A net income of $452 million, or $1.49 per diluted share, compared with $559 million, or $1.79 per diluted share in third-quarter 2014, combined with an operating revenue that declined by 10%, led to a tough third-quarter 2015 for Norfolk Southern (NS), the railroad reported on Oct. 28, 2015.
Third-quarter results, which included $37 million of expenses associated with restructuring the company’s Triple Crown Services subsidiary and closing its Roanoke, Va. office, together reduced net income by $23 million, or $0.08 per diluted share, NS said.
“Norfolk Southern’s third-quarter results reflect commodities markets that continue to soften, as well as costs associated with restructuring initiatives to strengthen our company going forward,” said NS Chairman, President and CEO James A. Squires. “These pressures will linger in the fourth quarter, while traffic volume to date continues to lag last year. However, looking ahead to 2016, we are confident that with a reasonable stable economy and our own intense focus on service, returns and growth, we are poised for better results.”
NS’ railway operating revenues declined 10% to $2.7 billion, “largely due to reductions in fuel surcharge revenues in each of the railroad’s three commodity groups, and continued reductions in coal shipments,” NS said. Overall volume declined 3% to 1.9 million units for the quarter. Railway operating expenses declined 7% to $1.9 billion, primarily due to lower fuel costs, compared with the same period of 2014. Income from railway operations was $822 million, 18 % lower compared with third-quarter 2014. The railway’s operating ratio was 69.7%, compared with 67.0% in the same quarter last year.
General merchandise revenues were $1.6 billion, 7% lower than the same period last year. Volume declined 1% “largely due to a 9% decline in metals and construction traffic due to softer steel production,” NS said. Four of the five general merchandise commodity groups reported lower revenue results on a year-over-year basis, principally the result of lower fuel surcharge revenue. These include: chemicals, $451 million, down 8%; metals/construction, $330 million, down 20%; automotive, $246 million, down 3%; and paper/forest, $203 million, down 3%. Agriculture rose 4% to $380 million.
Intermodal revenues were $621 million, 7% lower compared with third-quarter 2014, “as lower fuel surcharges and domestic shipments combined to reduce revenues,“ NS said. Total volume declined 1%.
Coal revenues were $482 million, 23% lower compared with third-quarter 2014. “A weak global export market and lower natural gas prices in the utility market combined to decrease volume by 16%, “ NS said.