MONTREAL — Canadian National’s revenue and profits declined in the first quarter as freight volume was flat and costs rose.
“Q1 was a solid quarter. It played out as we expected and it set us up well for the growth that we see ahead of us,” CEO Tracy Robinson told investors and analysts on the railway’s earnings call on Tuesday afternoon.
Operating income declined 7%, to $1.5 billion, as revenue decreased 1%, to $4.2 billion. Earnings per share fell 5%, to $1.72. CN’s operating ratio increased 2.1 points, to 63.6%.
Traffic volume was flat when measured by revenue ton-miles, the preferred metric of the Canadian railways. Volume fell 1% when measured by carloads and containers.
Freight volume remained high in Western Canada, where traffic on the Edmonton-Vancouver corridor approached the record levels of 2018-2019, says Derek Taylor, chief field operations officer.
International intermodal revenue ton-miles were up 12% at Vancouver and Prince Rupert, British Columbia, retiring Chief Marketing Officer Doug MacDonald says. “We’re seeing some great growth on the West Coast. Customers have really come back there after the strike there last summer,” he says. “We’re seeing lots of growth in Vancouver, but we’re also seeing it start to push up to Rupert.”
Halifax and Montreal container volume is down, however, due to the impact of the ongoing Houthi attacks on shipping through the Red Sea, which has prompted detours around Africa.
CN expects growth in virtually every traffic segment. The only exceptions: Anticipated declines in U.S. coal and fertilizers, and flat domestic intermodal volume amid loose truck capacity.
The railway’s key operating metrics were mixed compared to last year’s first quarter, when winter weather was mild. Car velocity, measured by car miles per day, declined 3%; through dwell was flat; and the railway met its local service commitments 92% of the time, a 6% improvement compared to a year ago. On-time train departures rose 5%, to 90% for the quarter.
CN saw a spike in its train accident and injury frequency rates during the quarter. Train accidents rose 10%, while injuries were up 22%. The railway has begun slip, trip, and fall simulator training that has helped reduce injuries.
“We have seen improvement in April and are tracking in line year to date with CN’s lowest ever frequency ratio in 2023,” says Patrick Whitehead, chief network operations officer.
Robinson began the call on a somber note, as a CN engineering employee was killed and one was critically injured Tuesday morning when a tractor trailer collided with their truck in British Columbia.
Robinson says CN is eager to reach a contract with the Teamsters union, which represents engineers and conductors in Canada. The railway wants to establish more predictable schedules that will improve crews’ work-life balance, she says. With talks deadlocked, the rank-and-file are currently in the midst of a vote that would authorize a strike in Canada as early as May 22.
