Norfolk Southern (NYSE:NSC) is taking measures to prevent future derailments following a costly incident in East Palestine, Ohio, in February 2023. The company has begun installing new-generation automated inspection portals on its tracks, marking the first of over a dozen such installations. These portals employ high-speed cameras to capture hundreds of images of passing rail cars, which are then analyzed by AI software for potential defects. This move has been lauded by Allan Zarembski, a noted railroad safety expert.
The derailment, which resulted in a hazardous chemical spill and subsequent fire, forced thousands to evacuate and left residents with lingering health concerns. Cleanup efforts have been ongoing for nine months and have cost Norfolk Southern $966 million so far. These costs include the removal of 167,000 tons of contaminated soil and 39 million gallons of tainted water.
Despite the challenges posed by the toxic chemicals and vinyl chloride released post-crash to prevent explosions, service improvements have been noted. The company has seen an increase in average train speed and less time spent in railyards.
The financial impact of the derailment has been significant, with the company grappling with costs nearing $1 billion. This event drastically impacted its Q3 profits, which fell to $478 million from last year’s $958 million. If not for the derailment expenses, profits would have been $601 million. Moreover, revenue fell 11% to $2.97 billion, slightly ahead of Wall Street forecasts but a drop in fuel surcharge revenue is projected to cause a 4% decline in yearly revenue.
However, CEO Alan Shaw remains optimistic about the firm's recovery potential. The company has received an initial insurance payment of $25 million as it continues cleanup operations and braces for total expenditure to surge further.
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