Union Pacific 2007 Annual Report Download - page 30

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26
Industrial Products – Volume declines more than offset
price increases, driving industrial products revenue
lower in 2007 compared to 2006. Continued softening
of the housing construction market, surplus
inventories, and general market uncertainty resulted in
lower lumber shipments. Delays of rail expansion
projects, customer production problems, unfavorable
weather, and the ongoing impact of a weak residential
construction market reduced stone shipments during
the year.
Price increases and fuel surcharges improved revenue
and ARC in 2006 over 2005. Volume levels declined due
to lower lumber, paper, and newsprint shipments,
which were partially offset by higher steel shipments.
The softening of the housing construction market, lower production levels, and general market uncertainty
drove the reduction in lumber shipments. Conversely, strong domestic markets throughout most of the year
drove the increase in construction-related steel material and pipe, particularly those materials used in oil and
gas drilling. Hurricane Rita reduced shipment volumes of industrial products in 2005, which favorably
affected volume comparisons with 2006.
Intermodal – Price increases improved intermodal
revenue in 2007 compared to 2006. Volume was flat
versus 2006 as increased domestic traffic due to new
service offerings and increased business under some of
our older, long-term contracts were offset by a decrease
of premium shipments. International traffic was flat in
2007 compared to 2006 due to general softening of
imports from Asia.
Record volume growth, fuel surcharges, price increases,
and index-based contract escalators combined to
improve revenue in 2006 over 2005, in addition to the
favorable impact from weaker intermodal revenue
during 2005 due to the January West Coast storm.
Carloadings grew due to strong imports, primarily from Asia, partially offset by decreased domestic traffic.
ARC improved due to price increases, fuel surcharges, and contract escalators.
Mexico Business – Each of our commodity groups includes revenue from shipments to and from Mexico.
Revenue from Mexico business increased 5% to $1.44 billion in 2007 compared to 2006. Price increases and
more shipments of automotive parts and intermodal containers drove revenue growth in 2007. Volume
declines in cement, some agricultural products, and newsprint shipments partially offset the increases.
Revenue from Mexico business increased 23% to $1.37 billion in 2006 compared to 2005. Price increases, fuel
surcharges, and increased shipments of finished vehicles, automotive parts, import beer, dry feed ingredients,
and intermodal drove revenue growth in 2006. Volume declines in coal, newsprint, and sulfur shipments
partially offset the increases.