2005 Analyst Meeting - Union Pacific Railroad...2005 Analyst Meeting 2005 Analyst Meeting Marketing...
Transcript of 2005 Analyst Meeting - Union Pacific Railroad...2005 Analyst Meeting 2005 Analyst Meeting Marketing...
2005AnalystMeeting
2005AnalystMeeting
Jack KoraleskiEVP Marketing & SalesUnion Pacific Railroad
Jack KoraleskiEVP Marketing & SalesUnion Pacific Railroad
New Business Environment
• Value of Our Capacity HasIncreased
• Every Carload Must BeRe-Investable
• Choose Which BusinessWe Can Handle
• All Business Must MeetRequirements of theChanging Environment
Demand > Supply
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S03
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M M J S N J05
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7-D
ay
Ca
rlo
ad
ing
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Sustained Demand
Secular Drivers
• TranspacificTrade
• PopulationGrowth
• HighwayInfrastructure
• Crude Oil
* As of May 20th
Last 21 Month Volumes
Previous Record Volumes – Any Year
Flood Embargo PRBIncidents
Growth In Key Corridors1998 - 2004
Challenge/Opportunity
Match Available Demand With UP’sValuable Capacity to Create a Book of
Business That Optimizes Yield andVelocity.
Commercial Strategy GoingForward…
• Drive HigherReturns
• Drive VelocityImprovement
• Maintain Focus onCustomerRelationship
Drive Higher ReturnsCore Price Improvement
1.0% 1.0% 1.0%
3.0%
4.3%
1Q 2Q 3Q 4Q 1Q
2004 2005
Drive Velocity ImprovementPhoenix
Economic Drivers
• Population Up 29% Since 1998
– 15% growth projected 2005-10
• Housing Starts Up 17% In 2004
– Projected to grow 20% by 2010
UP Volumes
1998 1999 2000 2001 2002 2003 2004
Up 44%Up 44%
Drive Velocity ImprovementPhoenix Inventory Control
PhoenixTempe
Mesa
McQueen
Gilbert
Magma
Dock
West Chandler
Chandler
Pipeola
Tolleson Campo
Buckeye
Arlington
• Improve ServiceReliability
• Daily Review of PhoenixYard Inventories
• Work Jointly withCustomers to ReduceInventory or ControlInbound Flow
• Avoid Having InventoryOverwhelm Resources
Drive Velocity ImprovementPhoenix Inventory Control
• Improve ServiceReliability
• Daily Review of PhoenixYard Inventories
• Work Jointly withCustomers to ReduceInventory or ControlInbound Flow
• Avoid Having InventoryOverwhelm Resources
2005
Two-Day Old Cars
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2/14 3/16 4/15 5/15
Profitability
1 2 3 4 5
Focus on Customer RelationshipSatisfied Customers Drive Results
Revenue Growth
Dissatisfied/
Neutral
Somewhat
Satisfied
Very Satisfied
Gro
wth
Rate
Overall Satisfaction Rating
Pro
fita
bilit
y In
dex
Focus on Customer RelationshipCustomer Satisfaction Survey
• Monthly TargetsEstablished
• Causes of VarianceIdentified
• Corrective Action PlanImplemented
• Follow-up WithIndividual Customer onAll DissatisfiedResponses
OverallSatisfaction
Velocity(MPH)
J02 J03 J04 J05
Our Message to Customers
• Unified Plan Will Drive Velocity Improvement
• Lean Management and Other Initiatives WillImprove Productivity
• Capital Investment Will Provide AdditionalCapacity
• Velocity, Productivity and Capacity Will AllowUs to Handle Future Growth
• Price Improvement Needed to Improve ROI toSupport Needed Capital Investment
2005AnalystMeeting
2005AnalystMeeting
Marketing & Sales Wrap-Up
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Q1 Q2 Q3 Q4
Agricultural Products Overview2004 Revenue = $1.7 Billion
WholeGrains
41%
GrainProducts
37%
Business Mix
Food/Ref.22%
Revenue Growth Trend
• Ethanol/Co-Products
• More Productive Forms ofService
– Shuttle/Unit Train Focus
– Express Lane
• Mexico
• Price to Support Reinvestment
($ Millions)200520042003
20%
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Q1 Q2 Q3 Q4
Automotive Overview2004 Revenue = $1.2 Billion
AssembledAutos80%
Materials20%
Business Mix
Revenue Growth Trend
• Well Positioned with GrowthCompanies
• New Plants/Products
• Parts Growth
• Leverage Premium Network
• Price to Support Reinvestment
($ Millions)200520042003
(3%)
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400
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Q1 Q2 Q3 Q4
Chemicals Overview2004 Revenue = $1.7 Billion
Fert16%
L&D28%
SodaAsh17%
Business Mix
Plastics 24%
LPG/Petr15%
Revenue Growth Trend
• Energy Market Favors NorthAmerican Production
• Limited Plant ExpansionOpportunities
• Selective Business Growth
• Price to Support Reinvestment
($ Millions)200520042003
12%
2005 Revenue Outlook• Volume – 1% to 2%
• Yield Improvement & Fuel Surcharge – 7%+/-
Agricultural 6-8%
Automotive 1-2%
Chemicals 3-5%
Energy 13-15%
Industrial 9-11%
Intermodal 7-9%
Total Revenue Growth of 8% to 9%Total Revenue Growth of 8% to 9%
Drive Higher ReturnsBusiness Model - 2005
Letter
Quotes
34%
Tariff
17%
Contracts
49%
Letter
Quotes
34%
Tariff
17%
Contracts
49%
Priceto
Market
LimitedPrice
Flexibility
2005 3-5
Past Outlook Years
Market 0-2% 1-2% 2%
Price 1%+ 7%+/- 3%+
Penetration 2-3% (1)-0% 0%+/-
TOTAL 3-5% 8-9% 5%+
Key Drivers of Growth
2005AnalystMeeting
2005AnalystMeeting