DAVID TWIDDY

The Associated Press

KANSAS CITY, Mo. (AP) -Regional railroad operator Kansas City Southern reported a much smaller second-quarter profit Thursday as the economy and lower fuel prices slashed revenue by 30 percent.

The Kansas City-based company said it earned $6.7 million, or 7 cents per share, during the three months ending June 30. By comparison, it earned $50.5 million, or 56 cents per share, during the same period a year ago.

Revenue during the quarter fell 30 percent to $341.3 million.

Analysts surveyed by Thomson Reuters had expected earnings of 10 cents per share on $370.5 million in revenue.

"The first six months of 2009 presented KCS with the harshest business environment in many decades," CEO Michael Haverty said.

Kansas City Southern, like other railroads, is suffering from a lack of freight as production dries up in the weak economy. Volume fell in all categories for a total decline of almost 19 percent, while much lower fuel prices from a year ago caused revenue from fuel surcharges that customers pay on their shipments to decline by 72 percent.

Railroad officials said they offset some of the damage by cutting operational costs 22 percent from a year ago, including a reduction in insurance, fuel and employee expenses.

Kansas City Southern, which also operates in Mexico, said it realized a $6 million gain during the quarter on a stronger peso, slightly higher than the $5.7 million it realized a year ago.

Haverty expressed "cautious optimism" about the second half of the year, saying he's seen signs that business in the U.S. and Mexico is stabilizing. He also said the company has completed construction of a new 90-mile rail line between Victoria and Rosenberg, Texas, that he said will provide cheaper and more efficient access to U.S. and Mexican markets.

Kansas City Southern shares rose 84 cents, or 4.3 percent, to $20.51 in Thursday morning trading.