Canadian National sets quarterly revenue record as traffic surges

RELATED TOPICS: CANADIAN NATIONAL | CANADA | FINANCIALS
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MONTREAL — Canadian National’s second-quarter net profit increased 20 percent as strong traffic growth led to record-high quarterly revenue, the railroad reported Tuesday afternoon.

Traffic volume increased 14 percent based on carloads, and 18 percent when measured by revenue ton-miles. Revenue increased 17 percent, to $3.3 billion. Net income was $1 billion, while operating income increased 16 percent, to $1.49 billion. CN’s operating ratio was 55.1 percent, up 0.6 points compared to a year ago.

“The CN team is pleased to report another very strong quarter,” CEO Luc Jobin said on the company’s earnings call.

With the exception of forest products, which were flat, all of CN’s traffic segments reported double-digit growth on a revenue ton-mile basis. Metals and minerals were up 45 percent thanks to a 175 percent increase in frac sand shipments. Grain and fertilizers were up 30 percent; coal, 25 percent; automotive, 18 percent; petroleum and chemicals, 15 percent; and intermodal, 12 percent.

CN’s volume growth for the quarter continued to top rest of the industry. Chief Marketing Officer Jean-Jacques Ruest noted that CN’s 14 percent carload growth was double the industry average of 6.7 percent.

CN’s key operating metrics held steady or improved during the quarter when compared to the second quarter of 2015, when the railroad handled similar volume levels. Train productivity improved 8 percent, yard productivity was up 10 percent, and car miles per day rose 2 percent. Terminal dwell, locomotive utilization, and train velocity were flat.

“I’m extremely proud of the operating team’s performance in this quarter,” Chief Operating Officer Mike Cory says, noting that the volume growth was the strongest in his 36-year career.

Nonetheless, CN is working on ways to boost its average train speed, Cory says.

Cory was asked whether he was concerned about losing operational talent after CSX Transportation, under former CN CEO E. Hunter Harrison, hired several supervisors recently. Harrison fired division managers and replaced at least some of them with CN veterans who understand his precision scheduled railroading operating model.

“We’ve lost a few front-line supervisors, so really the effect is small,” Cory says. CN has a strong bench, he adds, so the departures were “not significant.”

Executives expected continued strength across most traffic categories for the rest of the year, although they cautioned that volume comparisons will become more challenging starting in September.

CN executives affirmed the railway’s outlook for the year: adjusted earnings per share of between $4.95 and $5.10, up from last year’s results of $4.59 in adjusted earnings per share.

For the second quarter, CN reported earnings per share was up 24 percent, to $1.36. Wall Street analysts were expecting earnings per share of $1.32, according to Thomson Reuters I/B/E/S.

NEWSWIRETrains News Wire

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