KCS posts revenue gain, net loss in Q2

Kansas City Southern posted second-quarter 2021 revenue of $749.5 million, a 37% increase from the same period a year ago. Overall, carload volumes were up 31% compared to the prior year.

KCS attributed the revenue increase primarily to higher volumes, a higher fuel surcharge and the strengthening of the Mexican peso against the U.S. dollar.

The Class I posted a net loss of $378 million, or $4.17 per diluted share, compared with reported net income of $110.3 million, or $1.16 per diluted share, in Q2 2020.

This year’s Q2 operating expenses were $1.2 billion, which included a $700 million termination fee paid to Canadian Pacific after KCS called off its proposed merger with the Class I to enter into a merger agreement with CN.

The $700 million reimbursement from CN will be recognized after the KCS shareholder vote on the merger with CN, KCS officials said in a press release.

"KCS delivered strong second-quarter volume growth, as our franchise benefited from unique growth drivers and the economy recovered from the COVID-19 downturn," said KCS President and Chief Executive Officer Patrick Ottensmeyer. “Although we are pleased with the strong volume growth, we fell short of our own expectations for customer service.”

KCS' operating team is focused on implementing structural and sustainable changes aimed at improving performance and the "resiliency of our network," Ottensmeyer said.

"To that end, we have deployed additional assets and crews in support of our service recovery, setting the company up to continue delivering robust volume growth while improving customer service in the second half of 2021," he said.

KCS announced its merger agreement with CN in the second quarter. The merger "will deliver more choices to customers through the creation of new, single line service options between the U.S., Canada and Mexico," said Ottensmeyer.

"This combination represents an exciting opportunity for KCS and CN stakeholders, and we look forward to delivering a safer, faster, cleaner and stronger railroad," he added.