BNSF posts revenue decline on lower volumes in Q4, full-year 2019

Lower volumes due to severe winter weather and other factors contributed to BNSF Railway Co.'s revenue decline during fourth-quarter and full-year 2019, the Class I announced yesterday.

BNSF posted revenue of $5.8 billion for the quarter, down 6 percent, and $23.5 billion for all of 2019, down 1 percent, compared with Q4 and full-year revenue in 2018, railroad officials said in a quarterly financial performance summary.

The revenue decrease was partially offset by a 1 percent and 4 percent increase in average revenue per car/unit for Q4 and full-year 2019, respectively, as a result of increased rates per car/unit and a favorable outcome of an arbitration hearing, they said.

BNSF's operating income for Q4 and full-year 2019 was $2.1 billion and $8.1 billion, respectively, up 2 percent and 3 percent, respectively, compared to the same periods in 2018.

BNSF officials attributed the revenue decline to a 6 percent and 4 percent decrease in unit volume for the Q4 and full year, respectively.

Severe winter weather and flooding on parts of BNSF's network affected full-year volumes. In addition, full-year and Q4 volumes were impacted by the following:
• Consumer products volumes fell 5 percent for both the Q4 and full year primarily because of lower intermodal volumes, which were driven by moderated demand and the availability of truck capacity, as well as lower West Coast imports.
• Industrial products volumes dropped 10 percent and 3 percent in the quarter and full year, respectively. BNSF attributed those declines to overall softness in the industrial sector and lower sand volumes. The full year also included reduced loadings due to severe winter weather and flooding on parts of the network, partially offset by higher demand for petroleum products and liquefied petroleum gas.
• Agricultural products volumes dipped 3 percent in Q4 and 5 percent in the full year primarily due to export competition from non-U.S. sources and the impact of international trade policies. Full-year volumes in this category also were affected by challenging weather conditions.
• Coal volumes decreased 7 percent in Q4 and 5 percent for the full year primarily due to lower natural gas prices.

BNSF cut operating expenses year-over-year by 10 percent to $3.7 billion in Q4, and 4 percent to $15.4 billion for full-year 2019.

Also in 2019, BNSF spent $3.6 billion on capital expenses, the largest component of which supported maintenance and expansion of its network, company officials said.

For 2020, BNSF has budgeted $3.4 billion for capital expenses. This year's plan will focus on projects that support the Class I's growth and efficiency objectives. BNSF has slated $2.55 billion for the plan's maintenance and replacement component, including replacing and upgrading rail, ties and ballast, along with maintaining rolling stock.

BNSF expects to spend $581 million on expansion and efficiency projects along the railroad's Southern Transcon route, on routes to and from Texas and on intermodal facilities. The railroad has budgeted $270 million for equipment acquisitions in 2020.