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Kansas City Southern's CEO Discusses Q2 2012 Results - Earnings Call Transcript

The second aspect that makes cross-border intermodal important to us is that it represents some of the longest haul traffic on our network, which along with the high incremental margins we’re enjoying in this business segment makes this line of business quite profitable.

I don’t want to steal all of Pat’s thunder, but by no means was cross-border intermodal the only bright, shiny object in the second quarter. Traffic on Lazaro Cardeñas remains strong and automotive continues to grow rapidly. We’re also experiencing the ripple effect of automotive growth on our other commodity areas. And as Dave Ebbrecht will illustrate in a few minutes, KCS’ operational performance continues to excel and our safety statistics just get better and better. The two really go hand-in-hand. As you have heard me say in the past, a safe railroad is inevitably a well-run railroad, and that KCS is both is having a very definite, positive impact on our profitability.

While there are certain mixed signals regarding the direction of the economy, we do feel that some of the bright spots in the economy are having positive impacts on our business. Most notably the surge in automotive sales is certainly being felt in a number of our commodity groups. More over, the very solid manufacturing numbers we’re seeing related to Mexico are being reflected in our KCS volumes. I don’t by any means want to suggest that KCS is immune from the mood of uncertainty which is prevalent regarding the direction of the global economy. We are certainly impacted by it, but there are enough positives in the economy for KCS to maintain strong volume growth in the present business environment.

We are also very satisfied with the outcome of the Mexican presidential election. José Zozaya has a good working relationship with President-Elect Peña Nieto. We believe his administration will be pro-business and we’re confident that the relationship between our company and the Mexican government will remain solid and positive.

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