Chessie System Inc.'s freight hauling business is strong, but expected profits in the last three quarters of this year won't be enough to offset the railroad company's big first quarter loss and still match 1977 earnings. Chairman Hays Watkins said yesterday.
Watkins also criticized the Interstate Commerce Commission for last week cutting railroad's requested 7 percent rate hike for steam coal for utilities to 4 percent. He said Chessie plans to expand greatly the non-rail side of its business in the "next few years."
"The general freight business has been a little stronger than we expected in May and June, running about 2 percent ahead of last year, Watkins said, "We'd be doing even better if we could have found more" railcars to meet demand.
Combined shipments of coal, iron ore and coke are running at peak level" although coal-hauling this month is trailing the year-ago level because export markets for coal are depressed, he added.
"We think the general-merchandise freight business will be strong for the rest of the year." Watkins said. Based on these expectations, "We'll have exceptionally good results for the last nine months of this year.
But with the first quarter loss of $66.9 million, results for all of 1978 "won't be as good as last year" when Chessie earned $77.4 million ($4.01 a share) from operations on revenue of $1.5 billion.
Chessie's three railroads - the Chesapeake & Ohio, Baltimore & Ohio and Western Maryland - together haul more coal than any other railroad, so the coal strike last winter cut sharply into revenues.
He indicated 1978 spending for equipment building and repairing and roadway maintenance probably would rise to a record $575 million from $482 million last year.
The big first quarter loss in itself won't impede implementing any of Chessie's plans "but the coal strike did suggest that we might look to broaden our revenue base, beyond railroading in general and coal hauling in particular, Watkins said.
Currently, Chessie's non-rail operations consist of a real estate development concern and the Greenbrier resort in White Sulphur springs, W.Va.
Chessie is heavily dependent on coal, which is why Watkins was incensed by the ICC's rate ruling last week. Calling the decision "ridiculous." Watkins said, "The ICC in its decision recognized the need of railroads for more revenues. But in this case, it was politically more expedient to hold down the cost of coal to utilities and to second-guess the railroads.