KCS remains positive on cross-border trade

The railway continues to invest in Mexico and remains on track with positive train control implementation.    Kansas City Southern’s (KCS) second-quarter 2018 net income rose 10.4 percent year-over-year to $148.7 million amid higher revenues and volumes in five of six commodity groups and flourishing cross-border trade growth between the U.S. and Mexico.
   The Class I railway’s total revenues for the quarter rose 4 percent year-over-year to $682.4 million.
   Broken down by commodity group, revenues compared to the second quarter of 2017 for:
     • Chemical and petroleum totaled $157.8 million, up 13.7 percent;
     • Industrial and consumer products totaled $152.7 million, up 2.8 percent;
     • Agriculture and minerals totaled $125.1 million, up 1.4 percent;
     • Intermodal totaled $93.7 million, up 3.4 percent;
     • Automotive totaled $67.3 million, up 17 percent;
     • And energy totaled $56.5 million, down 19.9 percent.
   The sharp drop in energy was fueled by a previously announced closure of a power generation facility in Texas and by frac sand sourcing changes, partially offset by higher volume and pricing in the crude oil business, Brian Hancock, executive vice president and chief marketing officer at KCS, said on the earnings conference call Friday.
   Despite NAFTA uncertainty, KCS holds a positive outlook for U.S.-Mexico trade and continues to invest in Mexico. “We are continuing to work on both capacity and fluidity, as well as origin and destination opportunities on our line,” Hancock said during the call.
   The railway’s cross-border revenues during the quarter surged 19 percent year-over-year.
   KCS President and CEO Patrick Ottensmeyer also expressed optimism about Andrés Manuel López Obrador (AMLO) winning Mexico’s presidential election on July 1, which will result in him being inaugurated Dec. 1. “While it’s very early on in the new Mexican administration, we’re optimistic about the initial commentary that is coming from the new leadership team and the outlook for improved U.S.-Mexico relations and possibly a resolution of NAFTA in the near term,” Ottensmeyer said on the call.
   Jeff Songer, executive vice president and chief operating officer at KCS, said on the call that congestion faced during the first quarter of 2018 and early into the second quarter in the Houston area has eased and KCS has been working hard to clear the cross-border traffic that backed up in Northern Mexico during that time. Dwell should continue to moderate through the rest of the third quarter, Songer said.
   He also said positive train control work at KCS remains on schedule and the company expects to have its network fully equipped by the Dec. 31, 2018 deadline.
   KCS was the fourth Class I railway to report its second quarter 2018 results, with CSX posting net earnings of $877 million, up 72 percent year-over-year; Union Pacific reporting net income of $1.51 billion, up 29.2 percent year-over-year; and Canadian Pacific recording a net income of C$436 million, down 9.2 percent year-over-year.