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CSX revises down full-year growth forecast

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World Coal,

US rail operator, CSX, has provided investors with an update on the company’s full year guidance. Speaking at the Credit Suisse Global Industrials Conference in Palm Beach, Florida, Frank Lonegro, CSX’s Chief Financial Officer said that the energy market transition away from coal had hit harder in 4Q15 that anticipated.

“While we continue to expect to move around 30 million short t of export coal for the full year, domestic coal movements have declined more significantly in the fourth quarter that expected,” Lonegro said. “As a result we now expect full-year earnings per share growth to be about 3%.”

In its 3Q15 results, the company said it was expecting growth of at least 4% despite a US$450 million drop in coal revenues for the year. CSX and other North American rail companies have been hit by a weakening of domestic demand for coal as tighter regulations and low natural gas prices have weakened demand for coal-fired power.

US coal company, Peabody Energy, said it expected domestic demand for coal to fall by up to 100 million short t this year and shipments to drop by 90 million t as coal’s share of the US energy mix falls to just 35%. Production cutbacks are expected to be concentrated in the east, particularly in Appalachia, where mining costs are highest, hitting eastern rail operators such as CSX and Norfolk Southern, which is currently the subject of a takeover bid from Canadian Pacific, harder that western rivals BNSF and Union Pacific.

Exports have also been hit as global demand for coal drops and a strong US dollar hits US competitiveness compared to other exporting countries, particularly Australia and Indonesia. Powder River Basin-focused coal company, Cloud Peak Energy, and BNSF recently signed an amended agreement allowing Cloud Peak to reduce or stop its coal-for-export shipments.

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