OMAHA, NEBRASKA (AP) – The costs associated with Norfolk Southern (NS)’s fiery February derailment in Ohio have more than doubled to USD803 million as the railroad works to clean up the mess and moves forward with all the related lawsuits.
NS recorded another USD416 million charge related to the East Palestine derailment on Thursday as part of its second-quarter earnings after previously announcing a USD387 million charge earlier this year. Most of the costs are related to the cleanup of the hazardous chemicals that were released, but USD222 million is a combination of legal fees and the USD63 million of assistance it has offered to the community.
The derailment near the Ohio-Pennsylvania border prompted a national reckoning on railroad safety after thousands of people had to evacuate when officials decided to blow open several tank cars filled with vinyl chloride because they believed they might explode. The resulting fire sent a towering plume of black smoke over the town three days after the derailment that spilled several other hazardous chemicals when the tank cars carrying them ruptured.
The USD803 million cost estimate doesn’t include funds to compensate the East Palestine community for any long-term health effects, drop in home values or drinking water issues because those are still being negotiated, so the total will grow. But NS also expects to eventually recover some of those costs from its insurance and lawsuits against other companies involved in the derailment.
Chief Executive Officer Alan Shaw said he’s “proud of the way our team rose to the challenge” after the derailment, and the railroad will continue to help the community around East Palestine recover while also improving general working conditions on the railroad to address’ employees’ quality of life concerns.
“We are delivering on our commitment to recover service quickly,” Shaw said. “We’re delivering on our commitment to make a safe railroad even safer. We’re delivering on our commitment to address quality of life issues for our hard working craft railroaders. And we continue to deliver on our commitment to make things right for the people of East Palestine and the surrounding communities.”
The additional charges related to the derailment, combined with a six per cent drop in the number of shipments the railroad delivered, more than halved the Atlanta-based company’s profit to USD356 million, or USD1.56 per share. That’s down from USD819 million, or USD3.45 per share, a year ago.
Without the derailment costs, NS said it would have earned USD2.95 per share in the quarter, still well below Wall Street expectations. The analysts surveyed by FactSet Research generally expected NS to report earnings per share of USD3.11.
NS’s revenue declined to USD2.98 billion in the quarter, which also disappointed. Analysts were expecting USD3.08 billion revenue. Shaw said that full-year revenue is likely to be down at least three per cent because of the volume concerns and tough pricing environment with fuel surcharges declining sharply.
The railroad’s traffic was hurt by the derailment because NS had to operate with only one of its two tracks by East Palestine running on a busy corridor.
But consumer demand for imported goods has also weakened, and NS’s main competitor in the east, CSX, has said it was able to pick up some of NS business in the wake of the derailment.
