The early February derailment of a Norfolk Southern train in East Palestine took a toll on the company’s first quarter financial performance.
NS said this week that first quarter earnings were down 34 percent to $711 million.
Company officials said earnings took a hit due to a $387 million charge associated with the derailment, which spilled hazardous substances and forced hundreds of people to evacuate their homes for several days.
The charge doesn’t reflect the potential for insurance reimbursements.
NS CEO Alan Shaw also said during an earnings call that NS also suffered because of changes in operating practices, specifically changing how it assembles and operates long, heavy trains.
That change was made, NS officials said, in an effort to reduce in-train forces that could lead to a derailment.
During the first quarter of 2023, NS said revenue increased 7 percent, to $3.1 billion, while earnings per share fell 30 percent, to $2.04.
Adjusted for the effect of the costs associated with the East Palestine derailment, operating income was up 1 percent, to $1.1 billion, and earnings per share increased 13 percent, to $3.32. The operating ratio rose a whopping 14.3 points to 77.3 percent. In the first quarter of 2022, the OR had been 64.9 percent.
During the first quarter merchandise and coal traffic rose 5 percent while intermodal volume was down 4 percent.
The East Palestine derailment adversely affected NS operations in multiple ways. For a few days no trains could operate past the derailment site.
Once operations on the Fort Wayne Line resumed through East Palestine, trains were forced to operate at slower speeds, which had cascading effect.
NS also pledged to remove all of the soil and ballast between both tracks at the derailment site to remove any traces of spilled hazardous substances.
That work has been completed on one of the two mainline tracks, but won’t be completed on the other track until June.
The Fort Wayne Line through East Palestine is part of the busy NS route between Chicago and New York.
During the conference call, NS executives discussed the effects on it network of the operating changes it made to network.
The changes have affected 70 percent of manifest freights and 17 percent of intermodal trains. The result has been increased dwell times in terminals, a deterioration of on-time performance and slower average train speeds.
The use of distributed motive power has increased on half of the NS merchandise train network.
“We got really conservative on our train marshaling rules based on the environment and recent events,” Shaw said. “As we are dialing that in, and analyzing each train symbol and line segment, we are adding capacity back into the network.”
Chief Operating Officer Paul Duncan expects the adverse effects of operating changes to be short term.
“As we dial in our train makeup enhancements, we are already seeing improvements to our network in recent weeks,” he said.
Shaw contended that NS is a safe railroad, saying the accident rate fell 10 percent during the first quarter compared with all of 2022. The railroad’s mainline accident rate declined 13 percent while the personal injury rate improved by 12 percent.
At the same time Shaw said NS continue to do more to seek to become even safer.
This has included more training for field supervisors and installing additional hot bearing detectors.
NS executives said the carrier is still short of full crew staffing levels in a third of its crew bases despite an aggressive push to hire additional workers.