Norfolk takes $387 million charge due to Ohio derailment, warns on volumes

Reuters | April 26, 2023

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(Reuters) -U.S. railroad operator Norfolk Southern Corp took a $387 million charge in the first quarter due to the Ohio freight train derailment and said it expects economic headwinds to weigh on its volume and revenue during the April-June period.

Shares of Norfolk, which operates in 22 states and the District of Columbia, slipped 1.1% in afternoon trade on Wednesday.

Norfolk has come under heavy fire after one of its freight trains carrying hazardous materials derailed in East Palestine, Ohio in early February, spewing toxins into the air and water.

The U.S. Justice Department sued Norfolk last month, seeking to ensure that the railroad operator pays the full cost of cleanup and any long-term impacts of the derailment.

“(The charges) do not reflect any amounts potentially recoverable under the company’s insurance policies,” the company said on Wednesday, after reporting adjusted quarterly profit above analysts’ estimates on the back of robust pricing and demand for freight.

The company joined peer Union Pacific in issuing a cautious volume outlook as consumers faced with a slowing economy and sticky inflation tighten their discretionary spending.

“Within our Intermodal markets, volume in 2023 will be largely dependent on economic conditions, particularly the health of the American consumer” Norfolk’s marketing head, Claude Elkins, said on a post earnings call with analysts.

“Looking at the back half of ’23, clearly, the economic conditions remain uncertain.”

Norfolk posted an adjusted profit of $3.32 per share for the first quarter, compared with analysts’ average estimate of $3.12 per share, according to Refinitiv data.

Revenue rose 7.4% to $3.13 billion, edging past analysts’ estimates of $3.11 billion.

(Reporting by Amna Karimi and Nathan Gomes in Bengaluru; Editing by Subhranshu Sahu)