BNSF’s fourth-quarter 2021 net profit rose 13% amid an 11% gain in revenues, the western U.S. railroad reported.
Net income was $1.7 billion for the company in the fourth quarter of 2021, compared with net income of $1.5 billion in the fourth quarter of 2020. BNSF (NYSE: BRK.B) is privately held by Berkshire Hathaway.
Total revenues rose 11% in the fourth quarter to $6.3 billion.
Of that, consumer products revenue grew 7% to $2.2 billion despite a 9% loss in volumes that occurred “due to broad supply chain challenges which limited volume tendered and handled by BNSF,” it said.
Industrial products revenue rose 10% to $1.3 billion amid a 6% increase in volumes. Improvements in the U.S. industrial economy drove higher volumes in the construction and building sectors, which were partially offset by lower petroleum volumes due to unfavorable market conditions in the energy sector, BNSF said.
Agricultural products revenue increased 3% to nearly $1.5 billion despite a 2% drop in volumes due to lower grain shipments, which in turn were partially offset by higher fertilizers and ethanol volumes, as well as increases in the renewable diesel business, according to BNSF.
Coal revenue jumped 30% to $907 million amid a 9% increase in volumes due to increased electricity generation, higher prices for natural gas, which is a competing generation fuel for electricity, and improved export demand, BNSF said.
Revenues were able to offset a 10% increase in operating expenses, which were nearly $3.9 billion.
Fourth-quarter operating income rose 12% to $2.4 billion. BNSF’s operating ratio was 60%, compared with 60.3% in the fourth quarter of 2020. Investors sometimes use OR as an indicator of the financial health of a company, with a lower OR implying improved financial health.
For 2021, approximately 38% of BNSF’s freight revenues were derived from consumer products, while 24% came from industrial products, 23% came from agricultural products and 15% came from coal, according to Berkshire Hathaway.
BNSF capital investment plans for 2022
As BNSF looks to 2022, it expects to spend $3.55 billion on capital investments for the year, of which $2.71 billion will be for BNSF’s maintenance and replacement program to upgrade and track infrastructure and maintain rolling stock. This work will include nearly 14,000 miles of track surfacing and/or undercutting work and the replacement of 381 miles of rail and approximately 2.7 million rail ties, BNSF said.
Approximately $580 million of the 2022 capex budget will go toward efforts to grow BNSF’s consumer, agricultural and industrial products segments. Slated projects include double-tracking several segments in eastern Kansas and adding a new segment of triple track in California, all of which support BNSF’s Southern Transcon route; increasing train capacity in the Pacific Northwest; and beginning multi-year intermodal facility expansion projects at the Alliance facility in North Texas and the Cierco facility in Chicago. BNSF also seeks to improve the efficiency of its San Bernardino intermodal facility in Southern California.
Rounding out the 2022 capex is approximately $259 million for freight car and other equipment acquisitions.
BNSF’s capital commitments for 2021 were $2.97 billion, with much of that dedicated toward maintenance and expansion of BNSF’s network.
The 2022 capex budget, which includes plans to increase train capacity in the Pacific Northwest, comes as BNSF last month said it would be resuming operations and the maintenance of the Montana Rail Link (MRL), a Class II regional railroad operating over 900 route miles in Montana and Idaho.
MRL had a long-term lease with BNSF, in which MRL was leasing and operating on BNSF-owned tracks between Huntley, Montana, and Sandpoint, Idaho, since 1987.
“Over the last several years, more than 90% of the traffic traversing MRL’s leased line were loads moved on behalf of BNSF. The line has become a critical link in BNSF’s northern
transcontinental network, delivering grain, consumer and industrial products to the West Coast,” MRL said last month. “By MRL ending its lease and BNSF resuming operation of its line, BNSF will eliminate the need to interchange freight between the two railroads, strengthening the resiliency of the supply chain and enhancing rail capacity in the Pacific Northwest.”
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