(The following story by Robert Gibbens appeared on the Montreal Gazette website on January 24.)
MONTREAL — Canadian National Railway Co. took a hit from British Columbia’s extreme weather in the December quarter, but emerged with a 16-per-cent gain in earnings and confidence that 2007 will continue its “great run” since going public in 1995.
The fourth-quarter gain came from strong shipments of bulk commodities, price increases averaging nearly four per cent and rising productivity, CEO Hunter Harrison said. Moving more freight at higher prices with rising efficiency will ensure solid growth for the rest of 2007.
He bolstered that confidence by announcing that CN is raising its quarterly dividend rate by 29 per cent to 21 cents a share – the eleventh consecutive quarterly increase. CN’s cash flow can handle the higher rate, continuing share buybacks and heavy investment in track infrastructure and fleet.
“A few sectors are slowing but assuming the North American economy holds, commodity movements will remain strong, including intermodal traffic,” he told analysts. Lumber shipments, a big business for CN, should pick up in the second half.
With a network linking the Pacific with the Atlantic in Canada and extending south to Chicago, Memphis and the Gulf Coast, CN’s net earnings climbed to $499 million, or 95 cents a share, from $430 million, or 78 cents a share, a year earlier. Revenue was $1.94 billion, up three per cent.
Excluding a one-time tax recovery, net income was $472 million, or 90 cents a share, up 10 per cent on the year.
For all of 2006, earnings were a record $2.09 billion, or $3.91 a share, up 34 per cent from a year earlier. Excluding a $277-million tax recovery, net income was $1.81 billion, or $3.40 a share, up 16 per cent. The tax recoveries stem from lower Canadian corporate tax rates and settlement of prior tax issues.
The quarter’s results were slightly above most analysts’ estimates. CN shares rose $1.44, or 2.8 per cent, to $53.28 in Toronto. The 52-week range is between $55.95 and $44.43.
“It was the worst weather in British Columbia in 50 years. … We had to handle high winds and torrential rains, besides snow, avalanches and mudslides, and maintain our services,” Harrison said.
CN earlier estimated its 2007 capital spending will be about $1.6 billion, up four per cent from 2006, including $1 billion for trackage to increase average speed and capacity and raise productivity. That includes double-stack clearances on the B.C. North Line ready for the Prince Rupert intermodal terminal opening in the second half.
Strong shipments of coal, grain and fertilizers, petroleum and chemicals, metals and minerals, along with good intermodal performance, helped the fourth quarter, CN said. The stronger Canadian dollar reduced earnings by about $10 million. All measures of network efficiency improved. CN has since signed four-year contracts with the Canadian Auto Workers Union covering clerical staff, railroad workers and truck operators.
Burlington Northern Santa Fe Corp., the second-biggest U.S. railway, posted a 21-per-cent gain in fourth-quarter earnings to $519 million U.S. Revenue rose 9.4 per cent to $3.9 billion U.S., led by a 22-per-cent surge in coal shipments. CSX Corp. reported a 46-per-cent gain in earnings.