Norfolk Southern Profit Falls 39 Percent in Q1

Profit at one of the largest eastern-U.S. rail firms, Norfolk Southern, plunged by more than a third in the first quarter from the 2008 period while revenue fell by nearly a quarter in line with its volume decline.

Still, NS had $1.9 billion in first-quarter sales and $177 in net income. It also cut costs about 19 percent – mostly due to falling diesel prices but also through employee layoffs -- and ended the quarter with a bolstered cash position of $884 million from $618 million a year earlier.

“Current economic conditions were clearly reflected in Norfolk Southern’s first-quarter results,” said Charles W. Moorman, the chairman, president and CEO. “We are responding by aggressively controlling costs, while enhancing our service and continuing to invest in projects that will drive future growth.”

Stock analysts noted that the profit was weaker than expected, and one said the railroad cut headcount by a mild 2 percent year over year. But Moorman said the NS approach will “position us to participate in the economy’s eventual recovery as we tightly manage the company in the face of an ongoing reduction in railway traffic volumes.”

The company cited both a 20 percent drop in freight traffic and lower fuel-fee collections for its revenue drop. Its general merchandise sales of $975 million were 28 percent lower than the 2008 first quarter. It held coal revenue to just a 9 percent drop to $602 million, but intermodal fell 25 percent to $366 million.

NS said it averaged 29,597 workers in the period, down from 30,240 a year earlier. But it kept cutting and had 29,162 in March, down 4.2 percent just from November and more than a thousand NS train crew workers are now idled for a 9 percent drop. Chief Operating Officer Mark Manion said overtime pay fell 41 percent from a year earlier.

In equipment, NS officials said they have stored 400 locomotives or 11 percent of the fleet, plus 28 percent of railcars totaling 32,300.

Contact John D. Boyd at jboyd@joc.com.