Norfolk Southern Corporation · NYSE:NSC
Norfolk Southern — Credit Suisse 3rd Annual Industrials Conference 2015
19 slides from Norfolk Southern's conference presentation, Dec 2, 2015
Slide 1: Credit Suisse 3rd Annual Industrials Conference
1 Credit Suisse 3rd Annual Industrials Conference December 2, 2015 Alan H. Shaw Executive Vice President and Chief Marketing Officer
Slide 2: Guiding Principles Committed to Advancing Shareholder Interests
Guiding Principles Committed to Advancing Shareholder Interests 2 Advance shareholder interests through operating performance and financial strategy Deliver safe, reliable, efficient service Maximize incremental margin Reinvest in the core franchise Return capital to shareholders
Slide 3: Revenue
Revenue $ in Millions & y-o-y Percent Change Revenue in $ Millions Railway Operating Revenue First 9 Months 2015 vs. 2014 Merchandise $4,757 (5%) Coal $1,390 (24%) Intermodal $1,846 (4%) $7,733 $7,598 $1,021 $395 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 2014 2015 Revenue Less Fuel * Fuel Surcharge
Slide 4: Volume declines reduce revenue with lagged expense reduction
Volume declines reduce revenue with lagged expense reduction Low commodity prices impacting coal, steel, and grain Increased truck capacity Strength of the US dollar negatively impacting all export activity ‒ Dollar up 13% versus November 2014 Utility impacted by mild weather Steel product
Slide 5: Class I Railway Volume Fourth Quarter through Week
Class I Railway Volume Fourth Quarter through Week 46 (November 21, 2015) 5 *Includes CSXT, UP, and BNSF Units (000’s) & y-o-y % Change NS Other US Rails Combined* Agriculture 60 (3%) 303 3% MetCon 91 (14%) 250 (16%) Paper 35 (0%) 110 (4%) Chemicals 86 2% 401 (8%) Automotive 62 9% 167 5% Merchandise
Slide 6: Expected Expense Headwinds for 4Q 2015
Triple Crown Roanoke Restructuring Closure Total Accelerated depreciation $ 36 $ -- $ 36 Moving and other costs 8 6 14 Effect on Operating Expenses $ 44 $ 6 $ 50 6 Expected Expense Headwinds for 4Q 2015
Slide 7: Intermodal Growth Impacted by Triple Crown Restructuring; Accretive to the Bottom Line
Allows focus on Triple Crown’s key business segment – auto parts – TCS annual revenues of $350 million Negative impact to Intermodal volume and revenue per unit – RPU over 100% higher than conventional RPU – Creates a $6 decrease in the average Intermodal RPU Accretive to bottom line once rest
Slide 8: Rapid Decline of Commodity Prices Since Late 2014; Projected Stabilization in 2016
Rapid Decline of Commodity Prices Since Late 2014; Projected Stabilization in 2016 8 Source: Bloomberg Low commodity prices and strength of the US dollar impacting demand for: Utility Coal Export Coal Crude Oil Steel Export Grain International Intermodal Expect stable commodity volumes d
Slide 9: Truck Capacity Presents Near-Term Challenges, Long-Term Opportunity
Truck Capacity Presents Near-Term Challenges, Long-Term Opportunity 9 Short-term domestic intermodal challenges: ‒ Increased truck capacity limiting near term growth ‒ Service impacting ability to convert truckload freight ‒ TCS Restructure Long-term opportunity: ‒ Tighter capacity due to driver
Slide 10: International Intermodal Growth Slower in 4Q; Return to Trend Projected for 2016
International Intermodal Growth Slower in 4Q; Return to Trend Projected for 2016 10 “Weak Peak” with import volumes recently declining year-over-year ‒ East Coast seeing deceleration of growth; West Coast declines Export volumes continue to be depressed by strong US Dollar, weak demand condition
Slide 11: Emphasis on Contribution Growth Ahead
Opportunities: ‒ Consumer-driven markets • Automotive • Housing and Construction related commodities • Basic Chemicals ‒ International and domestic intermodal gains long-term Strategies to Drive Growth: ‒ Continued focus on pricing improvement ‒ Improving productivity and efficiency ‒ Network re
Slide 12: Anticipated Growth in Consumer Driven Markets
Anticipated Growth in Consumer Driven Markets 12 Source: WardsAuto; EIA Automotive: ‒ North American vehicle production projected to increase 2.7% in 2015; 2.0% in 2016 ‒ US vehicle sales up 5.9% through October Ethanol: ‒ Production and consumption to increased versus 2014 levels Basic Chemic
Slide 13: Expect Continued Improvements in Pricing with Mix Challenges
13 Expect Continued Improvements in Pricing with Mix Challenges $1,664 $532 $2,359 $1,326 $1,666 $544 $2,420 $1,343 $0 $1,000 $2,000 $3,000 Coal Intermodal Merchandise Total 3Q14 3Q15 +1% +3% +2% +0% Third Quarter Revenue per Unit Less Fuel* Despite excess capacity in rail and truck, pricing conti
Slide 14: Fuel Surcharge Headwinds Will Be Lower in 2016
Fuel Surcharge Headwinds Will Be Lower in 2016 $95.56 $101.07 $103.11 $91.15 $60.81 $51.07 $56.71 $44.88 $44.72 $0 $20 $40 $60 $80 $100 $120 $0 $50 $100 $150 $200 $250 $300 $350 $400 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 (F) 2016 Avg (F) WTI $/barrel* Revenue ($M) 14 * Note
Slide 15: Service Improvements Provide Revenue Opportunities
15 20 25 30 35 40 45 Dwell (Hrs) 15 * Data through November 27, 2015 23.4 hrs 2013 2014 2015 16 18 20 22 24 26 Speed (mph) 23.8 mph Service Improvements Provide Revenue Opportunities Better( ) Better( )
Slide 16: Drivers of Future Success
Recent initiatives set the stage for better performance in 2016 and will produce long term results Service improvements distinguish our product Coal ‒ No impact from environmental regulations in the near term in our Utility franchise ‒ Less exposure in the Export Thermal market Intermodal ‒
Slide 17: Strong Network Supports Future Growth
Strong Network Supports Future Growth 17
Slide 18: Committed to Driving Growth to the Bottom Line
Committed to Driving Growth to the Bottom Line Asset Utilization and Resource Sizing Continued Service Initiatives Pricing Volume Our Focus 18
Slide 19: Thank You
Thank You Pepin
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