Midwest Association of Rail Shippers

Transcription

1 January 13, 2016 Midwest Association of Rail Shippers Lance Fritz Chairman and CEO Union Pacific 1

2 2015 Economic Results Consumer-driven growth 1 Consumer Spending 2 Light Vehicle Sales 3.6% 3.0% 3.0% 3.1% 2.7% % Q15 2Q15 3Q15 4Q Q15 2Q15 3Q15 4Q Housing Starts 4 Unemployment % % 5.4% 5.2% 5.0% 4.9% Consumers cautious, but growth is gaining momentum Most noticeable in Automotive sales Housing growth slow, but expected to strengthen Economy approaching full employment Q15 2Q15 3Q15 4Q Q15 2Q15 3Q15 4Q Source: IHS Global Insight (December 2015) 2

3 2015 Economic Results Drilling and exports disappointing Industrial Production Oil & Gas Extraction & Drilling 12.2% 6.5% 1 2 Overall economy (GDP) improved at same rate as 2014 Exports soft on strong dollar and international economies (EU, China) -1.2% -7.4% -7.0% 3 Industrial Production did not rebound -19.9% Q15 2Q15 3Q15 4Q Continued drilling headwind Source: IHS Global Insight (December 2015) 3

4 Negative Shift from 2014 to 2015 Oil Price and Rig Count History October 2014 December 2015 WTI ($/Barrel) $100 $80 $60 $40 $20 $0 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 2,500 2,000 1,500 1, U.S. Rig Count Oil prices and drilling rig counts DOWN Impacts crude, frac sand, steel Rig Counts WTI Sources: Energy Information Agency (EIA); Baker Hughes 4

5 Lower Demand for Coal Henry Hub Natural Gas Spot Price October 2014 November 2015 $ per Million BTU $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 Lower NATURAL GAS Milder TEMPERATURES High INVENTORIES Source: EIA, National Oceanic & Atmospheric Administration 5

6 Long-term Economic Drivers U.S. Population (in millions) 12% Increase Population GROWTH Continued market RECOVERY Highway CONVERSIONS Global TRADE Source: Census Bureau 2015 National Population 6

7 Trans-Pacific Partnership Exports to TPP countries in 2014 $4.8 $1.2 $4.7 Source: Dept. of Commerce $10.6 $9.0 $8.4 $13.4 $38.3 $39.8 $20.2 $30.6 Illinois Top Export Sectors MACHINERY INFORMATION & COMMUNICATION TECHNOLOGIES AUTOMOTIVE PRODUCTS CHEMICALS HEALTH PRODUCTS 7

8 Global Manufacturing Cost-Competitiveness 2014, U.S. = 100 Index LARGEST TO SMALLEST EXPORTERS China Germany United States Japan South Korea France Italy Netherlands Belgium United Kingdom Canada Russia Mexico Taiwan India Switzerland Australia Spain Brazil Thailand Indonesia Poland Sweden Austria Czech Republic Source: BCG Global Manufacturing Cost-Competitiveness Index 8

9 OUR MISSION The men and women of Union Pacific are dedicated to serve. OUR VALUES Passion for performance High ethical standards Work as a team 9

10 Creating Value The UP Way C U S T O M E R S E M P L O Y E E S S H A R E H O L D E R S C O M M U N I T I E S World-class safety Excellent customer experience Resource productivity Maximized franchise Innovation Engaged team 10

11 World-class Safety GOOD 52% EMPLOYEE 18% CROSSINGS 25% RAIL EQUIPMENT ~ ~ ~ Reportable Injuries Per 200,000 Employee Hours Grade Crossing Accidents Per Million Train Miles Reportable Derailments Per Million Train Miles 11

12 Excellent Customer Experience 26.0 GOOD SPEED matters /15 8/15 9/15 10/15 11/15 12/15 AAR System Velocity (mph) 12

13 Resource Productivity 9.2 GOOD Attacking VARIABILITY at every turn July 15 Aug. 15 Sept. 15 Recrew Rate 13

14 Maximized Franchise 44% 26% 15% 10% 5% $1,850 M Infrastructure Replacement $1,100 M Locomotives & Equipment $650 M Capacity & Commercial Facilities $400 M Positive Train Control (PTC) $200 M Technology & Other 2015 Capital Plan: ~$4.2 Billion Includes cash capital, leases and other non-cash capital. 14

15 Innovation 15

16 Engaged Team 16

17 R A I L I N D U S T RY RISKS RAILROAD MERGERS STB ACTIVITY 17

18 January 13, 2016 Midwest Association of Rail Shippers Lance Fritz Chairman and CEO Union Pacific 18