BNSF's Fourth-quarter 2020 Net Profit Up 5%

A 6% decline in operating expenses contributed to a 5% increase in overall fourth-quarter net profit for BNSF (NYSE: BRK-B).

BNSF is a subsidiary of Berkshire Hathaway, which acquired the western U.S. railroad in February 2010. 

Net income was $1.5 billion in the fourth quarter of 2020, a 5% increase from $1.4 billion in the fourth quarter of 2019.

Total revenue slipped 3% to nearly $5.7 billion in the fourth quarter, while operating expenses fell 6% to $3.5 billion.

(BNSF)

Among BNSF's business units, revenue gains for consumer and agricultural products were enough to offset losses for coal and industrial products.

Consumer products volumes rose 13% in the fourth quarter, while revenue rose 3% to $2 billion amid heightened e-commerce activity. Increased retail sales and inventory replenishments by retailers contributed to fourth-quarter volume increases, BNSF said. 

Meanwhile, agricultural products volumes grew 15% and revenue jumped 20% to $1.4 billion on "strong" grain and meal exports. 

But industrial products volumes fell 12%, with revenue slipping 14% to $1.2 billion on reduced production in the energy and demand in the energy sector, which in turn drove lower sand petroleum products volume, BNSF said. Reduced steel demand also drove lower taconite volume, BNSF said.

And the systemic decline of coal continued to put BNSF's coal volumes and revenue under pressure. Coal volumes tumbled 21% and revenue fell 28% to $697 million amid lower natural gas prices, lower electricity demand driven by the COVID-19 pandemic, utility coal plant retirements and mild temperatures, BNSF said.

(BNSF)

Meanwhile, a 38% drop in fuel expenses contributed a 6% decline in fourth-quarter operating expenses.

(BNSF)

Looking at BNSF's annual figures, operating revenues slipped 11.3% between 2019 and 2020 amid a 7.2% decrease in volume and a 4.5% decline in average revenue per car/unit, Berkshire Hathaway said Saturday.  

Lower fuel surcharge revenue, driven in turn by lower fuel prices and business mix changes, led to the drop in average revenue per car/unit, while the COVID-19 pandemic "severely impacted" rail volumes in the first half of 2020. Volumes in the latter half of the year improved sequentially and recovered to pre-pandemic levels by the end of the year, Berkshire Hathway said.  

Approximately 37% of freight revenue was related to consumer products, while 26% was from industrial products, 24% from agricultural products and 13% from coal.

"Last year, Carl Ice, its CEO, and his number two, Katie Farmer, did an extraordinary job in controlling expenses while navigating a significant downturn in business," Berkshire Hathaway said in its 2020 annual report to investors. "Despite a 7% decline in the volume of goods carried, the two actually increased BNSF's profit margin by 2.9 percentage points. Carl, as long planned, retired at year-end and Katie took over as CEO. Your railroad is in good hands."

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