(Canwest News Service circulated the following by Scott Deveau on July 22.)
MONTREAL — Canadian National Railway Co. hopes to pick up steam in the latter half of the year, despite turning in an 11-per-cent drop in its second-quarter earnings yesterday.
The country’s largest railway said its profit during the quarter was bogged down by a strong loonie eroding the value of its U.S.-based revenue, a continued decline in the forestry and auto sectors, and the rapid rise in the price of fuel.
But Hunter Harrison, CN chief executive, said he expects oil prices to stabilize in the months ahead, the economy to start to recover in the second half of the year, and he reiterated the company’s earnings guidance in the mid-single-digits range for 2008 during a conference call yesterday.
“I think you’re going to see – I can’t tell you when, I’m not that smart – in 12 months or 18 months or something, the company will move away from this plateau and take another run,” he said.
The railway reported a second-quarter net income of $459 million, or 95 cents a diluted share, down from $516 million a year earlier.
The results beat the Street’s estimates of 89 cents a share, but the rapid 60-per- cent rise in the cost of fuel year over year made it impossible for the railway to fully recover the increases with its fuel surcharges, management said.
The railway’s operating ratio – an important gauge of its profitability, measuring operating costs as a percentage of revenue – deteriorated by 6.3 percentage points to 66.3 per cent.
Still, revenue increased four per cent to $2.1 billion during the quarter, mainly because of higher freight rates brought on by higher fuel surcharges and improved commodity volumes.
CN also announced a share buyback program in which it will purchase up to 25 million common shares for cancellation by July 29, 2009, or 5.3 per cent of its outstanding shares.