Chugging Along: P&W Freight Traffic Posts Gains
Photo/Courtesy
A Providence & Worcester train.
The past 18 months have been tough for the freight-hauling business, including Providence & Worcester Railroad.
The economy slowed and production dropped; supplies and finished products idled and railroads — this country’s largest hauler of freight — got pinched.
Coming off historic highs in 2006 and 2007 for the railroad industry, business plummeted more than 20 percent in late 2008 and stayed that way throughout the first two months of 2010.
But smoother rides may lie ahead.
Providence & Worcester reported a more than 25 percent increase in freight revenue for the first quarter of this year. Numbers for March, April and May all showed year-over-year increases that hit historic levels.
With a robust economy and plenty of business, railroads keep only 2-3 percent of their freight cars in storage.
As of the latest industry figures from February, 28 percent of all freight cars in the United States were in storage. P&W, by contrast, had zero.
“For the first quarter of this year, we are certainly above the rest of the industry,” said Frank Rogers, vice president of marketing and sales at P&W.
Market Perspective
Although operating at a $673,000 deficit for the first quarter, P&W is on the upswing from the first quarter 2009’s deficit of $1.4 million.
Shares in Providence & Worcester, which trade as PWX on the Nasdaq Global Market, have held between $10 and $12 per share since the start of 2009, down from nearly $20 per share that held from June 2006 to September 2008.
Founded in 1844, P&W conducted independent operations since 1973 following a break from the Penn Central railroad company.
The company employs 145 people and is the only freight rail provider in Rhode Island. P&W maintains the exclusive right to cover the Northeast corridor from New Haven, Conn., to the Massachusetts and Rhode Island borders. The company’s main freight is chemicals and plastics, construction aggregates and food products.
Railroad companies recovered plenty already since the industry was deregulated in 1980, steadily increasing market share among the modes of transportation from 30 percent in 1980 to 43 percent in 2007.
Railroads also made badly needed infrastructure improvements over that time span, investing their own money in new and improved tracks, as opposed to trucks, which use publicly built roadways, said Holly Arthur, spokeswoman for the Association of American Railroads.
“We are very competitive on price, and that’s because we have such great fuel efficiency that has more than doubled since 1980,” Arthur said, noting U.S. railroads move one ton of freight an average of 480 miles on one gallon of gas.
Adaptation
Throughout the years, P&W’s many clients came and went as the region’s industrial makeup changed; Rogers estimates more than half of the company’s customer base turned over since 1994. Manufacturing decreased significantly, although specialty manufacturing rose.
“We have to realize that nothing stays the same,” Rogers said. “You have to find other things to move.”
Northeast Utilities shipped by rail since the power company formed in 1966, NU spokesman Al Lara said. P&W serves as the utility’s primary rail link between Connecticut and Massachusetts, hauling large items such as utility poles for transmission projects.
“All of our substations are located near railroads, so it is very convenient for them to use,” Lara said.
To keep the number of customers and revenues climbing, P&W upgrades its infrastructure to meet the growing needs of the global economy, including by raising bridges along lines. This offers better access to the systems of rail in Canada, as Port Prince Rupert in British Columbia is a popular launching point for goods destined for China.
“It used to be everything was made here and then shipped here, and now there is more international traffic flows,” Rogers said. “The business has become more global, too.”
Brad Kane is a staff writer for the Hartford Business Journal, a sister publication of the Worcester Business Journal.
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