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Class I railroad Union Pacific saw second-quarter income and revenue fall amid a steep decline in freight that officials said was impacted by the COVID-19 pandemic, especially in April and May.
Net income fell 28% to $1.13 billion, or $1.67 share, compared with $1.57 billion, or $2.23, in the same period a year ago, the company said July 23.
Revenue fell 24% to $4.2 billion from $5.6 billion. The railroad’s operating ratio worsened to 61.0 from 59.6.
Operating ratio, or operating expenses as a percentage of revenue, is used to measure efficiency. The lower the ratio, the greater the company’s ability to generate profit.
“The second quarter proved very challenging as we faced a volume decline of 20% due to the economic impact of the COVID-19 pandemic. Demonstrating the transformation our company is experiencing through the implementation of Unified Plan 2020, we were able to largely mitigate the impact of that volume loss,” CEO Lance Fritz said.
Unified Plan 2020 is Union Pacific’s version of precision scheduled railroading. The railroad is one of several Class I railroads that has moved to become more efficient by incorporating the principle in its business model. Created by the late Hunter Harrison, PSR involves moving freight with fewer railcars and locomotives using a more simplified, direct line of transport across the network.
The railroad ended the quarter with 22% fewer employees, shedding 8,598 positions for a headcount of about 30,100.
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The company said reducing its workforce saved $240 million in the quarter.
Revenue from all sectors for which the railroad carries freight declined in the quarter:
- Automotive — 66% to $189 million from $554 million last year.
- Metals and minerals — 34% to $368 million from $557 million.
- Coal and renewable energy products — 29% to $369 million from $523 million.
- Energy — 28% to $431 million from $595 million.
- Food and refrigerated products — 25% to $205 million from $272 million.
- Intermodal — 16% to $897 million from $1.06 billion.
- Forest products — 12% to $266 million from $303 million.
- Industrial products — 10% to $435 million from $482 million.
- Grain — 9% to $644 million from $711 million.
- Fertilizer products — 2% to $168 million from $172 million.
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