BNSF posts 10 percent net income gain in 2015

BNSF Railway Co. closed out 2015 with a 5 percent decrease in total annual revenue, but a 10 percent increase in net income compared with 2014's results, the Class I announced on its website yesterday.

BNSF's 2015 net income rose to $4.2 billion from $3.9 billion a year ago. Total revenue slipped to $21.98 billion from $23.2 billion in the previous year. Results in 2015 benefited from improved operating performance, as both velocity and on-time performance were "significantly better" than 2014 service levels, BNSF officials said in the company's annual performance summary.

The operational improvements in 2015 reflected capital investments made to increase capacity in 2014 and 2015, they said.

Operating income climbed 10 percent in 2015 to $7.7 billion, while operating expenses dropped 12 percent to $14.2 billion. The company posted an operating ratio of 64 percent, down from 69.2 percent in 2014. The operating ratio does not include the impact of BNSF Logistics.

In fourth-quarter 2015, revenue slipped 13 percent to $5.4 billion and net income fell 9 percent to $1 billion compared with the previous year's quarter. Revenue per unit decreased by 10 percent for the fourth quarter and 6 percent for the full year as lower fuel surcharges across all business units were partially offset by increased rate per car or unit year over year. Fuel surcharge revenue dropped 55 percent versus 2014.

The Class I's total units for the fourth quarter were down 3 percent, while the full year 2015 was flat compared with the same periods in 2014. During 2015's second half — and particularly in the fourth quarter — BNSF faced declining demand, especially in coal and certain industrial products, company officials said in the financial statement.

"While our long-term outlook for the business remains unchanged, 2016 will be challenging because the rail industry is facing major economic headwinds that are impacting energy-related commodities and several other parts of our business," the statement read.

Coal volumes were down 8 percent in fourth-quarter 2015 compared with Q4 2014, as demanded softened due to higher utility coal inventory and increased use of other fuel sources as a result of low natural gas prices.

Meanwhile, Berkshire Hathaway Inc. Chairman and Chief Executive Warren Buffett said in his annual letter to shareholders that BNSF's service improvements in 2015 over 2014 levels was the "most important development" last year for Berkshire Hathaway, BNSF's parent company.

"After a poor performance in 2014, our BNSF railroad dramatically improved its service to customers last year," Buffett wrote. "To attain that result, we invested about $5.8 billion during the year in capital expenditures, a sum far and away the record for any American railroad and nearly three times our annual depreciation charge. It was money well spent."

Buffett acknowledged that 2015 was a "disappointing year" for most American railroads.

"Aggregate ton-miles fell and earnings weakened as well. BNSF, however, maintained volume, and pre-tax income rose to a record $6.8 billion (a gain of $606 million from 2014)," Buffett wrote. "Matt Rose and Carl Ice, the managers of BNSF, have my thanks and deserve yours."