Author Topic: CSX CEO: "Nobody in this world knows when coal will stabilize"  (Read 2004 times)

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Coming off the heels of the “freight recession,” CSX Corp. CEO Michael Ward said he’s proud of the company’s quick productivity turnaround to offset the declining economy.

 

The productivity and efficiency cuts CSX has made is what buoyed it in its first quarter earnings, which were in-line with analyst expectations at 37 cents per share.

 

“There’s not much we can do about where the marketplace is,” Ward said in a phone interview with the Business Journal on Wednesday. “But we can control our safety, service and productivity, and we will focus on those things.”

 

That meant making sure its assets matched where they would be most utilized in the network: Since the end of 2015 Q3, CSX has lengthened its trains, switched to a more efficient 28-hour schedule and dropped its headcount by 4,500 people.

 

Some of the changes will likely stabilize. Headcount for the second quarter is expected to be flat.

 

“Like Cindy [Sanborn, COO] said on our conference call, everything is on the table and we are constantly re-examining things,” Ward said. “That being said, it looks like we won’t need to do anything big in the second quarter. We had to take dramatic actions in the coal fields to respond to the downturn. We’re not expecting anything quite so dramatic as shutting down an operation.”

 

Despite workers' concerns that furloughs could happen as early as the end of the summer, CSX said it has no plans for its rail maintenance to end in the third quarter.

 

Ward said the engineering teams doing maintenance work will finish fixing tracks sometime during the fourth quarter, as they do every year, but that work won’t finish any earlier than beginning of fourth quarter.

 

“It’s going to go the normal time frame because we’re still doing the same level of capital investment,” Ward said. ‘We’ve still got to invest in the future.”

 

There have been other efficiency cuts CSX made. Although operating ratio climbed to 73.1 percent from 72.2 percent, Ward said that number was artificially dragged down because of liquidated damages that were reported in the first quarter last year. Taking out those damages, Ward said the operating ratio would have improved.

 

Intermodal, a growth market for CSX, grew 4 percent, and domestic intermodal grew 11 percent.

 

Meanwhile, coal is continuing to drop, with it down 31 percent for CSX this quarter.

 

“Nobody in this world knows when coal will stabilize,” Ward said. “The biggest wildcard is the Clean Power Plan. That has to work through the court systems: If it’s upheld, then coal will decline quickly. My guess is the issue will be resolved in another year and a half as it works through the court.”

 

As electric utilities prepare to use less coal, CSX is preparing to carry less coal.

 

“Our view is it’s always going to be an important part of our business, but it will be smaller,” Ward said. “We’ll grow our intermodal and merchandise.”

 



 

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