BNSF’s Q3 net income falls 6% despite revenue up 16%

Although total revenue increased 16% for the quarter, a 30% increase in expenses impacted BNSF’s third-quarter 2022 net income.

Net income was $1.44 billion in the third quarter of 2022, down 6% from $1.54 billion in the third quarter of 2021, according to BNSF’s filing with the U.S. Securities and Exchange Commission. The US western rail company BNSF is privately owned by Berkshire Hathaway (NYSE: BRK.B).

Third quarter revenue was $6.69 billion compared to $5.79 billion for the same period last year.

However, operating expenses in the third quarter increased to nearly $4.59 billion, compared to $3.53 billion a year ago, as higher average fuel prices drove an 80% increase in fuel costs. Fuel costs were $1.27 billion.

A 26% increase in compensation and benefit expenses to nearly $1.5 billion also contributed to the quarter’s higher expenses. These costs increased due to wage inflation and the impact of provisional or ratified collective agreements.

As a result, BNSF’s operating rate rose to 67.7% in the third quarter, compared to 59.5% a year earlier. Berkshire Hathaway defines OR as the ratio of railroad operating expenses to railroad operating revenue.

Although BNSF handled 5% fewer volumes in the third quarter, average freight revenue per unit increased 23% to $2,623, which helped generate higher revenue overall.

All of BNSF’s businesses reported revenue growth year-on-year. Consumer products sales rose 15% to $2.42 billion, although volumes fell 7% due to lower international intermodal shipments due to supply chain challenges, BNSF said.

Agricultural products sales rose 26% to nearly $1.34 billion, with volumes rising 4% on higher domestic grain shipments and shipments of renewable diesel and oil commodities.

Industrial products sales rose 7% to $1.47 billion, although volumes fell 15% as demand slowed for crude oil rail shipments and lower shipments of construction products.

Coal revenue rose 27% to $1.1 billion, according to BNSF, even though coal volumes fell 1% due to network problems.

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