New Berkshire CEO: BNSF needs to improve its profitability

BNSF’s 2025 operating ratio of 65.5% was 5.7 points behind the 59.8% performance of western rival and industry leader Union Pacific. (NYSE: UNP)

“The gap to the industry’s best remains too wide and closing it will require continued improvements in efficiency and service. Each one-percentage-point improvement in operating margin generates approximately $230 million of incremental operating cash flow for our owners,” Abel wrote. “The team recognizes the significance of this opportunity, and we will be disappointed if we do not deliver a substantial improvement over the next few years.”

Abel’s letter indicated that the core principles Buffett set remain intact – including letting the conglomerate’s companies have a large degree of autonomy.

This past year BNSF produced $8.1 billion in net operating cash flows and returned $4.4 billion to Berkshire in the form of dividends. That was slightly above the five-year average of $4.1 billion.

BNSF’s operating earnings increased 7.8% last year, to $8.05 billion, on flat revenue of $23.3 billion. Net earnings increased 8.8%, to $5.47 billion. The railroad’s operating expenses declined 3.7%.

For the year, the railway’s overall volume was relatively flat at 0.3% over 2024. Three of BNSF’s four business segments gained volume for the year.

Consumer products – which includes intermodal and automotive traffic — increased 1.2%. “The volumes increase was primarily due to higher intermodal shipments resulting from higher West Coast imports and a new intermodal customer, and an increase in automotive vehicle volumes,” Berkshire said.

Industrial products segment volume declined 4.6%, largely due to declines in shipments of construction products, plastics, and petroleum products.

Agriculture and energy products shipments increased 3.2% due to higher grain exports and petroleum fuel shipments, partly offset by declines in domestic grain and feed volume.

Coal traffic was up 1.1% as higher natural gas prices made coal more competitive for electricity generation.

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