KCS execs release annual 'state of the railroad' report

Although Kansas City Southern will face many of the same economic challenges in 2016 that it faced in 2015, the company's "strong financial and operational footing" is well-positioned for growth. As a result, KCS will proceed with many of its planned strategic capital expenditures, the Class I's top executives said yesterday in a letter to KCS employees.

In their "State of the Railroad" report, KCS Chief Executive Officer David Starling and President Patrick Ottensmeyer said the economic challenges ahead result in the company's cautious outlook for the new year.

"We expect continued volatility in oil and natural gas pricing, which means our energy business, just like our peers’ businesses, will again be difficult to predict," they wrote. "The strong U.S. dollar will make American exports more expensive and less attractive to other global producers, which may impact many of the products we move, such as steel and paper."

To weather 2015's challenges, KCS pursued strategic initiatives to manage costs, undertake planned maintenance, improve infrastructure and expand capacity, the leaders stated. The company's approach to 2016 will be to remain "extremely thoughtful" about costs in order to "remain flexible and respond quickly" to maintain profitability in the short term.

"That said, we operate in an industry that must consider both the long and short term timeframes and we can say with confidence that our long term future is bright," Starling and Ottensmeyer wrote. "Just as in the past, we will get through this period of economic uncertainty and will make the appropriate strategic capital investments that will facilitate industry-leading growth when macro-economic dynamics shift in our favor."

The report highlighted many of the Class I's accomplishments in 2015, as well as outlined some of the plans for 2016. For example, KCS' maintenance-of-way plans in 2016 include:
• the replacement of 500,000 ties and 50 track-miles of rail across the KCSR network.
• additional planned capacity programs including construction of two classification tracks in Jackson, Miss.; a new switching lead at the intermodal shipper facility in Kendleton, Texas; and a mechanical inspection track and storage track at the intermodal facility in Kansas City.
• construction of a storage-in-transit (SIT) yard in Mossville, La., to support Sasol Ltd.'s new project in Lake Charles, La., as well as the creation of a new classification yard for Kansas City Railway operations.

The report also identifies some of Kansas City Southern de Mexico's accomplishments in 2015 and plans for 2016.