OMAHA, Neb. – BNSF Railway made record profits in 2021 amid strong traffic and revenue growth.
For the year, BNSF’s operating profit jumped 13.7%, to $8.8 billion, while revenue rose 11.6%, to $22.5 billion, reported the railway’s parent company, Berkshire Hathaway, on Saturday. The railway’s operating ratio improved by 0.7 points to a record 60.9%.
“BNSF, our third giant, continues to be the No. 1 artery of American commerce, making it an indispensable asset to America as well as to Berkshire. If the many essential commodities transported by BNSF were transported by truck instead, America’s carbon emissions would skyrocket,” Berkshire Chairman Warren Buffett wrote in his annual letter to shareholders.
“Your railroad made a record $6 billion profit in 2021,” he wrote. “Here, it should be noted, we’re talking about the kind of old-fashioned compensation we favor: a figure calculated after interest, taxes, depreciation, amortization and all forms of compensation. (Our definition suggests a warning: misleading “adjustments” in earnings – to use a polite description – have become both more frequent and more fanciful as stocks have risen. Speaking less politely, I would say that bull markets breed bloated bulls… .)
“BNSF trains traveled 143 million miles last year and carried 535 million tonnes of freight,” Buffett added. “These two accomplishments far exceed those of any other US carrier. You can be proud of your railroad.
BNSF volume increased 6.9% overall for the year, driven by an 8.9% increase in coal shipments. The volume of consumer products increased by 7.7%, while industrial products increased by 5.4% and agricultural shipments increased by 2.9%.
Consumer Products operating revenue increased 13.7%, reflecting higher volumes and higher average revenue per car/unit. “The increase in volume is primarily due to intermodal growth in international and domestic shipments, driven by increased retail sales, restocking of inventory by retailers and increased trade activity. electronics,” Berkshire reported.
Sales of industrial products increased by 5%. “The increase in volume was primarily due to the improving U.S. industrial economy, leading to higher volumes in the construction and building sectors, partially offset by lower oil volumes due to weak market conditions. unfavorable in the energy sector,” Berkshire wrote.
Farm product revenue increased 5.8% due to higher domestic grain shipments and growth in ethanol and related products, as well as higher revenue per railcar.
Coal revenues increased 21.5% on higher volume and average revenue per unit. “The increase in volume in 2021 is attributable to increased power generation, higher natural gas prices and improved export demand,” the company said.
Berkshire said 38% of BNSF’s freight revenue came from consumer products, 24% from industrial products, 23% from agricultural products and 15% from coal.
In his letter to shareholders, Buffett recalled how Berkshire ended up making an offer to buy BNSF in 2009. Berkshire’s board of directors was scheduled to meet in Fort Worth – home to BNSF’s headquarters – on October 22. . So Buffett met earlier in the day with Matt Rose, who was BNSF’s chief executive at the time.
“When I made the appointment, I had no idea that our meeting would coincide with BNSF’s third quarter earnings report, which was released late on the 22nd. “The Great Recession was in full swing in the third quarter, and BNSF’s earnings reflected that collapse. The economic outlook was also bleak, and Wall Street did not feel supportive of railroads — or many other things,” said writes Buffett.
“The next day I met again with Matt and suggested that Berkshire would give the railroad a better long-term home than it could expect as a public company. I also told him the maximum price Berkshire would pay,” Buffett wrote.
“Matt relayed the offer to his directors and advisers. Eleven busy days later, Berkshire and BNSF announced a firm deal,” Buffett wrote. “And here I will risk a rare prediction: BNSF will be a key asset for Berkshire and our country a century from now.”