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Union Pacific chief says energy, agri markets boosting business for railroads

story by Roby Brock, a TCW content partner and owner of Talk Business
roby@talkbusiness.net

The CEO of Union Pacific Corp., the railroad transportation giant, told a Little Rock audience that he sees positive signs in the U.S. economy, particularly in the agricultural, chemical and auto business.

John J. “Jack” Koraleski, who has served as CEO since 2012, told the Arkansas Economic Development Foundation – the non-profit arm of the state’s economic agency – that early trends in his transportation portfolio are off to a good start in 2014.

“We think the agricultural markets are going to be pretty darn strong,” Koraleski said. “Overall, we think its going to be a pretty stable year for agricultural products.”

He also said a rebound in car sales are “almost back to what we would consider normal.”

But the energy business may be the biggest driver of new business for Union Pacific and the overall economy. Koraleski said shale production in the natural gas business has been steady across Union Pacific’s territory as fracking sand and chemicals as well as steel materials for pipelines have been a rising source of revenue.

He also said the coal business and a harsh winter have boosted the company’s bottom line. Koraleski said cold weather has been a big benefit to his firm, but he was no longer a fan of the freezing temperatures, despite its good economic news for Union Pacific.

“I’m ready to give up that strategy. I’m ready for it to not be cold anymore,” he joked.

Koraleski also noted that onshoring efforts – the move of foreign manufacturers back to U.S. soil – is expected to benefit Union Pacific and the overall economy in part due to competitive labor and low energy costs in the U.S.

“We’re starting to see more and more parent companies from the Eurozone look to the U.S. for manufacturing,” he told the audience.

KEYSTONE PIPELINE A ‘WIN-WIN’
The controversial Keystone XL Pipeline project has been a hot potato for business and political leaders nationally.

Koraleski said his company will win regardless of the project’s ultimate fate.

“If they build it fine, if they don’t, fine. We’re kind of in a very fortunate position,” he said.

Koraleski said if it is not built, his company will be a major transporter of the 700,000 barrels of oil coming from Canada to Mexico. If it is built, it will require 1,200 miles of pipe, rock, and concrete as well as provide jobs for 9,000 workers who will need trucks, tools, and housing.

“We haul all that stuff,” Koraleski said. “We’re lucky because we win either way.”

FACTS & FIGURES
Omaha-based Union Pacific reported its strongest ever quarterly and full year financial results last year. The company posted net income of $4.388 billion in 2013 on revenues of $21.96 billion. Those numbers were 11% and 5% higher respectively.

The company’s stock (NYSE: UNP) has been trading toward the high end of its 52-week high of $187.09.

Union Pacific has major and minor operations throughout Arkansas including in Hoxie, Jonesboro, Bald Knob, Pine Bluff, North Little Rock, Van Buren, Hope, Camden, and Texarkana. Union Pacific covers 23 states across two-thirds of the U.S. and has locations across North America.

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Several years ago, it opened a 600-acre intermodal facility in Marion, Ark., that Koraleski said is the “standard” for the company’s new endeavors.

In Arkansas, Union Pacific employs 2,074 workers with an annual payroll of $230 million. It invested $173.3 million in capital expenditures in the last year.

Koraleski has served in a number of roles with Union Pacific, where he has worked since 1972. He has served as controller of Union Pacific Corp., executive vice president of marketing and sales, and executive vice president of finance and information technology for Union Pacific Railroad. Prior to that, he worked in the real estate and administrative departments.

Koraleski earned a bachelor’s and master’s degree in business administration from the University of Nebraska at Omaha.

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