rationalizing their coal assets to adjust to the downfall in coal volumes. However, one Class I railroad, Canadian National Railway Company (CNI), remains relatively immune to the shrinking coal revenues. This railroad had nearly 5% revenues from coal and 9% coal volumes in 2015.

In the subsequent part, we’ll look at BNSF’s operating margins. We’ll also compare its operating margins with its peers’ margins, so you can get better insight into the operating efficiencies of these Class I railroads.

Source: Yahoo.com