A top official of Norfolk Western Railway Co. told more than 600 shareholders here today that the financially strong railroad is operating "at a new and higher level of profitability" than it did a decade ago even though the current recession will affect its earnings this year.

In an overall upbeat report to shareholders, Robert B. Clayton, N&W's executive vice president, said he can't tell yet how much earnings will be affected. Carloadings of merchandise were down 15 percent in April from a year ago, with May looking no better, he said. N&W's automotive business is the hardest hit. However, current strong coal loadings are expected to continue through the year and will offset the declining merchandise business, Clayton said.

"Our coal business should finish the year ahead of last year's fine level," Clayton said. In addition, he said he could see "nothing but good news as far as coal is concerned" begining in 1981. The export market is strong, demand for utility coal is rising rapidly and demand for domestic metallurgical coal should perk up when the recession ends, he said.

Roanoke-based N&W was the nation's most profitable railroad last year with net earnings of $199 million, up 88 percent over 1978.

Clayton presided over the meeting here in the ballroom of the N&W-owned Hotel Roanoke, filling in for N&W President John P. Fishwick; who was absent due to a respiratory illness.

In other N&W meeting news:

The company announced that its directors approved cost-of-living increases for retirees covered under its retirement plan. Effective July 1, N&W will increase its pension payments by one-quarter percent for each month of retirement before Jan. 1, 1980, up to a limit of 30 percent.

Lester E. Coleman, president and chief executive officer of Lubrizol Corp., was elected a director, succeeding Robert P. Neushel, who became a professor at Northwestern University and didn't stand for reelection.