Executive Vice President and Chief Marketing Officer Balanced - - PowerPoint PPT Presentation

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Executive Vice President and Chief Marketing Officer Balanced - - PowerPoint PPT Presentation

Nov 12, 2022 175 likes •597 views

Donald W. Seale Executive Vice President and Chief Marketing Officer Balanced Portfolio of Business % of 1H 2014 NS Network NS Revenue 74% of U.S. population Agriculture 55% of total energy 13% Coal consumption in U.S. 21% MetCon

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SLIDE 1

Donald W. Seale Executive Vice President and Chief Marketing Officer

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SLIDE 2

NS Network

  • 74% of U.S. population
  • 55% of total energy

consumption in U.S.

  • 65% of U.S.

manufacturing

  • Estimate 45M+ truck

shipments over 550 miles touch our network

  • Extensive port access

% of 1H 2014 NS Revenue

Agriculture 13% MetCon 13% Paper 7% Chemicals 16% Auto 8% Intermodal 22% Coal 21%

Balanced Portfolio of Business

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SLIDE 3

Chicago Detroit Cincinnati Memphis Louisville Toledo Cleveland Pittsburgh

Seaports River Ports Lake Ports

Savannah Norfolk Portsmouth Jacksonville Charleston Baltimore NY/NJ Philadelphia Camden/South Jersey Brunswick Wilmington New Orleans Braithwaite

  • St. Bernard

Mobile Jeffersonville Portsmouth Naples Granite City Burns Harbor Ashtabula Erie Morehead City

Network of Key Corridors and Port Access

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SLIDE 4

38% 40% 22%

Changing Business Mix

57% 22% 21% 33% 50% 17% 55% 21% 24%

First Half 2006 First Half 2014 Volume Revenue 3.98 million units $4.7 billion in revenue 3.75 million units $5.7 billion in revenue

Coal Intermodal Merchandise

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SLIDE 5

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 1,000 2,000 3,000 4,000 General Merchandise Coal Intermodal Total Revenue ($M) Units (000s)

2006 Volume 2014 Volume 2006 Revenue 2014 Revenue

RPU General Merchandise Coal Intermodal Total

1H 2006

$1,734 $1,293 $600 $1,179

1H 2014

$2,651 $1,865 $670 $1,530

RPU CAGR

5.4% 4.7% 1.4% 3.3%

1H 2014 vs. 1H 2006 Total Revenue CAGR: 3%

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Major Group Comparisons

First Half 2014 vs. First Half 2006

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SLIDE 6
  • Energy

‒ Coal continues in the mix ‒ Oil production – new and projected ‒ Natural gas production and expansion

  • Manufacturing

‒ Cost of US manufacturing ‒ FDI in the United States

  • Highway Conversions

‒ $680B in US trucking revenues ‒ Trucking industry is critically challenged

  • Highway congestion
  • Driver availability

‒ Intermodal and carload growth ahead

  • Agricultural Growth

4 Broad Categories of Growth

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SLIDE 7

David Lawson, Vice President - Coal Jeff Heller, Vice President - Intermodal & Automotive Mike McClellan, Vice President - Industrial Products

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SLIDE 8

NS Coal Network

  • Extensive network provides

access to U.S. coal basins

  • Outlet to domestic and

global markets via coastal, lake, and river ports

  • Investments to support coal

market shifts

  • Ability to handle growth

Utility 66% Export 18%

Domestic Met 10% Industrial 6%

First Half 2014 Volume

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SLIDE 9

NS Utility Coal Volumes

Tons in millions

Utility Volume & Basin Shifts

Source: SNL Energy

NS Utility Sourcing Shifts

Percentage of NS Utility Volume

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 1H14 CAPP ILB NAPP PRB

20 40 60 80 100 120 140 2010 2011 2012 2013 1H14

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SLIDE 10

U.S. Electricity Generation by Source

Source: EIA, Annual Energy Outlook May 2014

1 2 3 4 5 6 1990 2000 2010 2020 2030 2040

Natural gas Renewables Nuclear Coal Petroleum liquids & other 20% 52%

trillion kilowatthours

37% 19% 12% 30% 14% 10% 1% 4%

2012 1994

History Projection

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SLIDE 11

$2 $3 $4 $5 $6 $7 Range of HH Futures thru 2020

Midwest Northeast Southeast Baseload Competition Coal and NG

Utilization Factors and Sourcing Competitiveness

Source: SNL Energy

Forward HH Price Range $/mmbtu and Illustrative Coal Competition Ranges

NAPP ILB & PRB NAPP, ILB, PRB CAPP

Plant Capacity Utilization

Weighted avg. capacity factor (CF) for remaining NS plants

Source: SNL Energy

40% 45% 50% 55% 60% 65% 70% 2010 2011 2012 2013 1H14

  • Avg. CF Remaining Plants

'13/'14 Winter Avg. CF

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SLIDE 12

Illinois Basin 2010 - 8% 2014 – 20% Central Appalachia 2010 – 42% 2014 – 34% Northern Appalachia 2010 – 29% 2014 – 30% Western 2010 – 21% 2014 – 16%

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Coal Basin Origins – 2010 vs 2014 YTD

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SLIDE 13
  • NAPP

‒ West Brownsville, PA ‒ South Fork, PA

  • ILB

‒ Sorrento, IL ‒ White Oak, IL

  • Freight Car Investments

Investing in Coal’s Future

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SLIDE 14

Total U.S. Coal Exports

Source: Doyle Trading Consultants, Quarterly Coal Outlook and Price Forecast , 3Q 2014, 2014 – 2017 are estimated forecasts

  • 20

40 60 80 100 120 140 2010 2011 2012 2013 2014 2015 2016 2017 Short Tons (Millions) Metallurgical Steam NS

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SLIDE 15

Global and Domestic Markets Access

Owner East Coast Ports River & Lake Facilities NS Norfolk, VA Ashtabula, OH Sandusky, OH Wheelersburg, OH 3rd Party Baltimore, MD Charleston, SC Mobile, AL New Orleans, LA Philadelphia, PA Cyrus, WV Ceredo, WV Convent, LA

Lamberts Point Wheelersburg Terminal

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SLIDE 16
  • Upside capacity factor leverage

at post-2016 compliant utilities

  • Coal vs. gas competitiveness

with shifting basins

  • Available capacity to take

advantage of changing export demand

Summary

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SLIDE 17

Jeff Heller

Vice President, Intermodal & Automotive

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Intermodal

  • Increasing demand for Intermodal
  • Growth focused on markets east of the

Mississippi

  • Rising motor carrier costs and capacity

constraints

  • Strengthening pricing environment

Automotive

  • Increasing North America vehicle production
  • On-line plant expansions and new models
  • On-shoring of vehicle production

Network synergies exist between Intermodal and Automotive

Intermodal & Automotive Environment

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Norfolk Southern’s Intermodal Network

Intermodal Terminals On-Dock Access Interchange Gateways Hubs & Load Centers

Harrisburg Atlanta Charlotte Chicago Columbus Detroit Savannah Cincinnati Inland Virginia Norfolk New Orleans Memphis Dallas Huntsville Jacksonville Charleston Georgetown Kansas City St Louis Louisville Baltimore Greensboro Toledo Decatur Greencastle Cleveland Pittsburgh Boston Albany Buffalo Central Florida New York / New Jersey Bethlehem Philadelphia Shreveport Birmingham

  • 59 Intermodal Terminals
  • On-Dock access to all major EC ports
  • Comprehensive transcon service
  • Distributed “hub and spoke” network

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Greer

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NS Intermodal Volumes

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00

2010 2011 2012 2013 1H 14

Units (m)

Domestic International

NS Intermodal grew 7% in First Half 2014 vs. First Half 2013 Second Quarter 2014 was NS Intermodal’s 18th consecutive quarter of growth

Compound Annual Growth Rates, 2010-2013

2.14%

US GDP

3.87%

US Intermodal

6.84%

NS Intermodal

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SLIDE 21

Scratching the Surface

Significant opportunity for growth remains

5,000,000 10,000,000 15,000,000 20,000,000 25,000,000

3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

Total US Truck and IM Moves

Over 550 Miles

Domestic Intermodal Shipments Long-Haul Truckloads

Drivers of highway conversion

  • Highway congestion
  • Driver wages
  • Regulatory action
  • Environmental
  • Fuel cost

Source: TTX; IANA

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SLIDE 22

Driver Market

20 40 60 80 100 120 140 160 180 200

2010 2011 2012 2013 2014F

Truckload Costs

($/Loaded Mile, OTR; Index: 2003 = 100)

Labor Overhead Equipment Fuel 8.5% 4.8%

  • 0.4%

2.5%

Source: FTR

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SLIDE 23

NS Intermodal Network Growth

Majority of growth has been in these Corridors

500 1,000 1,500 2,000 2,500 2010 2011 2012 2013

Units

In Thousands

Premier MSLLC Crescent Heartland PAS 2010-2013 CAGR Premier 8% MSLLC 9% Crescent 16% Heartland 20% PAS 9% Total 11%

A Network of Key Corridors

New Orleans Shreveport Memphis Birmingham Atlanta Charlotte Cincinnati Chicago Detroit Columbus Boston Albany Greencastle Harrisburg Bethlehem Philadelphia New York/New Jersey

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SLIDE 24

Global Changes Enhance Opportunity

Port of NY/NJ

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NS Automotive Franchise

  • 27 NS-served assembly plants
  • 35 vehicle distribution

facilities

  • 4 million vehicles shipped in

2013

  • 160,000 parts shipments in

2013

  • A network for domestic and

international automotive

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North America Vehicle Production

  • Trend is positive

‒ 42% growth since 2010 ‒ Recent U.S. sales at highest SAAR since July 2006

  • NS rail network well-positioned

‒ Production up 61% since 2010 at NS-served plants in Southeast ‒ NS automotive exports up 156% since 2010

  • Industry outlook for continued

growth

‒ Forecast for over 18 million vehicles production in 2018

Source: WardsAuto Forecast, August 2014

12.2 13.5 15.8 16.5 17.3 2010 2012 2014

Annual North America Vehicle Production

(in millions)

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SLIDE 27
  • New model releases in 2014 at NS-served plants:

‒ Ford F-series Dearborn, MI and Kansas City, MO ‒ Ford Transit Kansas City, MO ‒ Mercedes C-Class Vance, AL ‒ GM Colorado and Canyon Wentzville, MO

  • BMW announces $1 billion plant expansion at Greer, SC
  • Volkswagen announces $900 million investment to expand Chattanooga, TN
  • Subaru plans for $422 million investment for Impreza at Lafayette, IN

NS-Served Opportunities

Assembly Plant Expansions and New Products

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SLIDE 28

Summary

  • NS has the premier

Intermodal & Automotive networks in the East

  • Both franchises are

growing and have upside potential in both volume and margin

  • NS will continue to focus

investment on areas of growth

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SLIDE 29

Don Seale

EVP and Chief Marketing Officer

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SLIDE 30
  • Improving TOP network with the

expansion of Bellevue Yard

  • Improving unit train productivity
  • Strong equipment position including

largest metals fleet in North America

  • Strong short line partnerships
  • Best in class Industrial Development
  • Expanding rail-truck transfer facility footprint

‒ 31 Thoroughbred Bulk Transfer Terminals (TBTs)

Strategic Growth Elements – Industrial Products

First Half 2014 IP Volume

Energy 13% Manufacturing 49% Construction 14% Agriculture 24%

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SLIDE 31

Top 10 Growth Markets

2013 vs. 2010 Volume Growth in Carloads

3,000 3,200 3,700 5,200 7,200 7,900 12,300 20,800 21,500 50,700 10,000 20,000 30,000 40,000 50,000 60,000 CANNED GOODS PULPBOARD CEMENT PLASTICS FOOD OILS LUMBER & WOOD SOYBEANS COIL STEEL SAND/OTHER PETROLEUM & ENVIRON.

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IP Market Segments

First Half 2014 vs. First Half 2010 Volume

0% 20% 40% 60% 80% 100% 1H 2014 1H 2010 13% 7% 49% 53% 14% 14% 24% 26%

Energy Manufacturing Construction Agriculture

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SLIDE 33

Annual Revenue in $M

82% 80% 74% 66% 64%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 1H 2014

Utility Coal Ethanol Marcellus/Utica Inputs NGLs Crude Oil

$2,008 $2,313 $2,029 $2,069 $1,130

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Energy Portfolio

Utility Coal Offset by Other Energy-Related Commodities: 2010 – First Half 2014

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SLIDE 34

Industrial Products Energy Portfolio

13% of Total IP Volume in First Half 2014

Ethanol 25% Shale Inputs 28% NGLs 16% Crude Oil 31%

First Half 2014 Energy Volume

  • 1H 2014 NS energy revenue CAGR up 22% vs.

1H 2010

  • NS has the most direct and efficient route to

crude terminals in the East

  • Access to 65 terminals used for shale input

distribution, and over 24 more under consideration

  • NS serves 22 ethanol production plants totaling

two billion gallons in capacity

  • Access to over 65% of the fractionation

capacity in the Marcellus/Utica region

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Key Strategic Elements of NS CBR Product Offering:

  • Superior route
  • Unit train logistics capabilities
  • Efficient connectivity to

strategic terminals and refineries

  • Export capabilities along the

east coast

NS Crude by Rail (CBR) Development

50 100 150 2010 2011 2012 2013 2014

NS Crude by Rail Volume (In Thousands)

In Excess

  • f 100K

Chicago

New Jersey Philadelphia

North Dakota Oil Sands

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SLIDE 36

Marcellus & Utica Shale Deposits

24% of IP Energy Volume

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SLIDE 37

Source: IHS Global Insight

NS Manufacturing Market

49% of Total IP Volume

5% 4% 12% 7% 38% 34%

Machinery Paper Scrap Pulp/Pulpboard Kaolin/Graphic Paper Metals Chemicals

0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40

U.S. Industrial Production Indexed to 2010 Raw Steel Paper Basic Chemicals

  • 1H 2014 NS manufacturing revenue CAGR up 5% vs. 1H 2010
  • U.S. manufacturing output is back to 2007 levels
  • U.S. manufacturing cost competitiveness is improving
  • Many companies are on-shoring and near-shoring production

First Half 2014 Manufacturing Volume

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SLIDE 38

16% 46% 22% 5% 11% Lumber/Wood Aggregates

  • Misc. Construction

Waste/C&D Cement

First Half 2014 Construction Volume

NS Construction Market

14% of Total IP Volume

Sources: BEA; IHS Global Insight

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 $0 $250 $500 $750 $1,000

Residential Non-Res. Housing Starts

Investment Chained 2009 $ Housing Starts M

  • 1H 2014 NS construction revenue CAGR up 6% vs. 1H 2010
  • Overall housing starts are ahead of last year despite severe weather this year
  • NAHB survey reports stronger current and future home sales
  • Increasing activity in lumber and wood products
  • Non-residential investment growing slower than residential until 2017

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SLIDE 39

First Half 2014 Agriculture Volume

24% 16% 10% 12% 9% 8% 21% Corn Feed Fertilizer Sweeteners Wheat Soybeans All Other

NS Agriculture Market

24% of Total IP Volume

  • 1H 2014 NS agriculture revenue CAGR up 5% vs. 1H 2010
  • Strong outlook for balance of 2014 due to favorable crop conditions
  • NS has an excellent and balanced portfolio of origin elevators and grain

processors throughout our network

NS Agriculture Network 39

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SLIDE 40

$276 $335 $340 $342

$0 $50 $100 $150 $200 $250 $300 $350 $400 2010 2011 2012 2013 Revenue ($M)

Revenue

Industrial Development

2010 2011 2012 2013

RPU $2,093 $2,194 $2,408 $2,513

Average New Revenue Growth: $323 M Annual Volume Growth: 140K

  • 271 new industries located
  • 110 industry expansions
  • $40B investment by NS

customers

  • 18K new customer jobs

created in 21 states

  • 562K carloads of new rail

traffic

2010 - 2013 Highlights

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Thank you

  • Four broad categories of growth ahead:

‒ Energy (utility coal plus shale activity) ‒ Manufacturing ‒ Highway conversions to carload and intermodal service ‒ Agricultural growth

  • Continued focus on strategic expansions

in network capacity and service ‒ Intermodal corridors ‒ TBT network ‒ Bellevue classification terminal

  • Improving service and efficiency for our

customers is the cornerstone of our growth strategy

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