KCS Crude Oil Discussion
Brian Hancock, Executive Vice President and Chief Marketing Officer 9/13/16
© 2016 Kansas City Southern
KCS Overview
Safe Harbor Statement
© 2016 Kansas City Southern
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 of this presentation. 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; interest rates; 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; credit risk of customers and counterparties and their failure to meet their financial obligations; 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; dependency on certain key suppliers of core rail equipment; changes in securities and capital markets; loss of key personnel; labor difficulties, including strikes and work stoppages; insufficiency of insurance to cover lost revenue, profits or other damages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic conditions; political and economic conditions in Mexico and the level of trade between the United States and Mexico; 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 December 31, 2013 (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 forwardlooking statements. KCS is not obligated to update any forward-looking statements in this presentation to reflect future events or developments. All reconciliations to GAAP can be found on the KCS website, kcsouthern.com/investors.
2
KCS’s Network is the center of the North American rail system Springfield
Dallas Shreveport Houston Laredo
East St. Louis
Birmingham
Jackson Meridian
New Orleans © 2016 Kansas City Southern
Kansas City
3
Short Line Railroads
© 2016 Kansas City Southern
Short Lines Extend KCS’ Reach from 6,600 Miles to over 12,837 Miles
4
Short Line Railroads & Transload Partners
© 2016 Kansas City Southern
There are 140+ Transloads on the KCS’ Network
5
Short Line Railroads, Transload Partners & Ports
© 2016 Kansas City Southern
KCS serves 20 Ports
6
KCS 2016 Capital Expenditures IT / Other 4% PTC 9% Capacity 8%
Maintenance 45%
Rolling Stock 8%
Sasol 11% Sanchez Yard 3% Other 3%
© 2016 Kansas City Southern
Growth 42%
Locomotive Overhauls 9%
7
San Luis Potosi – Commercial Opportunities WTC II
WTC/Watco Fluids Terminal
3G Refined Products
KCSM’s Interpuerto Intermodal Terminal
WTC I
Industrial Park
Logistik
Industrial Park
Marsori Project Transload Terminal
© 2016 Kansas City Southern
Industrial Park
8
Sanchez Yard Master Plan PERIMETRAL CHANNEL
TO MONTERREY
TO NUEVO LAREDO
DEPARTURE (12 TRACKS)
LOCOMOTIVE REPAIR
ENGINE ENGINE READY READY TRACKS TRACKS
CAR REPAIR SHOP
ENGINE READY TRACKS
CLASSIFICATION (70 TRACKS)
MULTIPLE AREA
WYE TRACK
CUSTOM AREA CIRCULATION TRACK ADMIN. BUILDINGS
EXISTING TRACKS LOCOMOTIVE SERVICE FUELING FACILITY
© 2016 Kansas City Southern
RECEIVING (8 TRACKS) COYOTE CHANNEL EXISTING TRACKS
B-1272
B-1273
B-1274
B-1275
B-1276
LEGEND Existing Tracks Future Roads Channels
9
© 2016 Kansas City Southern
Sasol Build Out
10
Positioned for Success KCS serves 11 of the 12 automotive manufacturers
In progress
Lazaro Cardenas
© 2016 Kansas City Southern
68% of FDI infused states KCS served
Currently not served by KCS
11
Automotive Outlook Mexico’s Auto Production Growth (units in millions) 2020 vs. 2015 +62%
5.5 5.2
4.9 4.3
3.2
3.4 3.5
2.9 2.9 2.6
1.4
1.4
1.3
1.6
1.5 1.5 1.6
1.2
1.1
1.2
3.9
4.2
4.4
3.4
1.5
1.6
1.9
1.7
2.1
2.4
2.4
2.6
2.8
2.8
1.2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Export Market
Domestic Market
© 2016 Kansas City Southern
1.9 1.8 1.8
2.3
2.0 2.0 2.1
Mexico Production 12
Intermodal Interchange Point Container Ports
KCS INTERMODAL NETWORK Montreal, QC
KCS Intermodal Facility NS Intermodal Facility
Syracuse, NY
Brampton, ON
CN Intermodal Facility
Detroit, MI
CSXT Intermodal Facility
Bethlehem, PA
Chicago, IL
UP Intermodal Facility FEC Intermodal Facility
East St Louis, IL
KCS Shared Intermodal Facility
Worchester, MA
Croxton, NJ Little Ferry, NJ
Rutherford, PA
Baltimore, MD
Marion, OH Greencastle, PA
Kansas City, MO
Norfolk, VA
Ports Memphis, TN
Los Angeles, CA Shreveport, LA
Charlotte, NC
Atlanta, GA Charleston, SC
Dallas, TX
Meridian, MS Jackson, MS
Wylie, TX
Savannah, GA Jacksonville, FL
Kendleton, TX Laredo, TX Salinas Victoria, NL
© 2016 Kansas City Southern
Miami, FL
Altamira, TM San Luis Potosi, SL
Tampico, TM
Mexico City, DF Veracruz, VZ Lázaro Cárdenas, MH
Toluca, EM
13
Lázaro Cárdenas Growth Plans
APMT Container Terminal • Opening Q4 2016 • Initial capacity: 1.2 mill TEU p.a.
© 2016 Kansas City Southern
HPH Container Terminal • Opened Dec 2007 • Current capacity: 2.0 mill TEU p.a.
14
Energy Reform is a reality: Business Opportunities
© 2016 Kansas City Southern
Importation of LPG Importation of refined products (gasoline, diesel & biofuels) Steel pipe for oil fields and natural gas transmission Shale oil (CBR) shipments from Mexican basins Importation of frac sand Increased fuel oil moves
15
© 2016 Kansas City Southern
New Gulf Region Ethylene and Plastics Plants
16
© 2016 Kansas City Southern
The KCS Cross Border Network Connects Major Grain Producers to Major Grain Consumers
SOURCES: Office of the US Trade Representative, USDA, Daniels Trading, Corn Supply-Demand US & State Details. William J. Hudson. The ProExporter Network. July 18, 2012, Produccion-Consumo de Maiz 2012. Grupo Consultor de Mercados Agricolas . June 2012
17
KCS Invests in its Partners
© 2016 Kansas City Southern
Innovation Creativity Teams working together
Stormy Kromer® Award
18
© 2016 Kansas City Southern
KCS wants to be the easiest to do business with you!
19
© 2016 Kansas City Southern
More Options for a Turbulent Global Marketplace!
20
© 2016 Kansas City Southern
KCS Overview
Safe Harbor Statement
© 2016 Kansas City Southern
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 of this presentation. 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; interest rates; 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; credit risk of customers and counterparties and their failure to meet their financial obligations; 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; dependency on certain key suppliers of core rail equipment; changes in securities and capital markets; loss of key personnel; labor difficulties, including strikes and work stoppages; insufficiency of insurance to cover lost revenue, profits or other damages; acts of terrorism or risk of terrorist activities; war or risk of war; domestic and international economic conditions; political and economic conditions in Mexico and the level of trade between the United States and Mexico; 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 December 31, 2013 (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 forwardlooking statements. KCS is not obligated to update any forward-looking statements in this presentation to reflect future events or developments. All reconciliations to GAAP can be found on the KCS website, kcsouthern.com/investors.
2
KCS’s Network is the center of the North American rail system Springfield
Dallas Shreveport Houston Laredo
East St. Louis
Birmingham
Jackson Meridian
New Orleans © 2016 Kansas City Southern
Kansas City
3
Short Line Railroads
© 2016 Kansas City Southern
Short Lines Extend KCS’ Reach from 6,600 Miles to over 12,837 Miles
4
Short Line Railroads & Transload Partners
© 2016 Kansas City Southern
There are 140+ Transloads on the KCS’ Network
5
Short Line Railroads, Transload Partners & Ports
© 2016 Kansas City Southern
KCS serves 20 Ports
6
KCS 2016 Capital Expenditures IT / Other 4% PTC 9% Capacity 8%
Maintenance 45%
Rolling Stock 8%
Sasol 11% Sanchez Yard 3% Other 3%
© 2016 Kansas City Southern
Growth 42%
Locomotive Overhauls 9%
7
San Luis Potosi – Commercial Opportunities WTC II
WTC/Watco Fluids Terminal
3G Refined Products
KCSM’s Interpuerto Intermodal Terminal
WTC I
Industrial Park
Logistik
Industrial Park
Marsori Project Transload Terminal
© 2016 Kansas City Southern
Industrial Park
8
Sanchez Yard Master Plan PERIMETRAL CHANNEL
TO MONTERREY
TO NUEVO LAREDO
DEPARTURE (12 TRACKS)
LOCOMOTIVE REPAIR
ENGINE ENGINE READY READY TRACKS TRACKS
CAR REPAIR SHOP
ENGINE READY TRACKS
CLASSIFICATION (70 TRACKS)
MULTIPLE AREA
WYE TRACK
CUSTOM AREA CIRCULATION TRACK ADMIN. BUILDINGS
EXISTING TRACKS LOCOMOTIVE SERVICE FUELING FACILITY
© 2016 Kansas City Southern
RECEIVING (8 TRACKS) COYOTE CHANNEL EXISTING TRACKS
B-1272
B-1273
B-1274
B-1275
B-1276
LEGEND Existing Tracks Future Roads Channels
9
© 2016 Kansas City Southern
Sasol Build Out
10
Positioned for Success KCS serves 11 of the 12 automotive manufacturers
In progress
Lazaro Cardenas
© 2016 Kansas City Southern
68% of FDI infused states KCS served
Currently not served by KCS
11
Automotive Outlook Mexico’s Auto Production Growth (units in millions) 2020 vs. 2015 +62%
5.5 5.2
4.9 4.3
3.2
3.4 3.5
2.9 2.9 2.6
1.4
1.4
1.3
1.6
1.5 1.5 1.6
1.2
1.1
1.2
3.9
4.2
4.4
3.4
1.5
1.6
1.9
1.7
2.1
2.4
2.4
2.6
2.8
2.8
1.2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Export Market
Domestic Market
© 2016 Kansas City Southern
1.9 1.8 1.8
2.3
2.0 2.0 2.1
Mexico Production 12
Intermodal Interchange Point Container Ports
KCS INTERMODAL NETWORK Montreal, QC
KCS Intermodal Facility NS Intermodal Facility
Syracuse, NY
Brampton, ON
CN Intermodal Facility
Detroit, MI
CSXT Intermodal Facility
Bethlehem, PA
Chicago, IL
UP Intermodal Facility FEC Intermodal Facility
East St Louis, IL
KCS Shared Intermodal Facility
Worchester, MA
Croxton, NJ Little Ferry, NJ
Rutherford, PA
Baltimore, MD
Marion, OH Greencastle, PA
Kansas City, MO
Norfolk, VA
Ports Memphis, TN
Los Angeles, CA Shreveport, LA
Charlotte, NC
Atlanta, GA Charleston, SC
Dallas, TX
Meridian, MS Jackson, MS
Wylie, TX
Savannah, GA Jacksonville, FL
Kendleton, TX Laredo, TX Salinas Victoria, NL
© 2016 Kansas City Southern
Miami, FL
Altamira, TM San Luis Potosi, SL
Tampico, TM
Mexico City, DF Veracruz, VZ Lázaro Cárdenas, MH
Toluca, EM
13
Lázaro Cárdenas Growth Plans
APMT Container Terminal • Opening Q4 2016 • Initial capacity: 1.2 mill TEU p.a.
© 2016 Kansas City Southern
HPH Container Terminal • Opened Dec 2007 • Current capacity: 2.0 mill TEU p.a.
14
Energy Reform is a reality: Business Opportunities
© 2016 Kansas City Southern
Importation of LPG Importation of refined products (gasoline, diesel & biofuels) Steel pipe for oil fields and natural gas transmission Shale oil (CBR) shipments from Mexican basins Importation of frac sand Increased fuel oil moves
15
© 2016 Kansas City Southern
New Gulf Region Ethylene and Plastics Plants
16
© 2016 Kansas City Southern
The KCS Cross Border Network Connects Major Grain Producers to Major Grain Consumers
SOURCES: Office of the US Trade Representative, USDA, Daniels Trading, Corn Supply-Demand US & State Details. William J. Hudson. The ProExporter Network. July 18, 2012, Produccion-Consumo de Maiz 2012. Grupo Consultor de Mercados Agricolas . June 2012
17
KCS Invests in its Partners
© 2016 Kansas City Southern
Innovation Creativity Teams working together
Stormy Kromer® Award
18
© 2016 Kansas City Southern
KCS wants to be the easiest to do business with you!
19
© 2016 Kansas City Southern
More Options for a Turbulent Global Marketplace!
20
