EX-99.1 2 kcsex9913172020.htm EX-99.1 kcsex9913172020
Exhibit 99.1 KANSAS CITY SOUTHERN Bank of America Global Industrials Conference 2020 © KANSAS CITY SOUTHERN KCS


 
Safe Harbor Statement This presentation contains “forward-looking statements” within the meaning of the securities laws concerning potential future events involving KCS and its subsidiaries, which could materially differ from the events that actually occur. Words such as “projects,” “estimates,” “forecasts,” “believes,” “intends,” “expects,” “anticipates,” and similar expressions are intended to identify many of these forward-looking statements. Such forward-looking statements are based upon information currently available to management and management’s perception thereof as of the date hereof. Differences that actually occur could be caused by a number of external factors over which management has little or no control, including: competition and consolidation within the transportation industry; the business environment in industries that produce and use items shipped by rail; loss of the rail concession of KCS’ subsidiary, Kansas City Southern de México, S.A. de C.V.; the termination of, or failure to renew, agreements with customers, other railroads and third parties; access to capital; disruptions to KCS’ technology infrastructure, including its computer systems; natural events such as severe weather, hurricanes and floods; market and regulatory responses to climate change; legislative and regulatory developments and disputes; rail accidents or other incidents or accidents on KCS’ rail network or at KCS’ facilities or customer facilities involving the release of hazardous materials, including toxic inhalation hazards; fluctuation in prices or availability of key materials, in particular diesel fuel; public health threats or outbreaks of communicable diseases; dependency on certain key suppliers of core rail equipment; changes in securities and capital markets; unavailability of qualified personnel; labor difficulties, including strikes and work stoppages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic, political and social conditions; the level of trade between the United States and Asia or Mexico; fluctuations in the peso-dollar exchange rate; increased demand and traffic congestion; the outcome of claims and litigation involving KCS or its subsidiaries; and other factors affecting the operation of the business. More detailed information about factors that could affect future events may be found in filings by KCS with the Securities and Exchange Commission, including KCS’ Annual Report on Form 10-K for the year ended 12/31/2019 (File No. 1-4717) and subsequent reports. Forward- looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward- looking statements. KCS is not obligated to update any forward-looking statements to reflect future events or developments. All reconciliations to GAAP can be found on the KCS website, kcsouthern.com/investors. © KANSAS © KANSAS CITY SOUTHERN KCS 2


 
Key Messages . Strong financial position – BBB Credit Rating – $600M undrawn revolving credit facility . Proactive response to COVID-19 – Safety is our #1 priority – Business continuity plans in place – No current impact to train operations . Strong start to the year – QTD volume +5% and revenue +8% – March MTD volume -5% and revenue 2%; impacted by lower Lazaro Cardenas container volume and FX – Limited P&L impact expected from commodity prices & FX – Cross-border network drives unique growth opportunities . PSR continues to improve service & cost – Cross-functional effort led by Sameh Fahmy – On track to deliver $61M of PSR savings in 2020 © KANSAS © KANSAS CITY SOUTHERN KCS Volume & Revenue performance as of March 16th, 2020. 3


 
Robust Credit Ratings & Metrics • From Single B in 2009 to BBB today • Only 26% of companies are BBB or above • Low 2x leverage ratio Strong Cash Flow Solid • 85% FCF CAGR since 2015 Financial Profile Ample Liquidity • $600M undrawn revolving credit facility • No debt maturities until 2023 Balanced Capital Allocation Policy • 40-50% capital projects & strategic investments • 50-60% share repurchases & dividends © KANSAS © KANSAS CITY SOUTHERN KCS Amounts and ratios as of 12/31/19 unless otherwise stated 4


 
COVID-19 Management . Safety of employees & communities is our #1 priority – Actively communicating with employees – Sickness protocols in place – Departmental staffing plans implemented . Business continuity plans in place – Dispatching from multiple locations – No current impact to train operations . Maintaining frequent communication with customers – No known customer facility closures . No current interruption to KCS’ materials and fuel supply chain © KANSAS © KANSAS CITY SOUTHERN KCS 5


 
QTD Volume and Revenue Performance QTD Volume & MTD March Volume & Revenue Performance Revenue Performance 10% 10% 8% 8% 8% Excluding Lazaro Cardenas Intermodal 6% 6% 5% and F/X impact, MTD Volumes are flat and Revenues are +5% 4% 4% 2% 2% 2% 0% 0% (2%) -2% (4%) -4% (5%) (6%) -6% Volume Revenue Volume Revenue © KANSAS © KANSAS CITY SOUTHERN KCS Volume & Revenue performance as of March 16th, 2020. 6


 
Q120 Revenue Trend QTD YoY Revenue Business Unit Key Drivers Performance Strength in Refined Product exports from the United Chemical & Petroleum States to Mexico; strong Plastics exports to Mexico Positive Franchise cross-border volumes up 14% MTD; Intermodal Lazaro Cardenas volumes down (52%) MTD Positive Industrial & Consumer Strong Metals and Pulp/Paper shipments Positive Expect strong end to the quarter from Grain & Food Agriculture & Minerals Product shipments Positive Lower Automotive production & shipments to U.S. & Automotive Canada from KCS-served OEM’s Neutral Low natural gas prices pressuring Utility Coal volumes; Energy Crude Oil represents just 2% of total revenues Negative © KANSAS © KANSAS CITY SOUTHERN KCS QTD Revenue performance as of March 16th, 2020. 7


 
Foreign Exchange Exposure to Depreciating Peso Peso has depreciated ~16% vs. USD in March Business Area Exposure Impact Peso denominated revenue and Revenues/Expenses Neutral expense generally offset in O.I. Income Taxes and Foreign currency derivative instruments Foreign Exchange Neutral hedge cash tax exposure Hedges Lazaro Intra-Mexico KCS bills customers in USD; Negative Intermodal Trucking competition bills in pesos Cross-border intermodal generally not Cross-Border Intermodal Neutral at risk due to longer length of haul Generally not at risk of loss due to All Other Mexico Traffic Neutral fluctuations in FX © KANSAS © KANSAS CITY SOUTHERN KCS 8


 
KCS Refined Products Business Benefiting from Growth in Non-Pemex Imports into Mexico . QTD Mexico Energy Reform volumes are up 50% vs. 2019 . Pemex production continues to decline . Non-Pemex imports to Mexico grew 54% in the 2nd half of 2019 . Non-Pemex sales are growing as a % of total sales © KANSAS © KANSAS CITY SOUTHERN KCS QTD volume performance as of March 16th, 2020. 9


 
PSR: Cross-Functional Success Mechanical Financial Planning & Analysis Walczak Vander Ark Yield Transportation Management Truitt, Eaton Austin Fuel Engineering Conservation Jones Roberts Sameh Fahmy EVP of PSR Service Car Utilization Design Tippins Daily © KANSAS © KANSAS CITY SOUTHERN KCS 10


 
On Track to Deliver 2020 PSR Savings ($ in millions) Total PSR Program Annualized OpEx Savings of $125M FY 2019 FY 2020 OpEx Category Primary Drivers Actual OpEx Incremental Savings OpEx Savings Compensation & Reduced headcount & crew $8 $15 Benefits costs Disposal of certain locomotives Depreciation and rail cars $5 $4 Train consolidation and Fuel efficiency/technology $19 $21 Equipment Lease returns & car cycle times $13 $17 Purchased Restructured contracts, and $13† Services and reduced repair expenses $4 Materials & Other Total $58 $61 © KANSAS © KANSAS CITY SOUTHERN KCS †Includes a $5.1M benefit from a one-time settlement 11


 
Solid Investment Thesis Best-positioned growth story in the industry with unique U.S.-Mexico cross-border network and the most profitable rail franchise in Mexico Well-diversified customer base and commodity mix Excellent strategic positioning with multiple growth drivers Track record of strong financial and operating performance, with continued improvement driven by precision scheduled railroading Solid balance sheet with improving cash flow and return profile © KANSAS © KANSAS CITY SOUTHERN KCS 12