(Courtesy of the Jacksonville Business Journal) -Jacksonville-based CSX Corp. closed one of the most challenging years in the company’s history with Thursday’s release of its fourth quarter earnings — but CEO Jim Foote said the company now has more clarity looking into the future.
The railroad closed 2020 with net earnings of $760 million for the quarter and $3.62 billion for the fiscal year. The quarterly earnings were down 11% percent over 2019 and the year-end revenues were 17%.
Foote noted CSX was no different than a lot of companies in America that were impacted by the novel coronavirus that was first confirmed in an American on Jan. 21, 2020.
CSX has dealt with recessions and weather-related disasters. What made the Covid-19 pandemic different was it not only slowed the economy, but had other unprecedented ramifications.
“What we never had to face before is ‘what do you do when something impacts your employees?’ Your railroad is fine…Everything is fine, but your employees are getting sick,” Foote told the Business Journal. “That was a whole new learning curve for us. Just like we always do, we adapted very, very quickly. We had more PPP, gloves, masks, you name it, for our employees earlier than anyone else did. We were building redundant offices. We were buying hand sanitizer by the truckload. We had nurses in the lobby. You have to be prepared for the black swan event. That’s the lesson learned: Be prepared for anything, as crazy as it might sound.
As the world evolves, we need to be more aware of things that could go wrong and plan for them.”
The Covid-19 pandemic upended the American economy, but it also changed consumer habits. CSX volumes decreased 5% to 5.89 million carloads for the year. The one area of business it witnessed growth for the year was in intermodal transportation, which increased 2% to 2.72 million carloads. Foote, in an interview with the Business Journal, said the intermodal growth is due to the foundation the company laid prior to 2020.
“We have seen that growth beginning over the last couple years,” Foote said. “In 2020, while there was a lot of disruption and a lot of chaos, there clearly were shifts in people’s buying and consuming habits. More and more of the e-commerce players and more of the shipping activity went to the intermodal players. We positioned ourselves to take advantage of a growth opportunity. And when the growth opportunity came along, we were there for our customers.”
CSX had 757,000 carloads of intermodal volume in the fourth quarter, an 11% increase over 2019. The company’s metals and equipment business had a bigger percentage change, at 16% over fourth quarter 2019; however, metals earned only $175 million in revenue in the fourth quarter compared to $476 million for intermodal traffic.
During a Thursday afternoon call with analysts and investors Foote noted that a rapid increase in volume in the fourth quarter — compared to the second quarter and first weeks of the third — as well as Covid-related employee absences impacted the railroad’s network.
Many of CSX’s 19,200 employees are deemed essential workers, and there have been flare-ups of employees getting sick in New York, in Florida, in Chicago and other regions that were hot spots for the coronavirus.
During Thursday’s call with analysts, CSX CFO Kevin Boone noted the company’s health and welfare costs increased in 2020 in part because of the pandemic.
In the 10 months since America came to a standstill, Foote said his company has learned how to operate amid the virus.
Thursday, announced it plans to hire enough employees to overcome the 8% attrition rate in the first half of 2021, anticipating an overall return to growth for the company and the economy at large.
“We have developed more clarity, clearly, than what we had in March or April. In March or April, we didn’t know what we were dealing with,” Foote said. “We were shutting down the country. … Never in my life did I think I would see the day where every auto assembly plant in the United States, if not the world, was shutdown.”
Thursday, CSX announced that its automotive volumes for the year dropped 25% to 344,000 carloads, dropping revenue 26% to $920 million. Those numbers started rebounding in the fourth quarter, with the decline — a 6% drop in volume and 8% in revenue — not as sharp for the fourth quarter as the rest of the year.
Foote said the second half of the year stabilized to the point where CSX can project well into 2021.
“In those days, asking me what I thought the third quarter or fourth quarter was going to be like I would have said ‘I don’t have a clue.’ Now, we understand where we are. We understand, hopefully, that we have an answer to this problem, from a global perspective, through vaccinations,” the CEO said. “We are in a different space right now. Even though things are not normal, businesses and people have adapted and are in a much better space right now to be able to plan and operate our companies appropriately.”
CSX photo courtesy of Brian Suh