Posts Tagged ‘CN finances’

CN Seeking to Bolster Financial Performance

September 20, 2021

Having failed to acquire Kansas City Southern, Canadian National management is now turning its attention to fighting a challenge by an activist investor group by seeking to boost its financial performance.

CN announced Friday a plan known as “Full Speed Ahead” that will seek to cut the railroad’s operating ratio to 57 percent, slash capital spending to 17 percent of revenue and resume buying back shares of its stock.

These measures will provide $700 million in new operating revenue next year, CN said, through improved operations, volume growth, a review of its non-rail businesses, and cutting management jobs.

In the first quarter of 2021, CN posted an operating revenue of 62.5 percent. Last year the operating ratio was 65.4 percent.

In a statement, CN called a 57 percent operating ratio “optimal for a world in which customers and regulators are putting a greater emphasis than ever on expanding customer choice, service and reliability.”

An operating ratio is the percentage of revenue spent on operating expenses.

The capital budget will be $3 billion next year a decline of 25 percent of revenue in 2019.

CN has in recent weeks been attacked by the TCI Fund, a London-based firm that holds $4 billion worth of CN shares.

TCI wants to replace CN CEO J.J. Ruest, Chairman Robert Pace and four members of the CN board of directors.

In response to CN’s Full Speed Ahead plan, TCI issued a statement saying it was not impressed with the plan.

“Why wasn’t this done before? The current management lacks the credibility to execute the plan.”

TCI Managing Director Chris Hohn and partner Ben Walker said CN has underperformed on nearly every measure of productivity and efficiency.

“Revenues per [revenue ton-mile], expenses per RTM, return on capital, operating ratio and profits have all gone backwards compared to the rest of the industry. CN has lost its way and the business needs to be fixed as a matter of urgency.”

TCI is seeking to rally CN stockholders behind its plan to install new top management at CN.

CN Revenue Up 2% in 2020 4th Quarter

January 27, 2021

Canadian National reported this week that fourth quarter 2020 revenues rose 2 percent to C$3.656 billion vs. the same period in 2019.

CN executives said the increase was due to increased shipments of U.S. grain, higher international container traffic via the Port of Vancouver, and freight rate increases.

However, CN said it also had lower applicable fuel surcharge rates and lower volumes of petroleum crude.

Operating income was up 16 percent to C$1.411 billion and the operating ratio fell 4.6 points to 61.4 percent compared with fourth-quarter 2019 results.

Total revenue ton miles were up 10 percent and carloads were up 7 percent in the fourth quarter compared to the fourth quarter of 2019.

Revenues for 2020 fell 7 percent to C$13.819 billion, which CN said was due to lower volumes across most commodity groups, primarily in the second and third quarter due to the COVID-19 pandemic.

CN said these lower traffic volumes were partly offset by freight rate increases as well as record Canadian grain shipments.

Operating income dropped 15 percent to C$4.777 billion, and the operating ratio increased 2.9 points to 65.4 percent vs. 2019.

Total RTMs and carloads were down 5 percent for the year compared with 2019.

CN expects to spend C$3.0 billion in 2021 on capital expenditures and is projecting “mid-single digit volume growth in 2021 in terms of RTMs.

CN Revenue Fell 19% in 2nd Quarter

July 23, 2020

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.

CN 1st Quarter Revenue Flat

April 29, 2020

Canadian National this week said its first quarter 2020 revenue was flat at CA$3.5 billion compared with the year-ago period.

Diluted earnings per share (EPS) rose 31 percent to CA$1.42, while adjusted diluted EPS increased 4 percent to CA$1.22, compared with the first quarter of 2019.

CN posted an operating ratio of 65.7 percent, an improvement of 3.8 points or 1.5 points on an adjusted basis, during the quarter.

Operating income increased 13 percent, or 4 percent on an adjusted basis, to CA$1.2 billion versus the year-ago period.

Operating expenses for the quarter decreased 5 percent to CA$2.3 billion, driven mainly by lower labor costs, depreciation expense and fuel expense.

In April CN’s traffic fell 15 percent led buy a nearly 90 percent drop in automotive volume due to the closure of North American assembly plants during the COVID-19 pandemic.

CN expects traffic to bottom out in May. In the meantime it has stored 500 locomotives and 15 percent of its freight car fleet.

It has suspended operations in yards in Battle Creek, Mich.; Jackson, Mississippi.; Garneau, Quebec; and Kamloops, British Columbia, and reduced mechanical shop activity at more than 20 locations across the system.

“I am very proud of how we recovered quickly in March from the service disruptions in February,” said CN President and Chief Executive Officer JJ Ruest in a statement.

“Our network is very fluid, and we are continuing the temporary right-sizing of our resources to match the weaker demand caused by the global recession. We are committed to providing long-term shareholder value by delivering on our strategic capacity investments for growth and by deploying technological innovations.”

In a news release, CN attributed its flat revenue during the first quarter in part to the impact the blockades and pandemic had on volume.

The pandemic led CN to revise its 2020 financial outlook, saying the demand for transportation services are correlated with the duration of containment measures and their effect on businesses and consumers, which remain uncertain.

CN has reduced 2020 capital expenditures by CA$200 million to CA$2.9 billion, but will spend CA$1.6 billion on track maintenance this year.

CN Revenue Fell 6% in 4th Quarter

January 31, 2020

Canadian National said this week that a labor strike and weak freight business contributed to a decline in revenue in the fourth quarter of 2019.

In a news release, CN said revenue declined 6 percent to CA$3.6 billion; diluted earnings per share (EPS) fell 22 percent to CA$1.22, adjusted diluted EPS dropped 16 percent to CA$1.25; and operating income and adjusted operating income each tumbled 16 percent to CA1.2 billion and CA$1.25 billion, respectively.

All figures are in comparison to the fourth quarter of 2018.

CN posted an operating ratio of 66 percent, up 4.1 points, and an adjusted operating ratio of 65.2 percent, up 4 points.

For the 2019 calendar year, CN had revenue of CA$14.9 billion, up 4 percent; a diluted EPS of CA$5.83, down 1 percent; an adjusted EPS of CA$5.80, up 5 percent; operating income of CA$5.6 billion, up 2 percent; and an adjusted operating income of CA$5.7 billion, up 3 percent.

The 2019 operating ratio was 62.5 percent, up 0.9 points; and an adjusted OR of 61.7 percent, up 0.2 points.

Traffic volume in the fourth quarter dropped 7 percent on a carload basis, or 13 percent when measured by revenue ton miles. Every commodity category fell during the quarter.

For the year CN’s traffic volume fell 1 percent on a carload basis or 3 percent on a revenue ton mile basis.

“We remain focused on executing our strategy of long-term sustainable growth at low incremental cost,” said CN President and Chief Executive Officer J.J. Ruest in a statement.

“”Our strategic deployment of technology, the next step in our precision scheduled railroading model and our next driver of value, is well underway. At the same time, we continue to closely monitor the freight volume environment and rightsize our resources and costs to demand.”

CNS said that during the past years it has spent CA$7.4 billion in capital expenditures to increase network capacity, efficiency and resiliency

Ruest said the 2020 capital spending budget will rise to CA$3 billion.

Although CN sees growth opportunities in 2020, it expects low single-digit volume growth in terms of revenue ton miles.

“The first half will be a challenge,” Ruest said.

CN is targeting an EPS growth in the mid single-digit range this year compared to adjusted diluted EPS of CA$5.80 in 2019.

Ruest said CN will look to additional small acquisitions and partnerships as a way to boost freight volume.

“We’re very mindful for the rail industry to be successful, including at CN, we need to grow the pie,” he said.  “Just exchanging pieces of pie, that’s not a long-term solution.”

In the long run Ruest said CN needs to do a better job of competing with trucks.

CN has discarded 5,000 freight cars, returned all leased locomotives, vacated some office space in Montreal, and eliminated 1,300 positions.

CN Adjusts 2019 Outlook in Aftermath of Strike

December 4, 2019

Canadian National has revised its 2019 full-year financial outlook to reflect the effects of an eight-day strike that recently ended.

CN estimates that the strike by members of the Teamsters Canada Rail Conference will affect the company by 15 cents of earnings per share.

The revised full-year financial outlook now calls for adjusted diluted EPS growth in the low-to-mid single-digit range versus last year’s adjusted EPS of CA$5.50.

In October CN had projected an adjusted diluted EPS growth in the high single-digit range for the year.

The strike began when more than 3,000 conductors and rail yard workers walked off the job during contentious negotiations for a new contract.

The union workers are in the process of voting on ratification of the tentative agreement that ended the strike.

CN Revenue Rose 4% in 3rd Quarter

October 24, 2019

Canadian National reported this week that its third quarter 2019 revenue increased 4 percent to CA$3.8 billion.

Diluted earnings per share rose 8 percent to CA$1.66, operating income increased by 8 percent to CA$1.6 million and net income was up 0.5 percent to CA$1.2 billion compared with the third quarter of 2018.

The third quarter 2019 operating ratio was 57.9 percent compared with 59.5 percent a year ago.

“Our team of railroaders swiftly aligned resources with the weaker demand to achieve solid efficiency gains,” said CN President and Chief Executive Officer JJ Ruest in a statement.

“We remain committed to our long-term agenda of growing faster than the economy at low incremental cost, and to taking scheduled railroading to the next level by deploying advanced operating technology.”

In a news release, CN said the revenue growth came from freight rate increases and higher intermodal revenue.

Operating expenses for the quarter were up 1 percent to CA2.2 billion due to higher purchased services and material expenses as well as higher depreciation and amortization expenses.

A slowing demand for rail service led CN to revise its profit outlook for 2019.

It is now projecting adjusted diluted EPS growth in the high single-digit range for 2019 versus last year’s adjusted diluted EPS of CA$5.50.

This past July CN’s financial outlook called for low double-digit growth in adjusted diluted EPS.

The carrier also expects a “slightly negative volume growth” this year in revenue ton miles.

CN said it sees signs of two economies, one of which is a strong consumer sector that’s boosting intermodal and automotive traffic and the other a struggling industrial economy that’s depressing demand for carload freight.

Volume for the third quarter was down 1 percent on a revenue ton-mile basis and by 0.4 percent on a carload basis.

In recent months, CN has responded to softening traffic by reducing its motive power and freight car fleets.

“We’re in process of returning nearly 3,000 railcars that were on lease, scrapping another 2,000 railcars, and have parked over 6,000 cars to saving car hire expense,” said Chief Operating Officer Rob Reilly.

CN has 150 locomotives in storage and will return remaining leased units this quarter.

It has furloughed train and engine crews, as well as mechanical employees.

CN Expects Better Financial Results

July 26, 2018

Canadian National is feeling more optimistic about its financial outlook after posting strong numbers for the second quarter.

The Montreal-based Class 1 railroad is looking to deliver 2018 adjusted diluted earnings per share in the range of CA$5.30 to CA$5.45, versus last year’s adjusted diluted earnings per share of CA$4.99.

This past April CN’s financial outlook called for a 2018 adjusted diluted earnings per share in the range of CA$5.10 to CA$5.25.

In the second quarter of 2018, CN said its net income rose 27 percent to CA$1.31 billion, or CA$1.77 per share, from CA$1.03 billion, or CA$1.36 per share, a year ago. Adjusted diluted earnings per share were CA$1.51, up from CA$1.34 last year.

Operating income grew 7 percent to CA$1.5 billion, while revenue rose 9 percent to CA$3.6 billion over last year’s quarter.

Operating expenses for the quarter increased 10 percent to CA$2.1 million compared with last year. CN posted an operating ratio of 58.2 percent, an increase of 0.7 points over second-quarter 2017, but an improvement of 9.6 percents over the ratio in first-quarter 2018.

In a statement, CN CEO Jean-Jacques Ruest said record capital investments in new equipment and expanded infrastructure are on schedule and CN is adding capacity.

Ruest said CN has momentum for a strong second half.

CN has increased its 2018 capital program by CA$100 million to CA$3.5 billion, with additional capital spending primarily going toward the purchase of new rail cars.

The railroad attributed its revenue increases to a higher volumes of Canadian grain, coal, overseas intermodal traffic, frac sand, refined petroleum products and U.S. grain; freight rate increases; and higher applicable fuel surcharge rates. They were partly offset by the negative translation impact of a stronger Canadian dollar.

Carloadings for the quarter climbed 6 percent to 1.5 million compared with the year-ago period.

The increase in operating expenses was mainly driven by higher fuel prices, higher labor costs and higher purchased services and material costs, CN officials said.

Winter Put CN 1st Quarter Revenue in Deep Freeze

April 25, 2018

Canadian National blamed harsh winter weather for depressing its first quarter financial numbers.

CN said first quarter revenue was flat at $3.2 billion while operating income fell 16 percent to $1 billion.

Net income declined by 16 percent to $741 million and operating expenses jumped 9 percent to $2.2 billion compared with the first quarter of 2017 results. All figures are in Canadian dollars.

The Montreal-based company said revenue ton-miles declined 4 percent to 57.2 million but carloads increased 3 percent to 1.4 million units. The operating ratio rose 6 points to 67.8.

By traffic segment, coal and intermodal revenue rose 10 percent to $142 million and $814 million, respectively, and metals and minerals revenue increased 7 percent to $388 million on a year-over-year basis.

However, grain and fertilizers revenue fell 11 percent to $539 million, forest products revenue dropped 6 percent to $422 million, automotive revenue declined 4 percent to $197 million, and petroleum and chemicals revenue decreased 3 percent to $564 million.

Aside from bad weather, CN also said its flat revenue resulted from a negative translation impact from the stronger Canadian dollar, which partly was offset by higher fuel surcharges and rates. The increase in operating costs was caused by weather, higher training costs for new employees and higher fuel prices.

CN officials said the harsh winter affected train lengths and caused operational performance to further slip after eroding since fall because of an unexpected double-digit traffic gain last year.

“We had lower resiliency in some high-volume areas going into winter, [which] made maintaining fluidity very challenging. Fluidity is the most important thing,” said Executive Vice President and Chief Operating Officer Mike Cory. “This lower resiliency, coupled with the extreme harsh winter conditions in those same areas, resulted in a decline in the service levels and an increase in [operational] costs.”

CN officials said they expect to spend $400 million — compared with a previously announced $250 million — to complete 29 major infrastructure capacity projects, mainly in western Canada. This includes new double track, more and longer sidings, and yard capacity expansions.

The railroad is also acquiring additional locomotives and box cars, along with hiring more train crew members.

“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,” said interim CN President and Chief Executive Officer Jean-Jacques Ruest. “With the people, equipment and infrastructure in place, and with a solid pipeline of growth opportunities ahead of us, we are confident in our ability to bring long-term value creation to our customers and shareholders.”

CN Net Income Falls 6% in 4th Quarter 2017

January 25, 2018

Canadian National said on Wednesday that its fourth quarter adjusted net income fell 6 percent to CA$897 million and adjusted diluted earnings per share fell by 2 percent to CA$1.20.

The financial figures include the effect of the Tax Cuts and Jobs Act approved in the United States in December.

Including the tax benefit, CN reported that quarterly net income rose 156 percent to CA$2.6 billion and diluted EPS jumped 164 percent to CA$3.48 compared with the fourth quarter of 2016.

Operating income for the quarter fell 7 percent to CA$1.3 billion, but revenue climbed 2 percent to CA$3.3 billion compared with a year ago.

Quarterly operating expenses increased 9 percent to CA$1.98 billion compared with 2016. The operating ratio was 60.4 percent, an increase of 3.8 points over 2016.

For all of 2017, CN’s adjusted net income increased 6 percent to CA$3.78 million and adjusted diluted EPS rose 9 percent to CA$4.99. Operating income increased 5 percent to CA$5.6 billion compared with the previous year.

CN’s revenue rose 8 percent year over year to CA$13 billion. Operating expenses for 2017 jumped 11 percent to CA$7.5 billion.

The operating ratio in 2017 was 57.4 percent, an increase of 1.5 points over 2016.

“Our growth continues to outpace the strengthening economy and I am pleased with the results our dedicated team generated in 2017,” said CN CEO Luc Jobin in a statement.

“Throughout the year we faced rapidly changing market demands and in the fourth quarter dealt with challenging operating conditions, including harsh early winter weather across the network, impacting our performance.”

Jobin said CN will add this year additional train crews and increase capital spending to a record CA$3.2 billion, which includes the acquisition of 60 new locomotives, expanding track capacity and improving intermodal terminals.

Capital spending will include CA$1.6 billion for track infrastructure maintenance and CA$400 million for installation of positive train control in the United States.