(Source: CN press release, January 24, 2023)
MONTREAL — CN today reported its financial and operating results for the fourth quarter and year ended December 31, 2022. Diluted earnings per share (EPS) of C$2.10 grew by 23% on an adjusted basis in the fourth quarter, and operating ratio remained flat at 57.9% on an adjusted basis. (1) For the same period, the Company reported diluted EPS growth of 24%, while operating ratio improved 0.4 points.
“I am very proud of the work accomplished by our team in the fourth quarter and throughout the year. Our approach to scheduled railroading improved our service to our customers, drove operational efficiency, and built the resiliency that enabled a rapid recovery during the extreme winter conditions late in the quarter. As we look to 2023, we believe our back-to-basics strategy and disciplined operating model will continue to deliver despite the softening economy.” — Tracy Robinson, President and Chief Executive Officer, CN
Financial results highlights
Fourth-quarter 2022 compared to fourth-quarter 2021
- Revenues of C$4,542 million, an increase of C$789 million or 21%.
- Operating income of C$1,912 million, an increase of 22%, or an increase of 21% on an adjusted basis. (1)
- Diluted EPS of C$2.10, an increase of 24%, or an increase of 23% on an adjusted basis. (1)
- Operating ratio, defined as operating expenses as a percentage of revenues, of 57.9%, an improvement of 0.4 points, or remained flat on an adjusted basis. (1)
Full-year 2022 compared to full-year 2021
- Revenues of C$17,107 million, an increase of C$2,630 million or 18%.
- Operating income of C$6,840 million, an increase of 22%, and adjusted operating income of C$6,862 million, an increase of 22%. (1)
- Diluted EPS of C$7.44, an increase of 8%, and adjusted diluted EPS of C$7.46, an increase of 25%. (1)
- Operating ratio of 60.0%, an improvement of 1.2 points, and adjusted operating ratio of 59.9%, an improvement of 1.3 points. (1)
- Free cash flow of C$4,259 million compared to C$3,296 million in 2021. (1)
- Return on invested capital (ROIC) of 15.8%, a decrease of 0.6 points, and adjusted ROIC of 15.9%, an increase of 1.8 points. (1)
Operating performance
Fourth-quarter 2022 compared to fourth-quarter 2021
• Operating performance improved across most measures in the fourth quarter of 2022 when compared to the same period in 2021.
- Injury frequency rate (3) improved by 34% and the accident rate (4) improved by 13%.
- Fuel efficiency improved by 1% to 0.886 US gallons of locomotive fuel consumed per 1,000 gross ton miles (GTMs).
- Car velocity (car miles per day) improved by 10%.
- Through network train speed (mph) improved by 1%.
- Through dwell (entire railroad, hours) improved by 9%.
- Train length (in feet) decreased by 7%.
Full-year 2022 compared to full-year 2021
The Company’s focus on scheduled railroading has resulted in improvements in car velocity, through dwell and fuel efficiency, as well as a decrease in train length and train weight, despite negative impacts from the harsh winter in the first quarter of 2022.
- Injury frequency rate (3) improved by 19% and the accident rate (4) increased by 7%.
- Fuel efficiency improved by 2% to 0.867 US gallons of locomotive fuel consumed per 1,000 GTMs.
- Car velocity (car miles per day) improved by 1%.
- Through network train speed (mph) decreased by 2%.
- Through dwell (entire railroad, hours) improved by 4%.
- Train length (in feet) decreased by 5%.
2023 outlook and shareholder distributions(2)
CN expects to deliver EPS growth in the low single-digit range due to a softer economic outlook.
The Company’s Board of Directors approved an 8% increase to CN’s 2023 quarterly cash dividend, effective for the first quarter of 2023. This is the 27th consecutive year of dividend increases, demonstrating our confidence in the long-term financial health of the Company. In addition, the Company’s Board of Directors also approved a new Normal course issuer bid (NCIB) that permits CN to purchase, for cancellation, over a 12-month period up to 32 million common shares, starting on February 1, 2023, and ending no later than January 31, 2024.
Fourth-quarter 2022 revenues, traffic volumes and expenses
Revenues for the quarter increased by 21% to C$4,542 million, when compared to the same period in 2021. The increase in revenues was mainly attributable to higher fuel surcharge revenue as a result of higher fuel prices, the positive translation impact of a weaker Canadian dollar, freight rate increases and higher volumes of Canadian grain.
RTMs, measuring the weight and distance of freight transported by CN, increased by 6%. Freight revenue per RTM increased by 15%, mainly driven by higher fuel surcharge revenue as a result of higher fuel prices, the positive translation impact of a weaker Canadian dollar and freight rate increases.
Operating expenses for the quarter increased by 20% to C$2,630 million, when compared to the same period in 2021. The increase was mainly as a result of higher fuel prices and the negative translation impact of a weaker Canadian dollar.
Full-year 2022 revenues, traffic volumes and expenses
Revenues for 2022 increased by 18% to C$17,107 million, when compared to 2021. The increase in revenues was mainly attributable to higher fuel surcharge revenue as a result of higher fuel prices, freight rate increases, the positive translation impact of a weaker Canadian dollar, higher Canadian export volumes of coal via west coast ports and higher volumes of U.S. grain; partly offset by lower international container traffic volumes via the port of Vancouver as a result of supply chain congestion and significantly lower export volumes of Canadian grain in the first half of 2022.
RTMs increased by 1%. Freight revenue per RTM increased by 18%, mainly driven by higher fuel surcharge revenue as a result of higher fuel prices, freight rate increases, a decrease in the average length of haul and the positive translation impact of a weaker Canadian dollar.
Operating expenses increased by 16% to C$10,267 million, mainly due to higher fuel prices and the negative translation impact of a weaker Canadian dollar.