Union Pacific: Pricing Gains Not Enough to Overcome Demand Decrease

A pair of Union Pacific locomotives idle in Atlanta on June 11, 2011. (Photo by Todd DeFeo)

Union Pacific Corp.’s $1.2 billion net income in the second quarter of 2015 was down from $1.3 billion a year ago.

The $5.4 billion in operating revenue was down 10 percent in the second quarter 2015 vs. the second quarter a year ago. Concurrently, second quarter business volumes, as measured by total revenue carloads, declined 6 percent compared to 2014, the railroad said.

“Solid core pricing gains were not enough to overcome a significant decrease in demand,” Lance Fritz, Union Pacific president and chief executive officer, said in a news release. “Total volumes in the second quarter were down 6 percent, led by a sharp decline in coal. Industrial products and agricultural products also posted significant volume decreases.  However, we made meaningful progress right sizing our resources to current volumes, and I am encouraged to report that we made these improvements while posting strong safety performance.”

Volume declines in coal, industrial products, and agricultural products more than offset the growth in automotive and intermodal. Chemicals volume was flat compared to 2014 as growth in base chemicals carloads offset a decline in crude oil shipments.

“While the volume outlook remains uncertain, we remain laser focused on operating safely and efficiently no matter what the market environment. We will continue to reduce costs and improve productivity as we further align resources with demand,” Fritz said. “Longer term, we continue to be optimistic about the strengths of our diverse rail franchise.”