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This morning, Kansas City Southern (KCS) recorded second-quarter 2007 revenue of $427.1 million, a 3.4 percent increase compared with the same 2006 period. In a prepared statement, the Class I attributed the quarter-over-quarter increase to a “continued strong pricing environment.”

The revenue particulars:

* For KCS' automotive group, second-quarter revenue increased 17.8 percent compared with 2Q 2006 – “a reflection of the growing importance of Mexico to the North American automotive industry,” KCS said.
* Coal revenue increased 10.4 percent (“on strong volume”).
* Chemical and petroleum products revenue was up 5.1 percent.
* Agriculture and minerals revenue rose 4.6 percent despite the still-slow U.S. “new homes” market.
* Paper and forest products revenue was up 1.2 percent.
* Intermodal was up a mere 0.6 percent due in part to “the loss of
certain haulage business,” KCS said, adding that if the loss were excluded from the equation, 2Q intermodal revenue increased 14 percent.

On the expense side, KCS reported second-quarter operating expenses of $344 million, a
2.5 percent increase compared with the same 2006 period. Operating income increased 7.2 percent to $83.1 million and the second-quarter operating ratio improved to 80.5, compared with 2Q 2006’s 81.2.

The second half of 2007 also looks promising. New business opportunities, the delivery of 120 new locomotives and other developments will “contribute to our goal of achieving a full-year operating ratio below 80 percent,” said KCS Chairman and Chief Executive Officer Michael Haverty.

Meanwhile, KCS’s Mexico game plan continues to take shape. Phase I operations at Mexico’s Port of Lazaro Cardenas are on track for a late-September opening. And the Class I recently started work on the reconstruction of a rail line between Victoria and Rosenberg, Texas. When completed in late 2008, the line will reduce KCS’ route to Mexico by 70 miles and “result in lower costs and improved service, which are critical elements of our cross-border intermodal growth strategy,” Haverty said.