January 22, 2016

Union Pacific reports 8% drop in profit

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UNION Pacific (UP), United States, has reported an 8% fall in net income from $US 5.18bn in 2014 to $US 4.77bn last year due to a significant drop in freight traffic and income.


Freight wagon loadings fell by 6% in 2015 with reductions reported in all types of freight except automotive. This compares with a 2.5% fall in overall railfreight traffic in the US in 2015. UP's freight revenue dropped by 10% to $US 20.4bn, while other revenue reduced by 1% to $US 1.4bn.

UP managed to cut its operating costs by 10% from $US 15.2bn in 2014 to $US 13.76bn in 2015 thanks mainly to a 43% reduction in fuel costs, and a 5% cut in the purchase of services and materials.

On the plus side, UP improved its operating ratio by 0.4 points to a new record of 63.1%. Average freight train speeds increased by 6% to 40.9km/h. UP managed to reduce personal injuries by 11% to 0.87 incidents per 200,000 employee hours which it says is a record. UP was able to increase capital spending in 2015 by $US 200m to $US 4.3bn.

"This past year was a difficult one in many respects, but our team did outstanding work in the face of dramatic declines in volumes and shifts in our business mix," says Mr Lance Fritz, UP's chairman, president and CEO. "Overall economic conditions, uncertainty in the energy markets, commodity prices, and the strength of the US dollar will continue to have a major impact on our business this year." However, Fritz says UP's strength and diversity should provide opportunities for new business development as both domestic and global markets evolve.

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