Genesee & Wyoming’s European Revenues in 2Q17
Genesee & Wyoming’s European revenues
In this part of the series, we’ll look at the performance of Genesee & Wyoming’s (GWR) UK and European operations. Its European revenues rose 4.6% to $148.0 million in 2Q17, from $141.5 million in the second quarter last year.
You should note that the UK and European same railroad revenues fell $19.0 million, or 13.4%, due to the unstable British pound. The closures of some Continental Europe intermodal services and the ERS Railways’ Continental Europe intermodal business restructuring also led to the fall in revenue.
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GWR’s reported fall in 2Q17 revenues was favorably compensated by the rise in revenue for the UK intermodal and increased aggregates and agricultural products revenue in Poland. The company’s UK infrastructure services revenues fell $2.1 million due to reduced services for Network Rail.
European carloads in 2Q17
Genesee & Wyoming’s European and UK carloads contracted 3.5% from 276,000 in 2Q16 to 267,000 in 2Q17. Much of the decline was led by coal and coke followed by intermodal traffic. Coal and coke carloads fell significantly by 57.0% followed by 5.0% in intermodal. The slump in carloads was favorably offset by ~20.0% higher carloads of minerals and stone.
Genesee & Wyoming anticipates $175.0 million–$180.0 million of revenue in 3Q17 for its European operations. On an annual basis in 2017, the company anticipates $620.0 million–$630.0 million.
In 3Q17, GWR expects its UK and European carloads to fall 3.0%. Its projections are based on reduced Continental Europe intermodal volumes due to ERS Railways’ restructuring. In addition, GWR expects lower volumes of UK coal traffic in the third quarter of 2017. However, higher minerals and stone and UK intermodal shipments should compensate for the estimated lower coal volumes in 3Q17.
With the rise in fuel prices, rail intermodal has become more competitive than long-haul trucking. The ELD (electronic logging device) regulations in the trucking sector will most likely create service disruptions, benefitting the railroads. Let’s look at the intermodal revenues of GWR’s Class I railroad (XLI) peers in 2Q17 for a better perspective:
- Canadian Pacific Railway (CP): rose 8.0%
- CSX (CSX): rose 7.0%
- Kansas City Southern (KSU): fell 1.0%
- Union Pacific (UNP): rose 3.0%
- Norfolk Southern (NSC): rose 10.2%
In the next part, we’ll take a look at GWR’s overall and segmental operating margins in 2Q17.