September 6, 2017 / 10:21 PM / 2 years ago

Union Pacific CEO sees pent-up demand in Harvey recovery

HOUSTON (Reuters) - No. 1 U.S. railroad Union Pacific Corp (UNP.N) has repaired most of the damage caused to its network by catastrophic flooding brought by Hurricane Harvey to Houston late last month and its network should be fully operational around the end of September, the company’s top executive said on Wednesday.

Union Pacific chief executive officer Lance Fritz speaks after touring the damage done to the U.S. railroadÕs network and ongoing repair work to rail lines and bridges in Houston, Texas, U.S. on September 6, 2017. REUTERS/Nick Carey

In an interview with Reuters after surveying damage to the Omaha, Nebraska-based railroad’s operations around Houston, Chief Executive Officer Lance Fritz said that while the storm will have a slight impact on third-quarter earnings, pent-up demand from manufacturers in the area and recovery efforts should boost the railroad in the fourth quarter.

Fritz said that “immediately following the hurricane, we were cut off from Houston in every direction. Virtually every (rail) subdivision was washed out or under water.”

Around a week and a half after the storm, Union Pacific’s routes to the north, west and south of Houston are “largely open” with the exception of three bridges that need to be repaired. The last of those will be fixed around the end of September, Fritz said.

He added that the railroad is also working to help dozens of its employees in the Houston area who have been affected, through its own charity organization and connecting them with state and federal authorities who are providing aid.

Fritz said while the railroad has managed to find a way to re-route freight around areas that are still affected “there are still dozens and dozens of our customers that are closed, some of which have an estimated time for reopening and some of which don’t.”

Harvey should shave around 5 cents per share off Union Pacific’s third-quarter earnings, partly due to lost business plus the need to pay for storm damage, the CEO said. Analysts expect Union Pacific to post third-quarter earnings of $1.53 per share.

“We have an umbrella insurance policy for catastrophic events like this, but the first few tens of millions (of dollars) are covered by us,” he said.

But during the fourth “I think there is going to be a fair amount of pent-up demand because a lot of manufacturers are going to spool back up or others have been producing but haven’t had an opportunity to ship,” Fritz added. “Then there will be rebuilding efforts, which will probably generate some incremental business as well.”

In the meantime, Union Pacific is still monitoring Hurricane Irma closely to see where it will make landfall, he said.

Reporting by Nick Carey; Editing by James Dalgleish

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