NS lays out plan to reduce costs, drive profitability and accelerate growth

Written by Jenifer Nunez, assistant editor
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Norfolk Southern has made a strategic plan designed to streamline operations and drive profitability and growth. The railroad's projected expense reduction and disciplined cost control initiatives are in the categories of compensation and benefits, purchased services and rents, materials and fuel.

 

NS expects to achieve annual productivity savings of more than $650 million per year by 2020, growing from an initial $130 million in 2016. With this plan, NS expects to improve consistency, reliability and availability, resulting in a faster, lower cost and more profitable railroad. NS has already begun implementing the plan and expects associated net benefits to begin appearing in Norfolk Southern’s financial results beginning in the first half of 2016.

The strategic plan, which was announced on Dec. 4, 2015, is the result of a six-month, comprehensive evaluation of the company’s business model, including customer service, network performance efficiency measures and revenue growth. The evaluation was led by Norfolk Southern’s Chairman, President and Chief Executive Officer James Squires with the assistance of the board of directors and management team. As a result of these measures, the company expects to achieve an operating ratio below 70 in 2016 with additional improvements driving operating ratio to less than 65 by 2020, with double digit annual EPS growth, increased return on investment and higher return of capital.

“Our new leadership team has already taken significant steps to improve financial and operational performance,” said Squires. “Specifically, we are focused on delivering high levels of superior service to build a more profitable franchise based on price and volume growth, implementing efficiency measures and increasing returns, while simultaneously maintaining our commitment to returning substantial capital to shareholders through share repurchases and dividends.

“While Norfolk Southern’s fourth-quarter results do not yet reflect the initiatives under way, we believe we have the right strategic plan to streamline operations, accelerate growth and enhance value for shareholders. The plan leverages our core competencies in customer service and reliability, while also improving network efficiency and consolidating operations. Importantly, through disciplined cost control, we believe we can achieve the productivity savings outlined in this plan, and even more.”

For a complete and detailed list of the plan outline please view it here.

 

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