(The following story by John D. Boyd appeared on the Journal of Commerce website on July 29, 2009.)
WASHINGTON, D.C. — Eastern-U.S. carrier Norfolk Southern Railway saw its profit plunge 45 percent from a year earlier in the April-June quarter to $245 million, as revenue fell 33 percent to $1.9 billion.
The net income was mildly above Wall Street expectations, but the revenue drop outpaced a 29 percent cost reduction and a 26 percent fall in freight volume.
“Second-quarter results obviously reflect the impact of the recession,” said Charles W. Moorman, NS chairman, president and CEO. But he said it was still a “solid” performance that showed the company cutting costs, maintaining service levels and still investing in capacity improvements that would position it better for when the economy picks up.
One reason that revenue fell so much, as with other railroads, was that fuel surcharges were much lower than at the same point in 2008, when diesel prices were hitting record highs and fuel fees were still rising to catch up.
Donald W. Seale, executive vice president and chief marketing officer, said a negative mix of traffic also weighed on sales. The mix of cargo types and haulage distance determines revenue and yield, and can vary significantly year to year.
The lower fuel revenue and mix changes helped cut average revenue per shipment down 10 percent to $1,315, Seale said, even though the company was able to boost overall pricing by 7 percent.
Cost cuts by NS included reducing average quarterly employment by 2,183 workers or 7 percent to 27,987.
Seale said “economic conditions remain unstable and uncertain for the second half of the year, but it does appear we have experienced a bottom in the economy.”
NS looks for “continued year-over-year declines through the second half for most of our commodities” based on tough comparison levels in 2008, he said, but growth in special or project traffic would help offset some of the traffic decline while NS officials “expect continued pricing improvement ahead.”