Glacier FarmMedia COVID-19 & the Farm

Grain handle drops in CN’s first quarter

Railway trims full-year earnings outlook

A CN locomotive near Jasper, Alta. (Photo courtesy CN)

Reduced traffic in grain, fertilizers and petroleum, against increased costs from “challenging operating conditions,” ate into the first-quarter bottom line for Canadian National Railway (CN).

Montreal-based CN on Monday booked net income of $741 million on total revenues of $3.194 billion for its quarter ending March 31, down from $884 million on $3.206 billion in the year-earlier period.

Carloads were down 12 per cent in CN’s grain and fertilizers segment, at 145,000, for segment revenue of $539 million, down 11 per cent. Revenue per grain/fertilizer carload rose just $16, to $3,717.

In other segments, revenue from petroleum and chemical traffic dropped three per cent, to $564 million; forest products, down six per cent, to $422 million, and automotive, down four per cent, to $197 million. Intermodal and coal revenue rose 10 per cent to $814 million and $142 million respectively, while metals and minerals revenue rose seven per cent to $388 million.

Lower revenue ton miles (RTMs, gauging freight’s relative weight and distance hauled) stemmed from “challenging operating conditions, including harsh winter weather and low network resiliency,” CN said, also noting currency impacts from a stronger Canadian dollar.

Higher fuel surcharges and freight rates helped offset those drops, CN said.

Operating expenses, meanwhile, rose nine per cent to $2.164 billion on the same “challenging operating conditions” as well as higher fuel prices and training costs for new employees, offset in part by the stronger loonie.

Citing “weaker than expected” RTMs in Q1 and a “longer than anticipated construction period” on its infrastructure capacity projects this year, CN on Monday pared its full-year earnings outlook for 2018 to $5.10-$5.25 per share, down from its initial outlook of $5.20-$5.40.

However, interim CEO J.J. Ruest said in CN’s release that the company “has turned the corner on a difficult quarter and winter.

“Our metrics are showing sustained, sequential improvement, and that momentum will build as we continue to expand track capacity, add crews and bring on new locomotives,” he said.

Ruest also noted CN’s plans for increased capital spending, including about $400 million in new track infrastructure, “particularly in Western Canada, to build capacity and improve resiliency.” — Network

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