CHICAGO (Reuters) - U.S. railroad Norfolk Southern Corp (N:NSC) on Monday reported a lower quarterly net profit as coal freight shipments and fuel surcharge revenue fell, and said coal would continue to weigh on results this year.
Like other major railroads, the Norfolk, Virginia-based railroad has seen coal shipments drop off as power plants shift to burning cheaper natural gas amid lower energy prices.
The strong U.S. dollar has also hurt exports as American producers have found it harder to compete against coal mined overseas.
Coal revenue at America's fourth-largest railroad in the second quarter slumped 33 percent to $453 million from $672 million. Coal shipments to utilities fell 23 percent in the quarter, while export coal shipments dropped 38 percent.
During a conference call with analysts, executives said that largely due to lower coal volumes, the company expected revenue in the second half of the year to be lower compared with 2014.
Norfolk Southern reported second-quarter net income of $433 million, or $1.41 per share, down 23 percent from $562 million, or $1.79 per share, a year earlier.
Analysts had on average expected earnings per share for the quarter of $1.42.
The company reported revenue of $2.7 billion, down from $3 billion a year earlier and below analyst expectations of $2.79 billion. The company said falling fuel surcharges helped drive revenue down.
"While we face short-term pressure... as we clear fuel surcharge revenue and coal headwinds, Norfolk Southern is well positioned to continue improving service," Chief Executive James Squires said in a statement.
While the company's fuel surcharges dropped, it also faced a sharply reduced fuel bill thanks to lower oil prices.
Norfolk Southern's fuel bill fell nearly 38 percent to $255 million from $408 million in the second quarter of 2014.
In early trading on the New York Stock Exchange, Norfolk Southern shares were up 1.8 percent at $84.46.