Declining grain exports and competition from lower spot rates in the trucking market were among the factors that led BNSF to post a 15% decline in net profits for the third quarter of 2023.
The Western U.S. Class I railroad, which is owned by Berkshire Hathaway (NYSE: BRK-B), reported net income of $1.22 billion for the third quarter of 2023, compared with $1.44 billion for the third quarter of 2022.
Freight revenues slipped 12% year over year (y/y) to $5.59 billion amid lower volumes, while average revenue per car/unit fell 7% on decreased rates and lower fuel surcharges but was offset by positive business mix, BNSF said. Overall operating revenues totaled $5.85 billion, down 13% from the third quarter of 2022.
Volumes for BNSF’s consumer products segment slipped 7% y/y amid lower West Coast imports, the loss of an intermodal customer and competition from lower spot rates in the trucking market, which impacted domestic intermodal demand, BNSF said in a news release issued over the weekend. But higher automotive volumes amid an increase in vehicle production partially offset the volume decline for consumer products.
Agricultural products volumes also fell, declining 3% y/y on lower grain exports. But increased grain consumption for domestic use helped offset the decline in export volumes.
Lower natural gas prices and weather-related impacts contributed to a 6% decline in coal volumes y/y.
But not all of BNSF’s segments posted volume losses. Industrial products volumes grew 1% on increased demand for construction products from infrastructure demand, partially offset by lower demand for plastics, chemicals and sand, BNSF said.
Meanwhile, BNSF’s operating income was $1.8 billion, down 14% y/y, while the operating ratio was 68.4%, compared with 67.7% for the third quarter of 2022. Investors sometimes use OR to gauge the financial health of a company, with a lower OR implying improved health.
Expenses were $4.04 billion for the third quarter, down 12% from nearly $4.59 billion a year ago and driven largely by a 32% decline in fuel expenses.
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