BNSF operating ratio improves despite revenue, traffic declines

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A BNSF manifest train heads north along the Mississippi River at Ferryville, Wis., on Aug. 4. BNSF saw broad declines in volume and earnings during the second quarter, but lowered its operating ratio.
TRAINS: David Lassen

FORT WORTH, Texas — BNSF Railway’s earnings slumped during the second quarter due to broad pandemic-related declines in traffic volume.

The railroad’s operating income fell 15.7%, to $1.5 billion, as revenue declined 21.9%, to $1.3 billion, BNSF’s corporate parent, Berkshire Hathaway, reported in a regulatory filing on Saturday. 

BNSF’s operating ratio was 61.9%, a 3.5-point improvement compared to last year, as the railroad cut its operating expenses 26%. BNSF and Canadian Pacific were the only Class I railroads to improve their operating ratios in the quarter.

Volume declined 17.9% in the quarter, with all four BNSF business segments reporting declines.

Revenue from consumer products — which includes intermodal and automotive shipments — fell 17.4% as volume sank 12.1%. “The volume decreases were due to lower intermodal and automotive shipments attributable to the COVID-19 pandemic,” Berkshire said in its filing.

Industrial products revenue declined 26.4% as volume fell 25.9%. The volume decreases were driven by the pandemic-related decline in U.S. industrial production and reduced demand in the energy sector, which reduced sand and petroleum products volume.

Agricultural products revenue declined 12.2% as volume fell 7%, primarily due to the pandemic’s impact on ethanol and related commodities, as well as lower grain exports.

Coal revenue plummeted 38.7% as volume declined by a third. The 33.6% decline in coal volume was driven by reduced electricity demand due to the pandemic, mild winter weather, low natural gas prices, and retirements of coal-fired power plants, Berkshire said in its filing.

Like the other Class I railroads, BNSF said the pandemic made the outlook for the year highly uncertain. “We believe BNSF’s fundamental business remains strong and it has ample liquidity to continue business operations during this volatile period,” Berkshire said in its filing.

BNSF anticipates that capital commitments for 2020 will be approximately $3.1 billion, or a $300 million decrease from its original capital commitment plan, the railroad said in its quarterly filing on Monday.

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