Tuesday, January 16, 2018

Off topic: CSX releases data on 2017 coal shipments (Updated)

The export coal business was good for CSX last year, while the domestic side, which caters mainly to power plants, continued to face what the money people call "headwinds".

CSX released its fourth-quarter and year-end financial results after the stock market closed at 4 p.m. today. The other major railroad in the eastern U.S., Norfolk Southern, releases its fourth-quarter results next week.

Because of how the calendar fell, CSX's fiscal 2016 had 53 weeks, which affects its year-to-year comparisons.

In the domestic coal business, CSX reported, "Utility coal volume declined reflecting the competitive loss of short-haul interchange traffic as well as strong competition from natural gas. Coke, iron ore and other volume declined, primarily driven by sourcing shifts and a temporary outage at a steel producer."

On the export side, "Volume increased as global supply levels and pricing conditions supported strong growth in U.S. coal exports."

CSX hauled 61.1 million tons of coal for domestic markets last year, down from 69.9 million tons in its 53-week fiscal 2016. It hauled 36.2 million tons of export coal, up from 25.7 million tons.

Executives are on a conference call with investment analysts at the moment. I'll listen to the replay later and — I hope — have an update later.

On a side note, the Tax Cuts and Jobs Act of 2017 was good for CSX's reported net income. The tax reform package boosted its fourth-quarter earnings by $3.157 billion. Q4 net was $4.14 billion, up from $458 million in the fourth quarter of 2016. Even without the tax change, net income for the quarter was  still up, at $573 million.

# # #

The conference call was more than an hour and a half, with very little of that devoted to the coal business. That's understandable, as the company's CEO passed away last month and a new guy is in charge. There has also been turmoil to deal with regarding service issues as CSX implemented its Precision Scheduled Railroading program.

As a result, there were few questions from analysts about coal. What was asked and what was said was pretty much in the expected range.

In his prepared remarks, CEO James Foote said, "Shipments to our northern utilities were down substantially, but shipments to southern utilities were up 5 percent."

In the Q&A that followed, Foote said, "Coal is very strong here for us, the outlook for us for export met and steam coal right now continues to be favorable despite everyone predicting earlier that it was not going to be, and so the question is how long is that going to hang in there and the challenges that we have with our domestic steam coal franchise, especially the northern utilities where they are being displaced by natural gas."

Foote said more details will be available at the company's investment conference in a few weeks.