Marketing Strategy & Outlook Jack Koraleski, EVP Marketing and Sales

Transcription

1 Marketing Strategy & Outlook Jack Koraleski, EVP Marketing and Sales

2 Strong Growth Performance Revenue $ Billions CAGR Revenue 8.9% Volume 1.3% ARC 7.5% $12.9 $14.8 $15.5 $10.9 $11.6 GDP

3 Core Price Improvement 6.9% 5.2% 6.0% % 0.7% 1.5% E 3

4 Focus On the Customer Resources Process Improvement Customer Value Customer Satisfaction Capital Investment 4

5 Customer Satisfaction Key Satisfaction Drivers (2007 vs 2006) Overall Satisfaction at Post- SP Merger Record 15 of 35 Questions at Best Ever Levels Corrective Action (Transportation) Competitive Prices Transit Times (Last 12 mos.) Consistency Local Switching +9 NCSC Problem Resolution Overall +7 Satisfaction Index Improvement 5

6 The Strength of a Unique Franchise Vancouver Diverse Business Mix Seattle Portland Eastport Duluth Twin Cities Fastest Growing States Port Access Oakland Salt Lake City Denver Omaha Kansas City St. Louis Border Crossings Los Angeles Calexico Nogales El Paso Eagle Pass Laredo Memphis Dallas New Orleans Houston Brownsville Intermodal 19% Energy 20% Agricultural Products 17% Autos 9% Industrial 20% Chemicals 15% Business Mix 6

7 Mexico A Key Link Revenue Growth ($Billions) 61% $1.37 $1.44 $0.89 $0.97 $1.11 Calexico Nogales El Paso Hermosillo Chihuahua Torreón Culiacán Aguascalientes Guadalajara Eagle Pass Monclova Saltillo San Luis Potosí Mexico Manzanillo City Lázaro Cárdenas Laredo Monterrey Querétaro Puebla Brownsville Tampico Mérida Veracruz Coatzacoalcos

8 Linking Production and Consumption Agricultural Products $2.61 Billion Revenue (2007) Access Major Grain and Produce Regions Flexibility to Meet Demands of the Market Ethanol Feed/Processors Export Infrastructure Refrigerated Boxcar Fleet Grain Export Produce Dairy, Poultry Produce Dairy Dairy Cattle Cattle, Poultry Grain Export Major Grain & Grain Products Region Cattle, Poultry Grain Export 8

9 Linking Production and Consumption Chemicals - $2.29 Billion Revenue (2007) Access Chemical Gulf Coast Wyoming Soda Ash / Trona Ore Eastport Line / Canadian Interchange PNW and Gulf Ports Infrastructure Gulf Coast 5 Major Classification Yards 10 Major Terminals 6 Storage-in-Transit Facilities Port Eastport Line Storage-in-Transit Soda Ash / Trona Ore Major Classification Yard Gulf Coast 9

10 Linking Production and Consumption Energy - $3.13 Billion Revenue (2007) Access Most Abundant, Lowest Cost and Secure Fuel Source SPRB (72%) Colorado/Utah (17%) Other (11%) River Terminals & West Coast Ports Infrastructure Cycle Time Advantage from SPRB to Chicago, St. Louis, and Texas UP Coal Network SPRB Coal Utility Plant CO/UT Coal Utility Plant SPRB & CO/UT Utility Plant Water Port Coal From CO/UT Water Port Coal From SPRB & CO/UT 10

11 Linking Production and Consumption Automotive - $1.46 Billion Revenue (2007) Access 7 Assembly Plants 38 Auto Ramps Vehicle Ports Mexico Market Infrastructure 30%+ Ownership of Fleet UP Distribution Centers Private Distribution Centers Assembly Centers Gateways to Mexico Ports 11

12 Linking Production and Consumption Intermodal - $2.93 Billion Revenue (2007) Access Route Advantage: Fast Growing LA- Texas/Southeast Market North/South Lanes PNW - Memphis Northern California Chicago West Coast Ports Mexico Border Crossings Infrastructure New Terminals EMP Box Ownership 12

13 Linking Production and Consumption Industrial Products - $3.10 Billion Revenue (2007) Access Lifeline of the Economy Over 200 Lumber Mills Extensive Coverage of Mineral Deposits Rock Network Infrastructure Manifest Network & Terminals Aggregates Lumber, Paper Copper & Other Non- Ferrous Minerals Major Terminals Lime, Aggregates Industrial Sand Lime Lumber, Paper 13

14 Key Opportunities for Growth Global Demand Growing Dependence on Rail Legacy Contracts 14

15 Global Demand: Energy Quadrillion BTUs World Demand for Coal % Million Kilowatt Hours U.S. Electric Power Generation by Fuel Type 3,500 3,000 2,500 2,000 1,500 1, Coal Nuclear Natural Gas Renewables Petroleum Source: Energy Information Administration Energy Outlook

16 Global Demand: Energy Coal Seattle Far East Export Growth Oakland Western Market Development Base Midwestern Growth Chicago St. Louis Renewed Eastern Demand for Western Coal Memphis Long Beach Mexico Market Eagle Pass New Orleans Europe Export Growth via River 16

17 Global Demand: Energy Transmission Pipeline North American Pipeline Expansion (Miles) 4,753 Pipeline Express 3,974 1,460 1,152 1,781 2,410 3,353 UP Pipeline Express (Carloads) 6,054 8,490 1, E 2009E 2010E 2011E Industry Sources 17

18 Global Demand: Energy Frac Sand Frac Sand (Carloads) 27,334 20,809 9,950 13,333 17,366 U.S. Rig Count 1,303 1,415 1, Source: Baker Hughes 18

19 Global Demand: Energy Wind Turbines Wind Turbine Carloads 2,700+/ Outlook Estimated Wind Electrical Generation (Billion KW Hrs) Source: Energy Information Administration,

20 Global Demand: Energy Ethanol Origin Base 68% of U.S. Ethanol Production Destination Unit Train Development Flexible Franchise Unit vs. Manifest Interior vs. Forward Plants Billion Gallons per Year U.S. Ethanol Production Capacity Production Conventional RFS Source: USDA Projected Production Capacity 20

21 Global Demand: Grain and Food Drivers Increasing Population Changing Diets Biofuels Opportunity Flexible Ag Franchise Food vs. Export vs. Fuel Meat and Poultry Exports Fertilizer Potash Exports Millions of Metric Tons World Wheat and Coarse Grains & Milled Rice 2,200 2,100 2,000 1,900 1, / / / /08 Production Consumption Source: USDA,

22 Global Demand Diverse Franchise Creates Opportunity Throughout Economic Cycles Strong Dollar Drives Imports and Overall Economic Growth Weak Dollar Spurs Export Growth and Substitution of Domestic Production for Imports Freight Revenue First Quarter 2008 Domestic 72% Other Imports 11% Mexico Imports 3% Other Exports 9% Mexico Exports 5% 22

23 Growing Dependence on Rail Highway Congestion Driver Shortages Highway Infrastructure Rail The Green Alternative Three Times More Fuel Efficient Than Trucks One Intermodal Train Can Take Up To 280 Trucks Off The Highway 2035 Source: FHWA HPMS data Source: FHWA HPMS Data 23

24 The Opportunity for Growth Total Western Market*: $103 Billion Truck/ Other 71% Western Rails 29% *Truck, rail, barge and air traffic haul lengths over 500 miles Source: Company Reports and Reebie Data 24

25 Auto Parts Intermodal Service Detroit Mexico Bi-directional Service Daily Seamless Interline Service Between Detroit and Mexico More Capacity Available to Handle Business Growth Equivalent to 35,000 Trucks Off the Highway Chicago Salem Detroit Laredo Mexico 25

26 Produce Railexpress Links Growers and Shippers with Retail and Food Service Distribution Currently One 55-Car Train Per Week Only Railcar Service in the U.S. Which is Faster than Refrigerated Trucks Starting Late 2008 Delano, CA Facility Wallula, WA Delano, CA Success Factors Train Starts Transit Days Truckload Equivalents Delivered On-Time Performance , % So. Schenectady, NY 26

27 Legacy Contracts Total Percent of Revenue Re-priced 74% 6% 3% 3% 6% 8% Percent of Legacy Revenue Chemicals 8% Autos 10% Intermodal 36% Industrial Products & Agricultural 2% Energy 44% 27

28 Going Forward Franchise Provides Opportunities for Growth in All Market Conditions Well-Positioned to Move the Resources the World Needs Legacy Contracts Customer Value Drives Growth and Price Improvement 5-Year Outlook CAGR Revenue 6-8% Volume 2-3% Price 5-6% 28