CN Revenue Fell 19% in 2nd Quarter

Canadian National said this week that its second quarter revenue fell 19 percent to CA$3.2 billion from nearly CA$4 billion a year ago.

The company said the financial results reflected lower volumes due to the COVID-19 pandemic.

Operating income was CA$785 million, down from CA$1.68 billion a year ago; net income of CA$545 million was down from CA$1.36 billion; and diluted earnings per share of 77 Canadian cents per share, down from CA$1.88.

Adjusted earnings per share were CA$1.28, down from CA$1.73. The operating ratio was 60.4 percent for the quarter, up from 57.5 percent compared with a year earlier.

Operating expenses rose 6 percent to CA$2.4 billion, mainly driven by a loss on assets held for sale resulting from the decision to market for sale for on-going rail operations, certain non-core lines, partly offset by lower fuel and and labor costs.

Excluding that one-time charge, operating expenses fell 15 percent compared with second quarter 2019 expenses.

CN attributed falling revenue to lower volumes across most commodity groups caused by the pandemic and lower applicable fuel surcharge rates, which were partly offset by increased shipments of Canadian grain, higher Canadian coal exports and freight rate increases.

“By being adaptable, we were able to swiftly rightsize our resources and continue to provide our essential transportation services to our customers, the economy and the communities we serve,” said President and CEO J.J Ruest in a statement.

During an earnings call with investors this week, CN executives said rising volumes or a second wave of the coronavirus pandemic that would hammer the company’s earnings.

Traffic volume in the second quarter fell 16 percent on a carload basis, or 18 percent when measured by revenue ton-miles, the preferred metric of the Canadian railways.

CN said it ran fewer but longer trains, closed yards and shops, furloughed 4,000 employees, and storing a third of its locomotive fleet and 20,000 freight cars.

Some of those changes are expected to endure said Chief Operating Officer Rob Reilly.

“The idled locomotive shops and switching yards will remain closed,” Reilly said. “We will continue to improve train size year-over-year.”

The closed yards are at Battle Creek, Michigan; Jackson, Mississippi; Garneau, Quebec; and Kamloops, British Columbia.

CN reduced mechanical shop activity at more than 20 locations and closed four locomotive shops.

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