"We've seen the financial system decide up," says the brand new CEO of Warren Buffett's Railroad
Katie Farmer, new CEO of BNSF Railway, told CNBC on Friday that their industry was clearly economically affected by the coronavirus pandemic, but optimism is looming.
"We have seen that the economy is picking up again in relation to the rail loads," Farmer told Squawk Box.
While the BNSF, owned by Warren Buffett-led Berkshire Hathaway, anticipates a rebound, Farmer noted that this year was different from the past.
"We basically say that if we handle 200,000 units a week it means that we are a busy railroad," she said. "In 2018 we handled more than 200,000 units per week 41 times a year. By 2020 and with the effects of the pandemic, we will not have reached 200,000 units on our railways."
"At the depth of the pandemic, our rail loads had actually dropped to around 150,000 units a week. Now we've seen these keep coming back. And we expect to finish somewhere near mid-195,000 to 196,000 this week. " Range, "she added.
The 50-year-old farmer will take over the role of CEO on January 1st. She will be the first female CEO to run a major railroad. She has been with the BNSF for 28 years, starting as an intern to various positions in marketing, finance and most recently as Executive Vice President of Operations.
She will take over at a time when the industry has seen a significant impact from the pandemic and much of the future looks uncertain. She said the majority of the sectors the railroad handles are "mixed bag".
The BNSF has four main business areas: In 2019, the company's sales consisted of 35% consumer goods, 27% industrial products, 21% agricultural products and 17% coal. With trends accelerated and decelerated by this pandemic, Farmer found that performance per sector was one-sided, with shipments of consumer products, which were primarily targeted at retailers, recovering better than others.
"We've definitely seen our consumer products business growing rapidly in the last few weeks," noted Farmer. "In preparing for a holiday season, we typically see what we call peak volume in a period from September to October. We actually saw peak volume relative to domestic intermodal in a time frame from August to September, which we believe is right a great thing."
The farmer also noted that the BNSF's agricultural produce business was the least affected by the pandemic. "People have to keep eating," she said. "We also expect a good fourth quarter there."
However, other businesses have reacted differently as the pandemic affected different sectors of the economy, she added. "I don't think we're going to see peak volumes when it comes to the rest of our business."
Industrial products, which farmers refer to as "industrial goods shopping carts," for example, recover much more slowly in energy-related areas such as fracking materials and petroleum. But within this sector "we see everything that has to do with construction or housing – for us that is wood deliveries – that is recovering well," she said.
The company's coal business is still feeling the effects of the pandemic, largely given the state of the sector ahead of this year. "We saw that the electricity demand was lower when the country was closed," she said. "We had a relatively mild winter. In addition to the structural decline we saw before the pandemic, our coal business was certainly affected."
Farmer reiterated the idea that the rail industry can still be seen as the leitmotif of the state of recovery in times of economic downturn. "We are very closely connected to the industrial and consumer markets," she said. "When you see times when these markets are down, the railroad, our cargoes, are a leading indicator of what you are about to see in the economy."
Correction: This story has been updated to reflect Katie Farmer said, "We are basically saying that if we are handling 200,000 units a week it means that we are a busy railroad … in 2018 we have over 200,000 units a week turned over 41 times this year. "