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Home / News & Reviews / News Wire / Canadian National reports improved financial results as volume and revenue rise NEWSWIRE

Canadian National reports improved financial results as volume and revenue rise NEWSWIRE

By Bill Stephens | April 30, 2019

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MONTREAL — Canadian National moved record volumes in the first quarter and reported improved financial results despite the impact of prolonged extremely cold temperatures that restricted operations across its system in Western Canada and the Midwest.

“After a very, very cold bitter winter, we delivered good results and have a positive outlook to report,” CEO Jean-Jacques Ruest said on the railway’s Monday afternoon earnings call with investors and analysts.

CN’s operating income rose 5% to $1.08 billion as revenue increased 11%, to $3.54 billion. Earnings per share, adjusted for the impact of one-time items, grew 17% to $1.17, which missed analysts estimates by a penny, according to I/B/E/S.

CN’s adjusted operating ratio was 67.2%, a 0.6-point improvement compared to a year ago.

CN’s volume was up 1% on a carload and unit basis, and grew 3% when measured by revenue ton miles, the favorite metric of the Canadian railways.

Petroleum and chemicals volume grew 10% despite a decline in crude oil shipments. Grain and fertilizer shipments were up 3%, as was automotive volume. Coal and intermodal were flat, while metals and minerals carloads sank 3% and forest products volume declined 4%.

Despite the slow growth in the first quarter, CN stuck with its outlook for the full year. The railway expects high single-digit percentage growth in revenue ton miles and earnings per share growth in the low double-digit range.

The confidence in volume growth rests on a variety of factors, including the opening of a new Alberta coal mine that will be exporting via the Port of Prince Rupert, B.C., as well as a new propane export terminal opening at Rupert.

Lumber orders remain solid, CN says, and the railway continues to move record amounts of Canadian grain. Zim Integrated Shipping Services is now calling on Prince Rupert, which will help increase international intermodal volumes, which also are expected to grow due to new refrigerated service and new auto parts import traffic.

Crude oil volume sank during the quarter due to the Alberta government’s order to curtail production and unfavorable oil price changes.

“CN has the capacity to move more crude,” Ruest says.

The railway expects crude volumes to ramp up this summer when new contracts take effect.

CN closed on its acquisition of Canadian trucking company TransX during the quarter, a deal executives say brings new sources of traffic to the railway.

“We’ve actually seen some growth come back to the railroad through TransX,” says Keith Reardon, senior vice president of consumer product supply chain growth.

Ruest was optimistic that the new operator of the container terminal at the Port of Halifax — which has not yet been named — will be able to work with CN to bring more volume to the East Coast port.

CN wants to make Halifax the Prince Rupert of the east by luring today’s big containerships to call at the port. CN would then move the containers to Montreal, Toronto, and Chicago. Prince Rupert is the fastest-growing container port in North America, with most of its traffic bound for the U.S. Midwest.

CN’s safety metrics deteriorated in the quarter. The Federal Railroad Administration train accident rate climbed 29%, while the FRA injury rate rose 3%. Both figures remained within the railway’s five-year average.

8 thoughts on “Canadian National reports improved financial results as volume and revenue rise NEWSWIRE

  1. Prince Rupert is also not well situated for cross dock distribution centers where ocean box lading is broken down and reloaded into domestic 53s for inland points. So that’s also a negative.

    But that closer sailing time to East Asia takes a whole lot of time out of the entire supply chain picture too, permitting (for example) viable service to Indianapolis that includes a short line interchange. The key is managing the ocean containers inland to keep the empties cycling back quickly (or reloaded quickly with Decatur grain or whatever) so the ocean carrier margins are maintained.

    Outlook: unclear.

  2. Paul for sure backhaul is key. CN is capitalizing on this with backhaul of grains for the prairies back to PoPR.

  3. I’m curious as to if Prince Rupert will remain a vital port once LA/Long Beach, and Port of Vancouver BC, start implementing capacity improvements. While PoPR provides capacity on the West Coast and closer sailings to Asia. The truth remains there’s no large metro to support high volumes once the rest of west coast gets its act together.

  4. Daryl, The US railroads measure volume in carloads and intermodal units. The Canadians prefer revenue ton miles. Bill

  5. Joe, No mention on the call regarding Canapux. It is entering a pilot program to test feasibility of the concept, but that likely won’t be ready for another 18 months or so. Bill

  6. “… when measured by revenue ton miles, the favorite metric of the Canadian railways. “

    I always see this “favorite metric” phrase referenced whenever reading news reports on CN and CP. Just out of curiosity, is there a different “favorite metric” for US Railways? Does it have to do with taxes, or cultural differences between the two countries?

  7. I’m pleased that investment in capacity is paying off.

    I’m curious about CN’s development of bitumen puck technology and wish something about that had been included in the report.

  8. Thanks, Bill. I have great hopes for Canapux eliminating the risks of explosion and contamination. Can’t come too soon.

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