Katie Farmer, incoming CEO of BNSF Railway, informed CNBC on Friday that her business has clearly been impacted economically by the coronavirus pandemic, however there’s optimism on the horizon.
“We’ve got seen the economic system begin to decide up relative to rail loadings,” Farmer informed “Squawk Box.”
Whereas BNSF, owned by Warren Buffett-led Berkshire Hathaway, anticipates a rebound, Farmer famous this yr has been totally different from the previous.
“We mainly say that if we’re dealing with 200,000 items per week, that signifies we’re a busy railroad,” she defined. “In 2018, we dealt with over 200,000 items per week, 41 occasions that yr. Quick ahead to 2020 and with the influence of the pandemic, we’ve not hit 200,000 items on our railroads but.”
“Within the depth of the pandemic, our rail loadings have been truly down to about 150,000 items per week. Now, we’ve seen that proceed to come back again. And we anticipate this week we’ll deal with someplace within the neighborhood of mid 195,000-196,000 vary,” she added.
Farmer, 50, will assume the CEO role on Jan. 1. She’ll turn into the primary feminine CEO to go up a significant railroad. She’s been with BNSF for 28 years, beginning as an intern and occurring to carry a wide range of positions in advertising and marketing, finance, and most lately as govt vp of operations.
She is going to take the helm at a time when the business has seen a marked influence from the pandemic, with a lot of the longer term trying unsure. She mentioned the vast majority of sectors the railroad handles is a “combined bag.”
BNSF has 4 major enterprise sectors: In 2019, the corporate’s income was made up of 35% shopper merchandise, 27% industrial merchandise, 21% agricultural merchandise and 17% coal. Given the tendencies accelerated and decelerated by this pandemic, Farmer famous that the efficiency per sector has been lopsided, with shopper merchandise shipments, primarily geared in direction of retailers, rebounding higher than others.
“We positively have seen our shopper merchandise enterprise enhance quickly over the previous couple of weeks,” Farmer famous. “When getting ready for a vacation season, we see what we name peak volumes, usually in a September-October timeframe. We even have seen peak degree quantity relative to home intermodal occurring in an August-September timeframe, which we predict is a superb factor.”
Farmer additionally famous that BNSF’s agricultural merchandise enterprise was the least impacted by the pandemic. “Individuals have to proceed to eat,” she mentioned. “We count on to see a superb fourth quarter there as effectively.”
Nonetheless, different enterprise sectors have reacted otherwise because the pandemic impacted varied areas of the economic system, she added. “I do not assume we will see peak volumes when it pertains to the remainder of our enterprise.”
Industrial merchandise, for instance, which Farmer described as a “market basket of commercial commodities,” is seeing a way more gradual restoration in areas associated to vitality, resembling fracking supplies and petroleum. However inside that sector, “we’re seeing something associated to development or housing — for us, that is lumber shipments — that’s rebounding properly,” she mentioned.
The corporate’s coal enterprise remains to be feeling the results of the pandemic, largely due to the place the sector was previous to this yr. “We noticed because the nation went into lockdown, electrical energy demand was decrease,” she defined. “We had a comparatively gentle winter. Along with the structural decline we had seen prematurely of the pandemic, our coal enterprise has definitely been impacted.”
Farmer echoed the concept that in occasions of financial downturn, the rail business can nonetheless be seen as a bellwether for the state of the restoration. “We’re actually intently tied to the economic and shopper markets,” she mentioned. “Whenever you see occasions the place these markets are down, the railroad, our loadings, are a number one indicator for what you are going to see within the economic system.”
Correction: This story has been up to date to mirror that Katie Farmer mentioned: “We mainly say that if we’re dealing with 200,000 items per week, that signifies we’re a busy railroad … In 2018, we dealt with over 200,000 items per week, 41 occasions that yr.”
