CSX Corporation : CSX CEO Says He Doesn't See Risk of U.S. Recession
07/18/2012| 01:08pm US/Eastern
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By Bob Sechler
CSX Corp. (CSX) Chief Executive Michael Ward said Wednesday that he sees no risk of a renewed U.S. recession despite what he acknowledged has been a slight slowdown in the economy since earlier in the year.
"We're certain we're going to see growth in the third quarter," Ward said in an interview, referring both to the U.S. economy and to his railroad's overall freight volume.
Still, he said he expects the growth to be "more moderate" in the second half than he had anticipated back in April, saying a number of recent economic data points have given him pause.
Excluding shipments of coal to U.S. power utilities, however, Ward noted that CSX's freight volume climbed 6% in both the first and second quarters this year. For the figure to turn negative in the second half, "something pretty darn dramatic would have to happen, and we don't see that anywhere on the horizon," Ward said.
Meanwhile, CSX said Wednesday that the rate of increase in its core transport prices slowed significantly in the second quarter. The Jacksonville, Fla. railroad company said core prices climbed 3% to 4% in the quarter compared with a year earlier, excluding the impact of falling prices for coal hauled to U.S. seaports and bound for use in overseas steel production.
CSX's core pricing climbed by 5% to 6% in the first quarter, and by about 7% throughout 2011, and those figures didn't exclude so-called metallurgical coal bound for export.
Ward said CSX excluded export metallurgical coal from the second-quarter pricing figure because it was particularly volatile amid slowing global steel production. "We had to take some decreases to match the world marketplace," he said.
Still, Ward said CSX's core pricing gains will exceed inflation in railroad costs this year, which is expected to be 2.4%.
CSX, the first of the top U.S. railroads to report second-quarter results, said late Tuesday that earnings ticked up 1.2% despite a big drop in the volume of coal it hauled to electric utilities, helped by expense controls and higher shipments of automobiles and containerized freight.
Second-quarter profit came in at $512 million, or 49 cents a share, up from $506 million, or 46 cents a share, a year earlier. Revenue slipped 0.2% to $3.01 billion. Analysts polled by Thomson Reuters had most recently predicted per-share earnings of 47 cents a share on revenue of $3.05 billion.
Overall coal shipments, which account for more than a fifth of CSX's volume, slumped 14% in the second quarter compared with a year earlier, matching the first quarter's percentage decline and in keeping with the railroad's April warning that coal would once again be a sore spot.
But Ward said Wednesday that the second quarter was likely the low point for coal shipments to U.S. utilities. Hot summer weather and the need to start adding to stockpiles ahead of next winter should spur more demand sequentially in the third quarter, he said.
CSX shares were off about 0.4% at $22.69 in recent trading.
-By Bob Sechler; Dow Jones Newswires; 512-258-1690; bob.sechler@dowjones.com
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