CSX, CN LOWER EARNINGS OUTLOOK
CSX Corp. and Canadian National, operators of Class I North American railroads, have lowered earnings expectations due to sharp declines in key commodities.
CSX, parent of CSX Transportation, said weak coal demand will impact the railroad's results for the third quarter, ending Sept. 27.
Coal carloads for the quarter are expected to be down about 5 percent from the year-earlier period, and revenues from the business sector will be off by about $35 million, CSX said.
Combined merchandise, automotive and intermodal carloads are up for the quarter, and revenues from these sectors are expected to more than offset the coal declines. Total rail and intermodal operating income for the third quarter should still be down from last year, however.
'Coal stockpiles at our electric utility customers have been dropping at a much slower rate than we anticipated despite the relatively warm summer weather,' said John W. Snow, chairman and chief executive officer of Richmond, Va.-based CSX. 'We believe inventories are approaching normal levels and unit trains coal shipments should pick up in the fourth quarter.'
For the full year, 'we expect total rail and intermodal expenses to be about the same as in 2001,' Snow said.
CN, the Montreal-based railroad, has ratcheted back its earnings expectations due to sharply reduced Canadian grain revenues, as a result of severe drought conditions in western Canada. Growth for 2002 will be at the low end of the 5 to 10-percent growth range previously announced by the company.
'Although CN's merchandise and intermodal business remain strong, the outlook for the 2002/2003 Canadian grain crop is much worse than anticipated,' said Paul M. Tellier, CN's president and CEO. 'Recent reports suggest this year's crop could be less than 50 percent of the five-year average. We are faced with two bad crop years in a row, which has significantly reduced the amount of product we can move.'