A View from the Tracks 2016 NCTA Spring Meeting Donna Cerwonka, CSX AVP Utility Coal

Transcription

1 1 A View from the Tracks 2016 NCTA Spring Meeting Donna Cerwonka, CSX AVP Utility Coal

2 Forward-Looking Statements This information and other statements by the company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, margins, volumes, rates, cost-savings, expenses, taxes, liquidity, capital expenditures, dividends, share repurchases or other financial items, statements of management s plans, strategies and objectives for future operations, and management s expectations as to future performance and operations and the time by which objectives will be achieved, statements concerning proposed new services, and statements regarding future economic, industry or market conditions or performance. Forward-looking statements are typically identified by words or phrases such as will, should, believe, expect, anticipate, project, estimate, preliminary and similar expressions. Forwardlooking statements speak only as of the date they are made, and the company undertakes no obligation to update or revise any forward-looking statement. If the company updates any forward-looking statement, no inference should be drawn that the company will make additional updates with respect to that statement or any other forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, and actual performance or results could differ materially from that anticipated by any forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by any forward-looking statements include, among others; (i) the company s success in implementing its financial and operational initiatives; (ii) changes in domestic or international economic, political or business conditions, including those affecting the transportation industry (such as the impact of industry competition, conditions, performance and consolidation); (iii) legislative or regulatory changes; (iv) the inherent business risks associated with safety and security; (v) the outcome of claims and litigation involving or affecting the company; (vi) natural events such as severe weather conditions or pandemic health crises; and (vii) the inherent uncertainty associated with projecting economic and business conditions. Other important assumptions and factors that could cause actual results to differ materially from those in the forwardlooking statements are specified in the company s SEC reports, accessible on the SEC s website at and the company s website at 2

3 Presentation overview... How times change Comparison with 2014 Volatility impact on rail service CSX: Fortune 250 company with a well diversified portfolio Leading North American transportation company with strong eastern network Company s business portfolio is well diversified Coal markets: will continue to transition in 2016 Low natural gas, low commodity prices, strong dollar expected to continue Company taking steps to address variable and structural costs of coal network Strategic initiatives position CSX for future success Network transformation, technology investment Casky Yard Investment 3

4 When I last spoke at NCTA.(in 2014) Polar Vortex became the catch phrase Natural gas prices were? $4.80 Utility coal stockpiles were low Export demand was robust Railroads were challenged to meet demand for coal How times have changed! 4

5 5 AAR YTD traffic data tells the story

6 2014 was challenging, but CSX service performance has slowly recovered Train Performance System Performance On-time Originations Train Velocity (mph) 72% 89% 89% 56% 67% 80% Q On-time Arrivals Q Terminal Dwell (hours) 62% 80% 82% 45% 51% 65% Q Q

7 CSX Network well positioned for eastern U.S. growth Chicago St Louis Memphis Gulf Coast Midwest Piedmont Atlantic Mobile New Orleans Tampa Montreal Charleston Savannah Jacksonville Florida Miami Northeast Boston New York Philadelphia Baltimore Norfolk Wilmington CSX-served Ports Population Density GT 6M 3-6M 1-3M LT 1M Connects all five eastern mega-regions Serves nearly two-thirds of the nation s population Access to over 60% of U.S. industrial production Superior market reach into Northeast and Florida Network reach is foundation for business diversity 7

8 Business diversified across broad market base Volume by Market: 6.8 Million Units Domestic coal Export Coal Domestic Intermodal International Intermodal Chemicals Automotive Metals Agriculture Phosphates Food & Consumer Forest Products Minerals Waste & Equipment 17% Consumer Goods: 42% Energy Sector: 16% 4% 25% 12% 2% 5% 9% Construction Sector: 12% 5% 1% 4% 6% 3% 7% Industrial Sector: 19% Agricultural Sector: 11% 8

9 ..supporting growth despite significant transition in our coal business 4% Volume Units in Thousands Merchandise Domestic Coal 5,793 23% 33% Intermodal Export Coal 4% 6,761 12% 42% Intermodal growth Driven by highway conversions and new customers and services Merchandise up slightly Industrial and housing economies have suppressed recovery Domestic coal decline Driven by regulation and natural gas substitution 40% 42% Export coal more variable Driven by commodity prices for metallurgical and thermal coal 9

10 In the short term, low natural gas prices and high inventories will limit utility demand $10 $8 $6 $4 $2 Henry Hub Natural Gas Prices Dollars per Million BTU $0 Jan-14 Jan-15 Jan North February Stockpiles CSXT Region Days of Burn avg South Mild winter Heating degree days down 20+% YOY in CSX territory Inventories well above normal levels NG price outlook depressed Coal burn dependent on weather and electricity demand Source: Global Insight Economic Forecast February 2016, PIRA Inventory data 10

11 US coal exports also remain challenged CSX moved 30 million tons in 2015 Seaborne pricing provides less support in 2016 CSX has ample resources and capacity for growth with direct service to 5 terminals We fully support US export coal for the long term $95 $85 $75 $65 $55 $45 API2 Spot Prices ($/ton) $35 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 $140 $120 $100 $80 Q Metallurgical Coal Benchmark $/ton Q Q Q Q Q Q Q Q Q

12 Longer term, CAPP declines expected to remain CSX CAPP Originated Coal Tons (Million Tons) US Coal Supply Outlook* (Million Tons) Tons (Ms) Active Loadouts CAPP NAPP IL Basin fewer active loadouts *Data from EVA Long Term Outlook for Coal and Competing Fuels Fall /2015

13 So structural costs must be addressed given the magnitude of change that has already occurred CSX Engineering Division Track Miles* CO Miles AP Miles Huntington Capital Spend (Appalachian and C&O Engineering Divisions) *Annual snapshot of boundary reports, class 1-5 track

14 CSX has taken significant actions to reduce costs 31.6 CSX Headcount Thousands of Employees ,400 Reduction 27.9 Right-sizing resources to lower demand environment Over 4,400 T&E furloughs Nearly 400 locomotives stored Significant actions to drive productivity savings Coal network rationalization Train length initiatives Streamlining headcount across Operations and G&A Q Q Q Q Q Q Q Targeting productivity of $250M in

15 CSX continuing to streamline cost structure Appalachian Coal Fields Eastern Kentucky West Virginia Significant actions taken in response to coal environment Erwin & Corbin facility closures Huntington Division consolidation Streamline coal shipments from Ashtabula to Toledo docks Evaluating additional opportunities Evaluating additional opportunities Branch lines, through routes and support facilities Corbin ~180 Employees Impacted Erwin ~300 Employees Impacted Continued focus on rightsizing G&A functions 15

16 Network transformation drives long term growth CSX Rail Network Key corridors drive growth in merchandise and intermodal Focus growth on I-95, I-90 and Southeastern Corridors Casky Yard Utility Coal shift to IL Basin required yard investment 2006 Today 16% 8% 14% 62% 23% 20% 30% 27% CAPP ILB NAPP Western 16

17 17 Casky Yard opened last summer and is the first new build CSX yard in nearly 40 years

18 18 Casky Yard enables longer, more efficient train operations in the IL Basin

19 Positive Train Control (PTC) Update On October 29 th, PTC deadline extended CSX specifics to date: $1.4 Billion invested in the PTC system More than 1,000 employees working on the system every day Equipped 70% of new signaling equipment, and PTC installation complete on almost 6000 of almost track miles required. At least partially equipped 2,956 locomotives Installed over 2,440 wayside interface units & over 500 radio basestations CSXT expects to have PTC-required technology deployed by end of 2018 PTC fully operational in 2020, following extensive testing & training 19

20 20 Thank you