Union Pacific reports 7.7% drop in 2015 profits

The Western U.S. railroad says an uncertain economy, energy markets, plunging commodity prices, and the strength of the U.S. dollar will be continuing challenges in 2016.    Union Pacific posted a 2015 fourth quarter profit of $1.1 billion, down from $1.4 billion in the fourth quarter 2014. In the fourth quarter, the company had operating revenues of $5.2 billion, a 15 percent decrease compared to the fourth quarter of 2014.
   Fourth quarter business volumes, as measured by total revenue carloads, declined 9 percent compared to 2014, “more than offsetting another quarter of solid core pricing gains,” said Lance Fritz, Union Pacific chairman, president and chief executive officer.
   “On the cost side, we continued to adjust resources throughout the quarter and also made solid progress with our productivity initiatives,” he added.
   Volumes declined in each of the railway’s business groups with the exception of automotive, which was up 1 percent. Volumes of intermodal cargo were down 14 percent, coal down 31 percent, chemicals down 7 percent, and agricultural and industrial products were down 23 percent.
   For the full year, UP had a profit of $4.8 billion in 2015, also down from $5.2 billion in 2014. Operating revenues totaled $21.8 billion in 2015 compared with $24 billion the previous year.
   Freight revenues decreased 10 percent to $20.4 billion compared to 2014. Carloadings were down 6 percent, again due to declines in each of the UP’s business groups with the exception of automotive.
   The port noted that average diesel fuel prices decreased 38 percent to $1.84 per gallon in 2015 from $2.97 per gallon in 2014.
   Average train speed, as reported to the Association of American Railroads, stood at 25.4 mph, 6 percent faster compared to the full year 2014.
   “This past year was a difficult one in many respects, but our team did outstanding work in the face of dramatic declines in volumes, and shifts in our business mix,” Fritz said. “Overall economic conditions, uncertainty in the energy markets, commodity prices, and the strength of the U.S. dollar will continue to have a major impact on our business this year. However, we are well-positioned to efficiently serve customers in existing markets as they rebound. The strength and diversity of the Union Pacific franchise also will provide tremendous opportunities for new business development as both domestic and global markets evolve.”