CSX Corp.’s 2018 job cuts exceeded management’s expectations, and company officials said last week they see plenty of room to cut further.
As the Jacksonville-based railroad company reported year-end financial results, its official employment fell by 1,531 in 2018 to 22,475 at the end of the year, but that’s only part of the story, according to our Jacksonville Daily Record news partner.
“With respect to our total workforce, which includes management and union employees as well as contractors and consultants, we exceeded our 2018 goal of 2,000 reductions,” Chief Financial Officer Frank Lonegro said during CSX’s conference call with analysts.
“Looking forward to 2019, improved service and operating fluidity together with opportunistic streamlining in our support functions will drive significant year-over-year labor productivity,” he said.
CSX officials did say they expect attrition to take care of its continued job reduction, as opposed to layoffs. But they do see areas for cost-cutting.
“Across the organization, operations, sales and marketing and all other functions, there are plenty of opportunities for improvement to keep us busy for years to come,” CEO James Foote said in the conference call.
“Millions of unnecessary events in our business processes can be eliminated which will improve service to our customers and allow them to be more efficient,” he said.
“We continue to make progress towards the efficiency goals set a little less than a year ago.”
A year ago, CSX officials said they were targeting a total employment count of 21,000 in its operations that cover most of the eastern U.S. by the end of 2020.
The company did not give any targets for 2019 but Lonegro said he expects this year’s reduction to be in line with CSX’s normal annual attrition rate of 6 to 7 percent.
“Better service obviously requires less folks to run the railroad. Less assets come from better service and less people to maintain those assets and then certainly on the G&A side, as we have attrition opportunities, we’ll take those,” he said.
The drop in employment and other cost-cutting moves allowed CSX to significantly improve its operating ratio last year, a key metric for the company.
CSX was hoping to get the ratio, which is operating expenses divided by revenue, down to 60 percent by 2020. However, it got there two years early, with the ratio falling below 60 percent in the second quarter of 2018 and ending at 60.3 percent for the full year, down from 67.4 percent in 2017.
Foote said he expects more improvements in the operating ratio this year but he said the 60.3 percent ratio for 2018 was helped by real estate sales, which boosted revenue in 2018. So analysts shouldn’t expect the ratio to drop even lower this year.
“I believe a good 2018 OR baseline to measure our improvement in 2019 is closer to 61, which adjusts for some of the better-than-expected benefits from real estate that occurred in 2018,” he said.
CSX grew revenue by 7 percent to $12.25 billion in 2018, and Foote projected revenue to grow by a “low single digits” percentage this year.
Foote said he expects “muted” growth in its intermodal business and “some moderation” in revenue growth from export coal shipments. However, he has a mostly positive outlook.
“Over the past few days, I have spoken to a number of large customers across different industries. General customer feedback has been positive and it’s consistent with the demand levels we are seeing today,” he said.
“While it’s hard to ignore the volatility in the equity markets, I cannot call out any trend in our business today that would point to a significant slowdown in our business,” he said.
“You really have to love being in the rail industry right now,” Foote said.
