managing change at g&w€¦ · 03.04.2017 · 20 . 1. rigorous upfront analysis – railroads...

1 Genesee & Wyoming Inc.

Managing Change at G&W Jack Hellmann, President & CEO

Midwest Association of Rail Shippers July 12, 2016


Agenda

1.G&W Overview

2.Managing Change

3.Current Trends


Overview

• NYSE: Listed as GWR with ~$3.5 billion market capitalization

• Railroads: 121 worldwide with ~16,000 track miles

• People: 7,500 worldwide

• Equipment: >1,300 locomotives

• Annual Carloads: ~3.0 million


Diversified by Geography

North

America

~80%

Australia

~10%

U.K./

Europe

~10%

G&W Operating Income by Segment


Diversified by Commodity

Agricultural Products

10% Autos & Auto Parts

1%

Chemicals & Plastics

10%

Coal & Coke 8%

Food & Kindred Products

3%

Intermodal 21% Lumber & Forest

Products 6%

Metallic Ores 5%

Metals 7%

Minerals & Stone 13%

Petroleum Products

5%

Pulp & Paper 8%

Waste 1%

Other 2%

2015 Freight Revenue* by Commodity

*Freight revenue is 70% of total revenues


Customer Focus of a Short Line on a Global Scale


Managing Change


Changes by Year: 1899-2016


Geographic Footprint

21 U.S. States 41 5 Countries 10

1,000 Customers 2,800 9,300 Track Miles 16,000 430 Locomotives 1,300

2006 vs. 2016


G&W Railroads: 2006

41 logos


G&W Railroads: 2016


Carloads Interchanged in North America

405,000

310,000

170,000

90,000

300,000

405,000

48,900

2006: 940,000 2015: 1,700,000


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

G&W Revenue Growth

($ millions)

$2,000

$451


2006: China-led Commodity Boom

2008: Global Financial Crisis

2012: Shale Oil & Gas Revolution

2015: U.S. Coal Collapse; Australian Iron Ore Collapse; Strong US$

Significant Changes Over Past Decade:

External Shocks and Transformational Growth

2010: Freightlink Acquisition in Australia ($320M)

2013: RailAmerica Acquisition in North America ($2B)

2015: Freightliner Acquisition in U.K./Europe ($740M)


1. Short Lines Excel at Playing

the Hand They are Dealt

– Operations can always be more efficient

– Opportunistic investments in downturns

External Shocks:

Key Lessons


2. Boom Never as Good as You

Think; Bust Never as Bad

– Linear extrapolation of trends

is always wrong eventually

External Shocks:

Key Lessons


U.S. Steam Coal Power Generation EIA Annual Energy Outlook Forecast Coal Use (mm tons)

0

200

400

600

800

1,000

1,200

2011 2012 2013 2014 2015 2016


3. Railroad Shipments Follow

the Evolution of the Economy

External Shocks:

Key Lessons


4. Politics Trump Economics

External Shocks:

Key Lessons


1. Rigorous Upfront Analysis

– Railroads & Customers

Transformational Growth:

Key Lessons


2. Outstanding People

to Execute Integration


Key Lessons


3. Cultural Emphasis

on Continuous Improvement


Key Lessons


4. Remain True to Core Values

of the Organization


Key Lessons


What Remains Constant Amidst Change?


To be the

safest and

most respected

rail service

provider

in the world.

Core Purpose


Safety Culture: 2006 - 2016

0

1

2

3

4

5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Injury Frequency Rate per 200,000 Hours

Class I

Short Lines


2.0

0.5

1.8

0.5

2.1

0

1

2

3 Safety Culture

Injuries per 200,000 hours

2006 2012 2012 2014 2015 2016YTD

0.7


Respected by Customers:

Customer Satisfaction Rating

5

6

7

8

9

10

2007 2009 2011 2013 2015

Trucking

Other Railroads

8.0 = Our Goal


Gary Long SVP, Midwest Region


Regions Designed for Customers

Customers

Finance Operations Engineering Sales &

Marketing Mechanical

Human Resources

Safety &

Compliance

Strategic Planning



Corporate Capabilities Support Local Focus

1. Outstanding Customer Service Intimate knowledge of our operations and customers’ needs

2. Industrial Development Driving new business to our 41-state footprint; 300+ meetings with local EDCs in last two years

3. Transload Enabling non-rail-served customers to tap freight-rail economics

4. National Accounts Relationships with customers served by multiple G&W railroads

5. Operating Excellence In-House Engineering, Mechanical, Purchasing



Strong Local Management

10 Regional Senior Vice Presidents

Promoted Internally ‒Succession Planning

Hired Externally

‒Class I Railroad Chief Operating Officer ‒Short Line Railroad President ‒Mining Railroad President

Joined via Acquisitions

‒RailAmerica Regional Senior Vice President ‒Freightliner Managing Director

4

4

2



Disciplined Allocation of Capital

$64 $96 $98 $89

$120

$179

$232 $249

$331

$372

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

($ millions)


Current Trends


North American Carloads YTD May 2016 vs. YTD May 2015

Commodity Change % CommentAgricultural Products (6,300) (7%) Weak Commodity Prices, High Levels of StorageAutos & Auto Parts (400) (3%)Chemicals & Plastics (2,300) (3%)Coal & Coke (45,800) (37%) Steam CoalFood & Kindred Products (900) (4%)Lumber & Forest Products 2,200 4% Wood Pellets and Wood ChipsMetallic Ores - 0%Metals 3,500 6% Steel inputs (scrap and pig iron) and pipeMinerals & Stone (6,400) (8%) Lower Frac Sand and Salt, Higher Aggregates and Cement Petroleum Products (300) (1%) Lower Crude By Rail, Higher LPGs/NGLsPulp & Paper (4,500) (6%) Containerboard (Truck Competition)Waste 1,700 12%Other (1,700) (6%)Total Carloads (61,200) (9%)


Segment 1: North America


North America Update

Expect Overall North American Volumes Down 5% in 2016

• Coal continues to be weak given low natural gas prices and represents 80% of overall carload decline


North America Update Other Key Commodities

• Lumber and Forest Products: Stronger housing market (up 4%) • Metals: Less import competition (up 2%) • Minerals and Stone: Strong construction aggregates offset by

lower salt and frac sand (down 6%) • Agricultural Products: Two competing forces: large crops and

high levels of storage vs. strong dollar and weak prices (+/-)


North America Update

Cost Reduction Focus

• Reducing corporate and regional overhead expense • Example: Internal benchmarking of operating regions


Segment 2:

Australia

Above and Below Rail Operations

Above Rail Operations


Australia Update

Global Commodity Weakness Largest Impact

• Three mines closed in 2015 (iron ore, manganese)


Australia Update

Cost Reduction Focus

• Right-sizing operational and administrative overhead to new business landscape


Segment 3: U.K./Europe


U.K./Europe Update

U.K. Intermodal & Infrastructure Services Performing Well

• Expect same railroad intermodal volumes up 5% - 10%

U.K. Coal Restructuring

• Expected fade to 2022 has been faster • New business wins reducing overall

rolling stock surplus

Continental Europe Intermodal Rationalization Continues

• Exiting unprofitable routes

Cost Reduction Focus in Both U.K. and Europe


G&W Priorities for 2016

1. Safety - Freightliner integration to G&W safety culture

2. Expense-reduction efforts in all three segments

3. New commercial development (U.S., Canada, U.K., Australia, Europe)

4. U.S. Short Line Tax Credit extension

5. Active acquisitions and investment pipeline

managing change at g&w€¦ · 03.04.2017 · 20 . 1. rigorous upfront analysis – railroads...

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