Posts Tagged ‘Canadian National’

CN Reports 4th Quarter Rise in Net Income

January 26, 2017

Canadian National said its 2016 fourth quarter net income increased 8 percent, but it continues to grapple with a mixed economic environment.

Canadian National “We saw weaker volumes during the year, but quickly adjusted as our dedicated team of railroaders maintained its focus on operational efficiency, while continuing to provide quality service to our customers and improve our safety performance,” said CN CEO Luc Jobin in a statement.

During the fourth quarter, CN earned net income of C$1.02 billion. The diluted earnings per share increased 12 percent to C$1.32, compared with the fourth quarter of 2015. Adjusted net income increased 1 percent to C$952 million, with adjusted diluted EPS increasing 4 percent to C$1.23.

Operating income increased 3 percent to C$1.39 billion. Revenues increased by 2 percent to C$3.22 billion. Carloadings increased 3 percent to 1,37 million and revenue ton miles increased 4 percent. The operating ratio improved by 0.6 points to 56.6 percent.

CN posted fourth quarter revenue increases for grain and fertilizers (14 percent), automotive (4  percent) and intermodal (1 percent).

Seeing declines were metals and minerals (6 percent), coal (6 percent), petroleum and chemicals (5 percent). Forest products revenue remained flat.

Operating expenses rose by 1 percent to C$1.82 billion. CN attributed that to higher casualty and other expenses, and higher depreciation and amortization expense, partly offset by lower pension expenses and lower costs resulting from operating productivity gains.

For all of 2016, net income increased 3 percent to C$3.64 billion, with diluted EPS rising 6 percent to C$4.67. Adjusted net income remained flat at C$3.58 billion, while adjusted diluted EPS increased 3 percent to C$4.59.

Operating income rose 1 percent to C$5.31 billion. Revenues decreased by 5 percent to C$12.04 billion. Carloadings and revenue ton-miles both declined by 5 percent in 2016.

The operating ratio for 2016 improved by 2.3 points to 55.9 percent. Free cash flow was a record C$2.52 billion, compared with C$2.37 billion in 2015.

The operating ratio was 55.9 percent in 2016, an improvement of 2.3 points over the 2015 operating ratio of 58.2 percent.

Annual revenues increased for automotive (6 percent), forest products (4 percent) and grain and fertilizers (1 percent), but was offset by declines for coal (29 percent), metals and minerals (15 percent), petroleum and chemicals (11 percent), and intermodal (2 percent).

In a statement CN said the decline in total revenues was mainly attributable to lower volumes of crude oil, coal and frac sand, as well as lower fuel surcharge rates. These factors were partly offset by the positive translation impact of the weaker Canadian dollar and freight rate increases.

Rail freight revenue per RTM remained flat compared with 2015, driven by lower fuel surcharge rates and an increase in the average length of haul. Other contributing facts included a positive translation impact of a weaker Canadian dollar and freight rate increases.

Operating expenses for 2016 decreased by 8 percent to C$6.73 billion. The decrease was mainly due to lower costs resulting from operating productivity gains, including cost-management initiatives and decreased volumes of traffic; lower pension expense; and lower fuel prices, partly offset by the negative translation impact of a weaker Canadian dollar on U.S.-dollar-denominated expenses.

“Overall, the economy remains challenging, but we remain optimistic and expect to see moderate volume growth in 2017,” Jobin said.

CN expects to deliver EPS growth in the mid-single-digit range in 2017 over adjusted diluted EPS of C$4.59 in 2016. In its news release, CN said it will continue to invest in the safety and efficiency of its network with a 2017 capital investment program of C$2.5 billion, which includes increased spending for Positive Train Control technology in the U.S.

CN has declared a 10 percent increase to it 2017 quarterly cash dividend.

For 2017, CN said it is assuming that North American industrial production will increase in the range of 1 percent to 2 percent, assumes U.S. housing starts in the range of 1.25 million units and U.S. motor vehicle sales of approximately 17.5 million units.

For the 2016-2017 crop year, the grain crops in the U.S. and Canada were above their respective five-year averages. The company assumes that the 2017-2018 grain crops in both Canada and the U.S. will be in line with their respective five-year averages.

With these assumptions, CN assumes total revenue ton miles for all freight categories in 2017 will increase in the range of 3 percent to 4 percent vs. 2016.

CN expects continued pricing improvement above inflation, believing that the value of the Canadian dollar in U.S. currency will be in the range of $0.75, and that the average price of crude oil (West Texas Intermediate) will be in the range of US$50 to US$60 per barrel.

In 2017, CN plans to invest approximately C$2.5 billion in its capital program, of which C$1.6 billion is targeted toward track infrastructure.

CP Won’t Bar Harrison from Working for CSX

January 25, 2017

A regulatory filing made by Canadian Pacific with the U.S. Securities and Exchange Commission shows where E. Hunter Harrison can and cannot work under the terms of his non-compete agreement with CP.

E. Hunter Harrison

E. Hunter Harrison

Harrison, who recently stepped down as CP’s CEO, cannot work for Canadian National, BNSF or Union Pacific. But he could work for CSX, Norfolk Southern or Kansas City Southern.

CP granted Harrison a limited waiver of the non-compete clause, which also included waiving a provision that Harrison is not permitted to solicit for employment at another company any CP employees above the level of manager.

Specifically, CP’s waiver makes an exception for the railroad’s chief of staff.

News reports have said that Harrison is teaming up with activist investor Paul Hilal of the firm Mantle Ridge to oust CSX CEO Michael Ward.

Some believe that Harrison would use being the head of CSX to lead a merger effort. Last year Harrison and CP unsuccessfully sought to merge with NS.

If Harrison does make a bid to become part the CSX CEO, he will have until Feb. 10 to do so under the terms of the CSX bylaws for nominating members of the board of directors and filing resolutions to be heard during the annual meeting, which is usually held in May.

Harrison Eyes Taking Over CSX as CEO

January 19, 2017

E. Hunter Harrison is back in the takeover game and setting his sights on wresting away control of CSX from current CEO Michael Ward.

E. Hunter Harrison

E. Hunter Harrison

The Wall Street Journal reported this week that Harrison, who fought an unsuccessful bid in early 2016 to acquire Norfolk Southern, has teamed up with Paul Hilal, a principal at hedge fund Mantle Ridge, to prod CSX to make a management change.

Hilal was formerly with Pershing Square Capital. The latter is run by William Ackman, who played a key role in getting Harrison named CEO at Canadian Pacific in 2012 after winning a proxy fight.

Harrison, 72, this week said he is severing his ties with CP before his official retirement from the company.

He will be succeeded at CP by Keith Creel, effective Jan. 31. In the interim, Harrison is reported to be on vacation and Creel will assume Harrison’s duties.

Harrison has agreed to sell all of his shares of CP stock by May 31 and the CP board of directors agreed to provide him with a limited waiver of a non-compete clause to which he would otherwise be subjected.

In return for waiving the non-compete clause, Harrison will forgo all roles he had with CP and give up substantially all benefits and perquisites to which he was entitled. The total value of those forfeited benefits is $89 million.

The CSX takeover attempt would be Harrison’s second. CSX rejected his overtures in 2014.

The WSJ reported that CP will not participate in any effort that Harrison makes to gain control of CSX.

Hilal left Pershing Square last year to start his own activist fund, which has raised more than $1 billion for a single investment, according to the WSJ. Those investors reportedly have committed to keeping money in the fund for five years.

Harrison became the CEO of CP after Ackman led a proxy fight that resulted in the ouster of CP CEO Fred Green.

If Harrison and Hilal follow that same script at CSX, they will seek to oust Ward, who has indicated he plans to retire in 2019.

Hilal was with Pershing Square at the time of the CP takeover and recruited Harrison, who had been CEO of Canadian National.

Railway Age magazine quoted Cowen and Company Managing Director Jason Seidl as observing, “Hunter left C$118 million in equity awards on the table, which indicates to us he still has a burning desire to run a railroad. His reputation of being the most sought after manager in the North American railroad industry could make it very difficult for CSX to refute Harrison’s desire to run its franchise.”

Seidl told Railway Age that a CSX takeover would differ from what Harrison attempted at NS because the latter involved a merger whereas the CSX gambit would be just a management switch.

Railway Age quoted an unnamed railroad industry analyst as predicting that if Harrison is able to become head of CSX a merger with CP will not likely be one of his first priorities.

The analyst said that Harrison could be expected to change the CSX engineering, train operations and capital investments plans that Ward’s management team has been implementing over the past year.

Given Harrison’s track record, the analyst expects that he would impose at CSX a more aggressive capital expenditure downsizing and reduce its labor force.

Harrison would not be likely to institute more aggressive marketing and selling promotions, but would oversee creating more discipline in CSX train operations.

Working on the Railroad, Literally

January 14, 2017
Crossing the diamonds of in Durand while testing the rails.

Crossing the diamonds of in Durand while testing the rails.

One in a periodic series of images I made last summer.

Shown is a series of images that I made at Durand Union Station last July. A Herzog Rail Testing Truck arrived at the diamonds of the Holly and Flint subdivisions of Canadian National.

The crew members got out to check by hand the rail in the diamonds. Then they reboarded the truck and off they went on the Holly Sub toward Detroit.

Article and Photographs by Craig Sanders

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A closeup of a testing shoe, or is it testing wheels?

Back aboard the truck and off we go. The guy with the white helmet is a CN employee.

Back aboard the truck and off they go. The guy with the white helmet is a CN employee.

A Study in O.W.L.S.

January 4, 2017

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I love the acronym O.W.L.S., which stands for one way low speed diamond frogs. It is not some type of bird.

These are the O.W.L.S. in Durand, Michigan, at the crossing of two Canadian National lines. The double track belongs to the Flint Subdivision while the single track is the Holly Sub.

With an O.W.L.S. diamond the trains on the high-traffic line cross at a level crossing in a tread bearing mode.

But trains on the lightly-used line must slow to or below 10 mph because its wheels must cross over the flangeway gap for the high-traffic line in flange-bearing mode. There is no flangeway gap for the low-traffic line.

Although these tracks are owned by CN, another user of the Holly Sub at this diamond is the Great Lakes Central.

The advantage of an O.W.L.S. is that trains on the high-traffic line can cross another rail line without a speed restriction. There is less chance of a wheel jumping the flangeway gaps as there is with a conventional crossing.

But from a railroad management standpoint a primary advantage of an O.W.L.S. is less maintenance costs. Now that is something that would make an accountant smile.

Article and Photograph by Craig Sanders

An International Adventure in November 1968

November 26, 2016

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Forty-eight years ago on the day after Thanksgiving, Mike Ondecker, John Woodworth and I headed to Toledo.

We met some railfans there who said there was a scrap yard in London, Ontario, that had some CN CLC (FM) C-liners still intact.

John and I convinced Mike to go to London and our all-Ohio trip turned into an international mini-adventure.

We drove home the next day never realizing this would be the beginning of many good trips together. Here are two images from that trip.

The top image was made on Nov. 29, 1968. It is the day after American Thanksgiving in Toledo, Ohio, and New York Central No. 4024 and Baltimore & Ohio No.1438 (on a Chesapeake & Ohio train) await their time to depart Central Union Terminal.

In the second image it is Nov. 30, 1968, in London, Ontario. CN’s London Reclamation Yard holds stripped hulks and almost complete CLC (FM) C-liners and other discarded equipment.

Day in Durand: 2

November 17, 2016

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One in a periodic series of images that I made last summer

Shortly before the crew that had taken the coal train into the yard in Durand, Michigan, finished its work, an eastbound Canadian National manifest freight rumbled through town.

Then the coal train crew left for Flint with a cut of cars it had picked up in Durand in tow of its BNSF motive power set and things got rather quiet.

A Great Lakes Central yard job was chattering on the radio, but otherwise there was no sign of activity. Some railfans came and went, but that was about all that was happening.

At one point a member of the Michigan Railroad Museum staff came out and said that the Port Huron connection wye was lined for a movement.

That would turn out to be the Huron & Eastern job that comes down to Durand and sets off and picks up cars for interchange to CN and the GLC.

The lull was finally broken at 2:17 p.m. when the H&E job showed up and backed into the yard, using the Port Huron connection.

About 15 minutes later, CN sprang to life but not without some complications. A Pontiac-bound train had stopped west of Durand to await yarding instructions from the CN RTC (rail traffic controller).

The RTC had two challenges. With the H&E job working in the yard, the tracks available to CN to set out cars was limited, lest the CN crew set out cars on a track the H&E crew needed to get out of the yard.

The other challenge was that not all of the Durand set out cars on the CN train were located in a single block within the train.

If the H&E job wasn’t working in the yard, the CN train could take the two blocks of Durand cars along with the cars between them, set out the latter on a yard track, and then pick them up and take them back to its train.

The RTC decided that the CN crew would take the second block of Durand cars to Pontiac and a westbound would take them to Durand that evening and set them off.

The CN crew dutifully set off its Durand cars and came out of the yard running light.

It got back onto its train and told the RTC it was ready to head for Pontiac. Instead, it wound up sitting for more than hour waiting for other CN traffic to clear.

That included another eastbound manifest freight heading toward Flint and a train that came up from Pontiac on the Holly Subdivision and would turn west onto the Flint Sub in Durand.

By the time all of this got sorted out, it was about 4:15 p.m. and I had seen my last CN train for the day.

I stayed around to watch the H&E job back out of the yard and then head onto its home rails to leave town.

I had to get back to the home of my wife’s cousin for dinner so I left Durand not long after the H&E job left.

On the day, I had seen 12 movements involving three railroads, counting Amtrak. That is probably a good day for Durand lulls and all.

Article and Photographs by Craig Sanders

A nearly two-hour lull was broken by the arrival of a Huron & Eastern train from the Saginaw-Bay City region.

A nearly two-hour lull was broken by the arrival of a Huron & Eastern train from the Saginaw-Bay City region.

 

GP40-2LW was built  for CN in 1976 but now works for the Huron & Eastern.

GP40-2LW was built for CN in 1976 but now works for the Huron & Eastern.

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Getting a close up look at the trailing unit, which features a different livery than the leader.

Getting a close up look at the trailing unit, which features a different livery than the leader. The GP30AC was built in 1971 for the Louisville & Nashville.

Next stop is the yard in Durand.

Next stop is the yard in Durand.

The CN train to Pontiac had a long cut of cars to set off in Durand.

The CN train to Pontiac had a long cut of cars to set off in Durand.

The conductor is on the point and the CN job is ready to back into the yard in Durand.

The conductor is on the point and the CN job is ready to back into the yard in Durand.

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Two generations of owners in Durand. The Grand Trunk Western caboose is on static display.

Two generations of owners in Durand. The Grand Trunk Western caboose is on static display.

Backing around the Port Huron wye to make a set out in the yard in Durand.

Backing around the Port Huron wye to make a set out in the yard in Durand.

After making a set out in the yard in Durand, the CN job came out light.

After making a set out in the yard in Durand, the CN job came out light.

The light power move passes Durand Union Station.

The light power move passes Durand Union Station.

An eastbound manifest freight clatters across the diamonds in Durand.

An eastbound manifest freight clatters across the diamonds in Durand.

Coming up the Holly Sub from Pontiac and Detroit.

Coming up the Holly Sub from Pontiac and Detroit.

Someone had fun drawing in the dirt on the nose of CN No. 2338.

Someone had fun drawing in the dirt on the nose of CN No. 2338.

A cut of auto racks clears the signals on the Chicago wye in Durand.

A cut of auto racks clears the signals on the Chicago wye in Durand.

Moving from the Flint Sub to the Holly Sub on the Chicago wye.

Moving from the Flint Sub to the Holly Sub on the Chicago wye.

With opposing traffic having cleared, the CN train for Pontiac gets underway and heads to the Holly Sub. The Durand depot is on the left.

With opposing traffic having cleared, the CN train for Pontiac gets underway and heads to the Holly Sub. The Durand depot is on the left.

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A Huron & Eastern crew member guides his train out of the yard in Durand and onto the CN Port Huron wye as it prepares to leave town.

Day in Durand: Part 1

November 15, 2016
The first photo of a train that I made in Durand, Michigan, last July was one of my favorites of the day. A local is coming around the connection from the Holly Subdivision to the Flint Subdivision to head to Flint.

The first photo of a train that I made in Durand, Michigan, last July was one of my favorites of the day. A local is coming around the High Wye from the Holly Subdivision to the Flint Subdivision to head to Flint.

One in a periodic series of images that I made last summer

Back in July we made a trip to Michigan to visit with some of my wife’s relatives in Flint. While she and her cousins went shopping I drove to Durand to spend a day at one of Michigan’s most famous railroad junctions.

Three railroads serve Durand, but there is no guarantee that you’ll see all three on a given visit because two of them are short lines that might have one or two trains a day, if that.

I sort of saw the Great Lakes Central. From the Durand Union Station I saw a GLC locomotive come to the far end of the yard for head room.

But the GLC road job that works in Durand and takes interchange traffic to the Ann Arbor in Howell, Michigan, went north out of Owosso on the morning I was in Durand.

A local railfan told me that meant that by the time that job came through Durand it would be dark. So much for seeing the Great Lakes Central.

The other short line is the Huron & Eastern which shows up pretty reliably on weekdays in the afternoon.

And then there is Canadian National, the primary railroad in Durand. The CN tracks once belonged to the Grand Trunk Western, which actually was a CN property for several decades before the GTW identify began disappearing in favor of the CN brand.

Interestingly, the first train I saw on this day was a local led by a former GTW GP9r still wearing its Grand Trunk colors and markings.

It was leading a local headed for Flint that I was told had originated there last night. The train goes east from Flint, works its way to Detroit via Mt. Clemens and returns to Flint via Durand and the Holly Sub.

I had timed my visit to reach Durand in time to get Amtrak’s westbound Blue Water, which arrived early and had to wait for time to depart.

The local railfan I was chatting with said that typically a westbound intermodal train follows Amtrak into Durand.

There was a westbound not long after Amtrak departed, but it was a manifest freight. The intermodal must have been running ahead of Amtrak and I never saw an intermodal train during my approximately nine hours in Durand.

Because I was in Durand so early, it’s tough to photograph a westbound because of the lighting conditions. I tried to get the westbound CN manifest freight as a side shot with the depot but it didn’t work out that well.

If you’ve spent time in Durand you know the CN traffic is about the same level as that of the CSX New Castle Subdivision through Akron. There are going to be some long gaps between trains.

It would be about two hours before the next train arrived, a Powder River coal train bound for the Huron & Eastern.

It came into view with two BNSF units on the lead. As is standard procedure, the coal train ran east past the westbound home signals and backed up on the Port Huron Connection.

The CN crew tied the train down and cut off the BNSF motive power. The H&E would use its own power to deliver the coal to a utility plant.

The CN crew could either run light to Flint, where they would go off the clock, or they might be directed by the rail traffic controller — CN speak for dispatcher — to make a pickup in Durand.

I’m sure the crew would rather run light to Flint because it would mean less work. But that would not be the case on this day. They had work to do in the yard.

It would be another hour before another train passed the Durand depot, an eastbound CN manifest freight.

Ten minutes later the CN crew that had been picking up cars in the yard appeared on the Port Huron connection and headed for Flint. Another nearly two-hour gap between trains was getting underway.

Article and Photographs by Craig Sanders

Former GTW No. 4623 would be the only locomotive I saw on this day in GTW markings.

Former GTW No. 4623 would be the only locomotive I saw on this day in GTW markings. It is coming around the connection from the Holly Sub to the Flint Sub.

Amtrak's Blue Water leaves town en route to Chicago but its next stop will be in East Lansing. It was the first time I had seen those signals beneath P42DC No. xxx in operation.

Amtrak’s Blue Water leaves town en route to Chicago but its next stop will be in East Lansing. It was the first time I had seen those signals beneath P42DC No. 126 in operation.

After going about two hours without seeing a train the sight of a BNSF locomotive, or any locomotive for that matter, was welcome sight. A Power River coal train eases its way into Durand.

After going about two hours without seeing a train the sight of a BNSF locomotive, or any locomotive for that matter, was welcome. A Powder River coal train eases its way into Durand.

Backing up on the Port Huron connection to deliver loaded coal hoppers to the Huron & Eastern.

Backing up on the Port Huron Wye to deliver loaded coal hoppers to the Huron & Eastern.

In case you were wondering where I made this photograph here is a big clue.

In case you were wondering where I made this photograph here is a big clue.

As the coal train crew worked in the Durand Yard an eastbound manifest freight rolled through town on the Flint Subdivision.

As the coal train crew worked in the Durand Yard an eastbound manifest freight rolled through town on the Flint Subdivision.

Coming out of the Durand Yard with a load of freight cars.

Coming out of the Durand Yard with a load of freight cars.

And away to Flint we go.

And away to Flint we go.

CN Makes Environmental A List

November 1, 2016

Canadian National said it has been awarded a position on the Carbon Disclosure Projects’s Climate A List.

Canadian NationalCN said it is among the 9 percent of worldwide corporations to participate in CDP’s climate change program. The CDP is an international not-for-profit that promotes sustainable economies.

Thousands of companies submit annual climate disclosures to CDP for independent assessment. CDP said that 193 companies have made its A List in recognition of their efforts to reduce emissions and mitigate climate change.

“We are pleased to be recognized by the CDP for the eighth straight year and proud of CN’s continued leadership on climate change action,” said CN President and CEO Luc Jobin. In a statement, CN said it has cut locomotive carbon emission intensity by 19 percent and is approximately 15 percent more fuel efficient than the industry average.

CN 3rd Quarter Net Income Up, Traffic Down

October 27, 2016

Canadian National reported that its third quarter 2016 net income was C$972 million, or C$1.25 per diluted share, compared with net income of C$1.01 billion, or C$1.26 per diluted share for the third quarter of 2015.

Canadian NationalCN’s operating income fell 5 percent to C$1.41 billion while revenue revenues decreased by 6 percent to C$3.01 billion. Carloadings declined 4 percent and revenue ton-miles were down 3 percent.

Operated expenses dropped by 7 percent to C$1.61 billion.

CN said it posted a record 53.3 percent operating ratio, a 0.5-point improvement over the prior-year quarter’s performance. Free cash flow for the first nine months of 2016 was C$1.74 billion, which was flat compared with the year-earlier period.

“With solid execution from our industry-leading operating team and a network-wide focus on providing quality service, CN delivered outstanding results in the third quarter while facing a still sluggish North American and global economy,” said CN CEO and President Luc Jobin, in a statement.

Jobin said the challenges that CN faced during the quarter included shifting traffic demands and a delayed Canadian grain harvest

“We also continued to reinvest in our business and infrastructure, investments that are driving ongoing safety, service and productivity improvements, while we maintained our commitment to providing the long-term value that helps CN and its customers succeed,” he said.

CN expects a 2016 adjusted diluted earnings per share to be up approximately 1 percent versus last year’s adjusted diluted EPS of C$4.44.

The CN Board of Directors has approved a fourth-quarter 2016 dividend on the company’s common shares outstanding. A quarterly dividend of C$0.375 per common share will be paid on Dec. 30, 2016, to shareholders of record at the close of business on Dec. 9, 2016.