NS Posts 2nd Quarter Drop in Operating Revenue

Norfolk Southern Corporation reported that its second quarter operating revenue fell 11 percent to $2.7 billion. The railroad company attributed the drop to weak coal demand and lower fuel surcharges revenues.

Income from railway operations was $814 million, a drop of percent.

Nonetheless, NS reported that it posted a net income of $433 million, even though it was a drop of 23 percent, and diluted earnings of $1.41 per share, a drop of down 21 percent.

The company’s volume was 1.9 million units, down 2 percent, and its operating ratio was 70 percent, a gain of 3.5 points compared with the second quarter of 2014 results.

NS also said that its operating expenses declined 6 percent to $1.9 billion because fuel costs plunged 38 percent to $519 million and materials and other supply costs dropped 5 percent to $235 million.

In a news release, the company said its financial performance was affected by falling natural gas prices, declining fuel surcharges and growing oversupply globally.

Domestic utility coal volume fell 23 percent to 175,400 units and export coal volume plunged 38 percent to 36,600 units. Total coal revenue fell 33 percent to $453 million while volume declined 21 percent to 275,700 units.
General merchandise revenue decreased 5 percent to $1.6 billion but volume inched up 1 percent to 661,500 units.

Volume growth in chemicals, automotive and paper shipments helped to offset traffic declines in steel, fertilizers and wheat. Chemicals volume rose 13 percent to 137,300 units primarily due to traffic gains in crude oil and natural gas liquids.
Intermodal revenue slipped 3 percent to $633 million, but volume rose by 2 percent to 999,900 units.

NS President and Chief Executive Officer James Squires said the volume growth in intermodal and merchandise was encouraging as were significant service improvements.

He said there remain good prospects for volume growth in the near and long term in the intermodal, energy, manufacturing and housing markets.

“We are confident in our long-term strategy,” Squires said. “Norfolk Southern is well positioned to continue improving service, which will reduce costs and add value to our customers. We have a strong legacy of success, and we are taking the right steps to continue value creation.”

Executive Vice President of Finance and Chief Financial Officer Marta Stewart said that NS has scaled back its capital spending budget for 2015 by $130 million or 5 percent. Earlier this year, NS had projected 2015 capital expenditures of about $2.4 billion.

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