Railroad Exec: 'We still see a lot of headwinds'

The 2009 acquisition of Burlington Northern Santa Fe by Berkshire Hathaway was framed by billionaire investor Warren Buffett as a bet on America. “It’s an all-in wager on the economic future of the United States,” Buffett said of the $44 billion acquisition that year.

And BNSF's Executive Chairman Matthew Rose told Yahoo Finance that he is still optimistic on the long-term growth of the company despite near-term headwinds.

"We still have a lot of headwinds, specifically as the commodity supercycle is really coming to a close. the strong dollar is a headwind. Certainly the coal business is a headwind. The rest of the economy on the consumer side actually feels pretty good," Rose said. "So we'll rely on our old standards. A lot of growth in domestic intermodal and agriculture should be pretty good for us. So that's the great part about us having a balanced portfolio."

Rose reiterated Buffett's commentary in his 2015 annual letter that coal remains a headwind, and highlighted that right now the low natural gas prices present the biggest threat.

"I've seen low natural gas prices in my period of stewardship of the company go from $13 to now $1.75, and that is really what is hurting coal today. What will hurt coal tomorrow is the Clean Power Act that is matriculating through the EPA and the court system."

BNSF is the largest of Berkshire Hathaway's  “Powerhouse Five” — the company's non-insurance businesses — which also includes Berkshire Hathaway Energy, Marmon, Lubrizol and IMC. The pending Precision Castparts acquisition will make this "Powerhouse Six." BNSF moves about 17% of America’s intercity freight, making it number one among the seven large American railroads.

The railroad is one of Berkshire's more capital-intensive businesses, which have become a larger part of the conglomerate's portfolio. While the life-blood of the company remains insurance, Buffett said his shift away from capital-light businesses like See's Candy to more capital-intensive businesses like BNSF and Precision Castparts was a problem "of prosperity." Small companies that don’t require capital no longer have the scale to provide sufficient return to a firm as large as Berkshire.

"Capital is the lifeblood of any railroad, really any network business like this," Rose said. "We had the all-time safest year in our railroad. A lot of that is due to the very strong infrastructure and capital we've been able to put in."

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