Shortline operator Genesee and Wyoming (NYSE: GWR) reported an 8.7 percent decline in operating income in the second quarter of 2019 amid year-over-year declines in freight revenue from its Australian and European operations.
Operating income for the second quarter of 2019 totaled $94.2 million, down $8.9 million from $103.1 million in the second quarter of 2018, the company said. Of that, company-wide operating revenues fell 4 percent to $571.5 million, while operating expenses dropped 3 percent to $477.3 million.
But despite the decline in operating income, GWR managed to generate a 16 percent gain in net income in the second quarter, with net profit rising to $51.4 million compared with $44.2 million in the second quarter of 2018. Diluted earnings per common share were $0.90 in the second quarter of 2019, compared with $0.73 for the same period in 2018.
The rail company's operating ratio, which is operating expenses divided by operating revenues, was 83.5 percent in the second quarter of 2019, compared with 82.7 percent for the same period in 2018.
Operating revenues for GWR's North American segment rose 0.7 percent, or $2.3 million, to $341.8 million in the second quarter year-over-year, even though North American carloads fell 5.5 percent to 406,95 carloads over the same period. Excluding traffic from two railroad leases in Canada that expired at the end of 2018, carloads from existing operations fell 3.5 percent amid lower volumes for coal and coke traffic, metals traffic, pulp and paper traffic and lumber and forest products traffic. But agricultural volumes and chemicals and plastics traffic rose year-over-year in the second quarter.
Operating income from GWR's North American operations was also higher, rising to $84.3 million in the second quarter of 2019, compared with $80.3 million for the same period in 2018. The second quarter operating ratio for GWR's North American operations was 75.4 percent, compared with 76.4 percent in the second quarter of 2018.
Genesee and Wyoming owns or leases 120 freight railroads worldwide, including 114 short line and regional railroads in 41 U.S. states and four Canadian provinces.
The company said the merger with Brookfield Infrastructure and GIC that was announced on July 1 is still ongoing and is expected to close by the end of 2019 or in early 2020 pending regulatory approval. The parties had announced that Brookfield Infrastructure and GIC would acquire GWR at a price of $112/share, which was valued at approximately $8.4 billion. If the merger succeeds, GWR will become a privately held company.
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