Reports related to this article:
Project(s): View 1 related project in PECWeb
Plant(s): View 1 related plant in PECWeb
en
Researched by Industrial Info Resources (Sugar Land, Texas)--Amid cost cutting and efficiency gains in a tougher market environment, CSX Corporation (NYSE:CSX) (Jacksonville, Florida) is boosting its planned capital expenditures by $300 million for this year. The increase will allow the eastern U.S. freight railway to speed up payments for locomotives, which in turn will allow it to avoid seller financing charges in 2017. Industrial Info is tracking 20 active CSX projects worth $1.46 billion.
CSX now expects its total capital spend to be $2.7 billion for 2016. The additional $300 million will accelerate locomotive payments delivered throughout 2016 under a long-term commitment. The railway originally intended to pay for the locomotives in 2017.
Chief Executive Officer Michael Ward told investment analysts last week that "we either pay the financing charges or avoid them by pulling it forward and... every dollar is on the table and that seems like a good way to save a little bit of money as we look forward into 2017."
Chief Financial Officer Frank Lonegro said: "By completing our locomotive purchase this year, we clear the path in 2017, for CSX to begin returning to our long-term core capital investment guidance of around 16% to 17% of revenue."
The railway will receive 60-65 new locomotives in the second half of 2016, said Ward, who added he did not expect the railway to make major investments in new locomotives in 2017 and 2018.
For related information, see January 14, 2016, article - CSX Railway Reports 5% Drop in Fourth-Quarter 2015 Earnings, Plans for $2.4 Billion Capex for 2016
More Efficiency Gains, Lower Revenue Expected for Second-Half 2016
At the same time it is increasing capital expenditures this year, the railway is pushing to achieve up to $350 million in productivity and efficiency savings for 2016. Since first-quarter 2016, CSX said it has reduced the company's employee headcount by about 4,500 versus the prior year, with cost savings amounting to $230 million in the first half of 2016.
CSX still expects 2016 full-year earnings per share to decline, reflecting tougher energy markets, along with the impact of the strong U.S. dollar and low commodity prices. For the third quarter, the majority of the markets will be down, with the most significant declines continuing to be shipments of coal and crude oil, Lonegro said. Domestic coal shipments remain down as power producers still prefer low cost natural gas over coal as their fuel source. He said he expects the total coal market (domestic and exports) to decline 25% for the year.
Shipments of agricultural products and chemicals are also expected to decline in the third quarter this year in comparison with third-quarter 2015. On the plus side, automotive volumes are expected to grow in the third quarter, as light vehicle production is higher than last year. Mineral volumes are also expected to grow on the strength of the fly ash remediation business.
The railway said second-quarter 2016 earnings were $445 million, down from $553 million in second-quarter 2015. Revenue for the just-ended quarter was $2.7 billion, roughly 12% less than the second-quarter 2015 amount of $3.06 billion.
Progress on Proposed North Carolina Terminal
Ward said he was "really excited" about the proposed intermodal terminal in North Carolina. The terminal could help position eastern North Carolina as an East Coast transportation logistics hub, serving the metro-Raleigh area.
With a total investment value of $272.6 million, the project could be located at a site near Selma in Johnston County, but Ward said the exact location had not been determined. "We're finding that we're getting great cooperation from the state and local officials," he added. "We're very encouraged that we will be able to work cooperatively with them."
The terminal would be a private/public funding venture, with CSX providing $150 million and the state putting up the rest of the funding. Construction kick-off could be as early as second-quarter 2018, with completion in fourth-quarter 2019.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
CSX now expects its total capital spend to be $2.7 billion for 2016. The additional $300 million will accelerate locomotive payments delivered throughout 2016 under a long-term commitment. The railway originally intended to pay for the locomotives in 2017.
Chief Executive Officer Michael Ward told investment analysts last week that "we either pay the financing charges or avoid them by pulling it forward and... every dollar is on the table and that seems like a good way to save a little bit of money as we look forward into 2017."
Chief Financial Officer Frank Lonegro said: "By completing our locomotive purchase this year, we clear the path in 2017, for CSX to begin returning to our long-term core capital investment guidance of around 16% to 17% of revenue."
The railway will receive 60-65 new locomotives in the second half of 2016, said Ward, who added he did not expect the railway to make major investments in new locomotives in 2017 and 2018.
For related information, see January 14, 2016, article - CSX Railway Reports 5% Drop in Fourth-Quarter 2015 Earnings, Plans for $2.4 Billion Capex for 2016
More Efficiency Gains, Lower Revenue Expected for Second-Half 2016
At the same time it is increasing capital expenditures this year, the railway is pushing to achieve up to $350 million in productivity and efficiency savings for 2016. Since first-quarter 2016, CSX said it has reduced the company's employee headcount by about 4,500 versus the prior year, with cost savings amounting to $230 million in the first half of 2016.
CSX still expects 2016 full-year earnings per share to decline, reflecting tougher energy markets, along with the impact of the strong U.S. dollar and low commodity prices. For the third quarter, the majority of the markets will be down, with the most significant declines continuing to be shipments of coal and crude oil, Lonegro said. Domestic coal shipments remain down as power producers still prefer low cost natural gas over coal as their fuel source. He said he expects the total coal market (domestic and exports) to decline 25% for the year.
Shipments of agricultural products and chemicals are also expected to decline in the third quarter this year in comparison with third-quarter 2015. On the plus side, automotive volumes are expected to grow in the third quarter, as light vehicle production is higher than last year. Mineral volumes are also expected to grow on the strength of the fly ash remediation business.
The railway said second-quarter 2016 earnings were $445 million, down from $553 million in second-quarter 2015. Revenue for the just-ended quarter was $2.7 billion, roughly 12% less than the second-quarter 2015 amount of $3.06 billion.
Progress on Proposed North Carolina Terminal
Ward said he was "really excited" about the proposed intermodal terminal in North Carolina. The terminal could help position eastern North Carolina as an East Coast transportation logistics hub, serving the metro-Raleigh area.
With a total investment value of $272.6 million, the project could be located at a site near Selma in Johnston County, but Ward said the exact location had not been determined. "We're finding that we're getting great cooperation from the state and local officials," he added. "We're very encouraged that we will be able to work cooperatively with them."
The terminal would be a private/public funding venture, with CSX providing $150 million and the state putting up the rest of the funding. Construction kick-off could be as early as second-quarter 2018, with completion in fourth-quarter 2019.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
