Union Pacific Corporation · NYSE:UNP
Union Pacific — Union Pacific 2008 Analyst Conference
28 slides from Union Pacific's conference presentation, 2008
Slide 1: Marketing Strategy & Outlook
Marketing Strategy & Outlook Jack Koraleski, EVP – Marketing and Sales
Slide 2: Strong Growth Performance
Strong Growth Performance Revenue $ Billions 2003 - 07 CAGR $15.5 $14.8 Revenue 8.9% Volume 1.3% ARC 7.5% $12.9 $11.6 GDP $10.9 2003 2004 2005 2006 2007 2
Slide 3: Core Price Improvement
Core Price Improvement 6.9% 6.0% 5.0 - 6.0% 5.2% 1.5% 0.7% 2003 2004 2005 2006 2007 2008E 3
Slide 4: Focus On the Customer
Focus On the Customer Resources Process Customer Customer Improvement Value Satisfaction Capital Investment 4
Slide 5: Customer Satisfaction
Customer Satisfaction Key Satisfaction Drivers (2007 vs 2006) Corrective Action Overall Satisfaction at Post- (Transportation) +10 SP Merger Record Competitive +4 15 of 35 Questions at Best Prices Ever Levels Transit Times (Last 12 mos.) +13 79 72 Consistency +13 64 Local Switching +9 NCSC Problem R
Slide 6: The Strength of a Unique Franchise
The Strength of a Unique Franchise Vancouver Diverse Business Mix Seattle Fastest Growing States Eastport Portland Duluth Twin Cities Port Access Oakland Salt Lake Omaha Border Crossings City Denver Kansas City St. Louis Agricultural Los Memphis Intermodal Products Angeles Calexico Dallas 19% 17% Au
Slide 7: Mexico … A Key Link
Mexico … A Key Link Revenue Growth ($Billions) 61% $1.44 $1.37 $1.11 $0.97 $0.89 Calexico Nogales El Paso Hermosillo Eagle Pass Chihuahua Monclova Laredo 2003 2004 2005 2006 2007 Torreón Brownsville Monterrey Saltillo Culiacán San Luis Potosí Aguascalientes Tampico Querétaro Mérida Guadalajara Verac
Slide 8: Linking Production and Consumption: Agricultural Products
Linking Production and Consumption Agricultural Products – $2.61 Billion Revenue (2007) Access Major Grain and Produce Regions Grain Produce Export Flexibility to Meet Demands of the Market Dairy Major Grain & Produce Grain Products Ethanol Dairy Region Feed/Processors Dairy, Poultry Export Cattle,
Slide 9: Linking Production and Consumption: Chemicals
Linking Production and Consumption Chemicals - $2.29 Billion Revenue (2007) Access Eastport Line Chemical Gulf Coast Wyoming Soda Ash / Soda Ash / Trona Ore Trona Ore Eastport Line / Canadian Interchange PNW and Gulf Ports Infrastructure Gulf Coast 5 Major Classification Yards 10 Major Terminals Por
Slide 10: Linking Production and Consumption: Energy
Linking Production and Consumption Energy - $3.13 Billion Revenue (2007) • Access UP Coal Network – Most Abundant, Lowest Cost and Secure Fuel Source • SPRB (72%) • Colorado/Utah (17%) • Other (11%) – River Terminals & West Coast Ports • Infrastructure – Cycle Time Advantage SPRB Coal Utility Plant
Slide 11: Linking Production and Consumption: Automotive
Linking Production and Consumption Automotive - $1.46 Billion Revenue (2007) • Access – 7 Assembly Plants – 38 Auto Ramps – Vehicle Ports – Mexico Market • Infrastructure – 30%+ Ownership of Fleet UP Distribution Centers Private Distribution Centers Assembly Centers Gateways to Mexico Ports 11
Slide 12: Linking Production and Consumption: Intermodal
Linking Production and Consumption Intermodal - $2.93 Billion Revenue (2007) • Access – Route Advantage: • Fast Growing LA- Texas/Southeast Market • North/South Lanes • PNW - Memphis • Northern California – Chicago – West Coast Ports – Mexico Border Crossings • Infrastructure – New Terminals – EMP B
Slide 13: Linking Production and Consumption: Industrial Products
Linking Production and Consumption Industrial Products - $3.10 Billion Revenue (2007) • Access Lumber, Paper – Lifeline of the Economy Industrial – Over 200 Lumber Mills Sand – Extensive Coverage of Mineral Deposits Copper & – Rock Network Aggregates Other Non- Lime • Infrastructure Ferrous Minerals
Slide 14: Key Opportunities for Growth
Key Opportunities for Growth Global Demand Growing Dependence on Rail Legacy Contracts 14
Slide 15: Global Demand: Energy
Global Demand: Energy U.S. Electric Power World Demand for Coal Generation by Fuel Type 225 3,500 200 Coal 3,000 Million Kilowatt Hours % 175 57 Quadrillion BTUs 2,500 150 125 2,000 100 1,500 75 Nuclear 1,000 50 Natural Gas 500 Renewables 25 Petroleum 0 0 1980 1990 2000 2010 2020 2030 1980 1990 2000
Slide 16: Global Demand: Energy
Global Demand: Energy Coal Seattle Far East Export Western Base Growth Chicago Renewed Market Midwestern Oakland Development Growth Eastern Demand for St. Louis Western Coal Memphis Long Beach Eagle New Orleans Pass Mexico Europe Export Market Growth via River 16
Slide 17: Global Demand: Energy
Global Demand: Energy Transmission Pipeline Pipeline Express North American Pipeline Expansion (Miles) 4,753 3,974 3,353 UP Pipeline Express 2,410 (Carloads) 1,781 8,490 1,460 6,054 1,152 1,960 2005 2006 2007 2008E 2009E 2010E 2011E 2005 2006 2007 Industry Sources 17
Slide 18: Global Demand: Energy
Global Demand: Energy Frac Sand Frac Sand (Carloads) 27,334 20,809 17,366 13,333 U.S. Rig Count 9,950 1,415 1,303 1,108 2003 2004 2005 2006 2007 2005 2006 2007 Source: Baker Hughes 18
Slide 19: Global Demand: Energy
Global Demand: Energy Wind Turbines Wind Turbine Carloads 2,700+/- Estimated Wind Electrical Generation 100 (Billion KW Hrs) 921 80 743 60 40 20 2006 2007 2008 0 Outlook 2005 2007 2009 2011 2013 2015 Source: Energy Information Administration, 2008 19
Slide 20: Global Demand: Energy
Global Demand: Energy Ethanol Origin Base U.S. Ethanol Production 68% of U.S. Ethanol Capacity Production Billion Gallons per Year 16 Destination Unit Train Development 12 Flexible Franchise 8 Unit vs. Manifest 4 Interior vs. Forward Plants 0 1999 2003 2007 2011 2015 Production Conventional RFS Sour
Slide 21: Global Demand: Grain and Food
Global Demand: Grain and Food Drivers World Wheat and Coarse Increasing Population Grains & Milled Rice Changing Diets 2,200 Millions of Metric Tons Biofuels 2,100 Opportunity Flexible Ag Franchise – 2,000 Food vs. Export vs. Fuel Meat and Poultry Exports 1,900 Fertilizer Potash Exports 1,800 1998/9
Slide 22: Global Demand
Global Demand Freight Revenue First Quarter 2008 Diverse Franchise Creates Opportunity Throughout Economic Cycles Strong Dollar Drives Imports and Overall Domestic Economic Growth 72% Weak Dollar Spurs Export Growth and Substitution of Domestic Production for Imports Other Other Exports Imports 11%
Slide 23: Growing Dependence on Rail
Growing Dependence on Rail Highway Congestion Driver Shortages 2035 Highway Infrastructure Rail – The “Green” Alternative Three Times More Fuel Efficient Than Trucks One Intermodal Train Can Take Up To 280 Trucks Off The Highway Source: FHWA HPMS data Source: FHWA HPMS Data 23
Slide 24: The Opportunity for Growth
The Opportunity for Growth Total Western Market*: $103 Billion Truck/ Western Other Rails 71% 29% *Truck, rail, barge and air traffic – haul lengths over 500 miles Source: Company Reports and Reebie Data 24
Slide 25: Auto Parts Intermodal Service
Auto Parts Intermodal Service Detroit – Mexico Bi-directional Service Detroit Chicago Daily Seamless Interline Service Between Detroit and Mexico Salem More Capacity Available to Handle Business Growth Equivalent to 35,000 Trucks Off the Highway Laredo Mexico 25
Slide 26: Produce Railexpress
Produce Railexpress Success Factors Train Starts 78 Transit Days 4.4 Truckload 15,015 Equivalents Links Growers and Shippers Delivered 99.9% with Retail and Food Service On-Time Distribution Performance Currently One 55-Car Train Per Week Wallula, WA So. Schenectady, NY Only Railcar Service in the U
Slide 27: Legacy Contracts
Legacy Contracts Total Percent of Revenue Percent of Legacy Revenue Industrial Products & Agricultural Chemicals 2% 8% 2008 6% Autos 2009 10% 3% 3% 2010 Energy Re-priced 6% 2011 44% 74% Intermodal 8% 2012+ 36% 27
Slide 28: Going Forward: 5-Year Outlook
Going Forward 5-Year Outlook CAGR Revenue 6 - 8% Volume 2 - 3% Price 5 - 6% Franchise Provides Opportunities for Growth in All Market Conditions Well-Positioned to Move the Resources the World Needs Legacy Contracts Customer Value Drives Growth and Price Improvement 28
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