Kansas City Southern's utility coal revenues and volumes declined significantly during the second quarter due to decreased demand following the coronavirus pandemic, and concerns remain over whether a second wave of infections would further decrease demand, executives said on the railroad's earnings call on July 17.
"Well, as you all know, it's a very interesting quarter," Michael Naatz, CMO, said. "Beginning in the second half of March and accelerating through April, COVID-19 resulted in a pretty profound decrease in demand and production for many products."
Utility coal revenues totaled $23.2 million in the second quarter, down 16% year on year, while carloads totaled about 25,600, down 16%. Revenue per unit was $906, compared with $905 in the year-ago period.
In KCS' coal and petroleum coke segment, revenues were down 6% to $9.5 million, while carloads rose 1% year on year to 14,500. Revenue per unit was $655, down from $701.
Over six months, utility coal revenues were $46.8 million, down 22%, carloads totaled 54,800, down 14% and revenue per unit averaged $854, compared with $939 year on year. Coal and petroleum coke revenues totaled $21.1 million, up 2%, while carloads came to 29,500, flat year on year, with a revenue per unit of $715, compared with $698.
"I think our biggest concern sitting here right now is the volume environment and what, if any, negative impact as a result of the second wave of infections could cause plants to shut down." Michael Upchurch, CFO, said.
Second quarter revenues totaled about $548 million, down 23% year on year due to the overall decline in demand from the coronavirus pandemic, while net income was $110 million, down 14.6%.
Total volumes during the quarter fell 21% year on year.
Due to the economic uncertainty caused by the pandemic, KCS decided to not provide a 2020 guidance on revenue, volume, operating ratio or earnings per share.
"I did want to take a moment to demonstrate how our daily volumes are recovering," Naatz said. "While it's fair to say that we have not completely recovered across all of our business units, we're absolutely moving in the right direction."
"Since hitting bottom in early May, our overall carload volumes have increased about 39%," he continued. "Despite some continued consumer and economic weakness, we are seeing a very healthy recovery in a couple of our key growth areas."
