(The following article by Paul Delean was posted on the Montreal Gazette website on October 19.)
MONTREAL — Canadian National Railway is still on a roll. Despite the negative impact of hurricanes, higher fuel costs, a couple of major derailments and an appreciating Canadian dollar, the nation’s largest rail transporter yesterday reported record third-quarter earnings of $411 million for the three-month period ended Sept. 30, a 19-per-cent improvement from a year ago.
“From a financial standpoint, it was an outstanding quarter,” president and CEO Hunter Harrison said.
“The model is clearly working. The railroad’s running as well as I’ve ever seen it run.”
Revenue for the quarter rose six per cent to $1.8 billion through a combination of higher freight rates (including a boosted fuel surcharge) in Canada and the U.S. and double-digit growth in the grain, fertilizer, coal and intermodal sectors.
The company said favourable income-tax adjustments and other income helped offset $28 million in uninsured expenses stemming from a 43-car derailment that dumped heavy oil and hazardous chemicals near Wabamun Lake, Alta., in early August.
In July, four CN employees died in a the head-on collision of two CN freight trains in Mississippi. That crash is still under investigation.
“These incidents put a chilling impact on this organization,” Harrison told analysts in a conference call yesterday. “It’s hard to be pleased with a quarter when you face those kinds of issues.”
The company said its operations on the U.S. Gulf Coast were affected by the recent hurricanes, with petroleum and chemical revenues down because of soft market conditions and reduced production in the region.
But increasing coal, grain, forest products, fertilizer and mining shipments, particularly in Western Canada, more than compensated and made for a rosy corporate outlook into 2006, though it could cloud over if energy prices continue to rise and interest rates remain low (forcing CN to shell out as much as $50 million more to meet pension obligations).
Through the first nine months of the current fiscal year, the railway had net income of $1.1 billion ($3.98 a share), a hefty jump from $882 million ($3.05 a share) in 2004. Revenue totalled $5.3 billion, up from $4.8 billion a year ago.
Like most companies listed on the Toronto Stock Exchange, CN had a down day yesterday, its shares slipping $1.91 to close at $82. In the past year, they’ve gained more than 32 per cent.