Norfolk Southern Corp. said Monday that profit for its latest
quarter dropped 23% as declining demand for coal—a key commodity
for the rail sector—weighed on the railway's results.
Revenue linked to the transport of coal was $453 million for the
three-month period ended in June, Norfolk Southern reported on
Monday, some 33% lower compared with the same time frame last year.
Volume of the commodity dipped 21%, driven by a nearly quarter less
demand from domestic utilities and 38% less demand in exports.
There has been less demand for coal from U.S. electricity
utilities as natural-gas prices have fallen, making the alternative
attractive. And slowing economic growth in China and the
strengthening of U.S. dollar—which makes most American products and
services more expensive overseas—has also dented coal exports.
Sliding fuel prices have also pinched fuel-surcharge fees, a key
revenue stream for railways.
Previously, Norfolk had reported that coal carloads for the year
through June 27 had declined some 21% compared with the same period
a year before. Dropping fuel prices have also cut into
fuel-surcharge revenue. Also this month, Jacksonville, Fla.-based
railroad company CSX Corp. reported that sagging coal shipments had
contracted its revenue. Overall, Norfolk Southern reported a profit
of $433 million, or $1.41 a share, down from $562 million, or $1.79
a share, a year earlier. Revenue decreased 11% to $2.71 billion,
with total volume dipping 2% as gains in intermodal and merchandise
traffic were offset by the drop in coal.
Intermodal revenues, or sales from freight movement by two or
more kinds of transportations, were $633 million, 3% lower compared
with the same period a year before as higher volume was offset by
lower fuel surcharges.
Analysts surveyed by Thomson Reuters predicted revenue would
slide some 8% to $2.8 billion with earnings down almost a quarter
compared with the previous year, at $1.42 a share.
Shares of the company's stock fell 1.1% in light premarket
trading.
According to data from the Association of American Railroads,
across the industry coal carloads are down 9.4% for the year to
date through July 4 compared with the same period in 2014, while
metallic ores and metals carloads dipped 5.9%. Total carloads are
down 3.9%, offset slightly by a rise of 2.7% in total intermodal
units, or shipments that use an additional means of transport like
ship or truck along with rail.
Write to Ezequiel Minaya at ezequiel.minaya@wsj.com
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