No. 1 U.S. railroad Union Pacific Corp reported a lower quarterly net profit on Thursday as freight volumes dropped 6 percent. Still, profit beat expectations, thanks to higher freight rates charged to customers. The fall in freight at Union Pacific was led by a sharp decline in coal shipments. The company said it expected freight volumes to remain down during the second half of the year. All of the major U.S. railroads have been hit by lower coal freight volumes as power plants have shifted more to burning cheap natural gas amid low energy prices. Coal exports have also been hurt by a strong U.S. dollar, which has made the commodity less competitive against foreign coal producers. During the second quarter, Union Pacific saw coal volumes plummet 26 percent. Agricultural products were also down 7 percent and industrial products were off 13 percent. Automotive and intermodal shipments - the latter consist of standardized containers carrying consumer goods that can be hauled by ship, truck or train - provided some relief for the railroad, rising 7 percent and 2 percent respectively. The company saw its operating ratio, a key performance metric for analysts who follow the sector, improve by 0.6 of a percentage point to 64.1 percent. The railroad said that its core pricing rose 4 percent during the quarter and it benefited from a fuel bill that was 41 percent lower than the same period in 2014. "Solid core pricing gains were not enough to overcome a significant decrease in demand," Union Pacific chief executive officer Lance Fritz said in a statement. "We will continue to reduce costs and improve productivity as we further align resources with demand." The Omaha, Nebraska-based company reported second-quarter net income of $1.2 billion, or $1.38 per share, down 8 percent from $1.3 billion, or $1.43 per share, a year earlier. Analysts had expected earnings of $1.35 a share. The company posted second-quarter revenue of $5.4 billion, down 10 percent from $6 billion a year earlier. Analysts had expected revenue of $5.6 billion for the quarter.