Kansas City Southern posts record revenue on strong demand of oil products into Mexico

28 January, 2019

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Kansas City Southern (KCS) reported record fourth quarter 2018 revenues of US$694 million, an increase of 5% from fourth quarter 2017 led by strength in crude oil and refined products fleet into Mexico, despite carload volumes remained flat compared to prior year.

However, net income fell in the fourth quarter due to a recorded a tax expense instead of a large benefit it reported during the same period a year ago.

The transportation holding company reported net income of US$161.1 million, down 71% from the comparable quarter a year ago. It said earnings were US$1.59 a share, down from US$5.33 a share.

For the full year of 2018, KCS achieved record revenues, of US$2.7 billion, up 5% from 2017, on 2% carload growth. Full year 2018 operating income was US$986 million. Excluding a gain on insurance recoveries, adjusted operating income was US$968 million, a 5% increase over prior year. The Company’s 2018 adjusted operating ratio was 64.3%, unchanged from 2017. Reported net income in 2018 was US$629 million, or $6.13 per diluted share.

In the fourth quarter, KCS reported 16% growth in cross-border carloads and revenue, most notably from refined products and cross border intermodal business.

The Chemical and petroleum business unit recorded revenue growth of 19%. This growth was primarily driven by strong southbound volumes of refined fuel products moving into Mexico. For the full year, the Mexican energy reform business contributed nearly US$100 million of revenue with carloads and revenue growing at 156% and 120% respectively.

Current fuel shortages in Mexico also represent a huge opportunity and company executives are engaged in talks with senior Cabinet-level officials to address this issue.

President and CEO Patrick J. Ottensmeyer said during a conference call that there’s a plan in the works to develop a more of a longer-term sustainable rail strategy for moving refined products. “We're literally in the middle of those conversations as we speak,” he said.

“AMLO made it clear that, how Mexico intends to compete in the marketplace and our perspective is that KC will serve Mexico's needs, whether that comes domestically or across the border,” added Michael W. Upchurch, Executive Vice President and Chief Financial Officer.

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