(The Canadian Press circulated the following article by Donald Mckenzie on July 20.)
MONTREAL — Canadian National Railway Co. president Hunter Harrison says the company’s “dynamite” second-quarter numbers should keep on rolling, with full-year profit expected to climb by as much as 25 cent over last year.
The railway’s profit in the three months ended June 30 jumped to $416 million from $326 million, while per-share net earnings rose 30 per cent to $1.47 from $1.13. “I am thoroughly pleased and delighted about the quarter,” Harrison said in a conference call Wednesday.
“They’re some obviously dynamite results.”
Six-month profit surged to $715 million, or $2.51 a share, from $536 million, or $1.85 a share – and company officials believe shareholders are in line for more glowing numbers.
Harrison said he expects Canada’s largest rail carrier to earn between 20 and 25 per cent more than the full-year profit of $4.34 a share in 2004.
The previous forecast called for growth of between 10 and 15 per cent.
CN stock rose after the earnings announcement, gaining $4.90, 6.66 per cent, to close at $78.50 on the Toronto Stock Exchange.
CN’s free cash flow of $787 million as of June 30 served as the impetus to a company announcement it will buy back 16 million shares – about six per cent of outstanding shares.
Virtually all of CN’s key sectors performed well in the quarter.
“On the revenue side, core merchandise businesses – including forest products, metals and minerals, and petroleum and chemicals -continued to register solid gains,” Harrison noted.
“CN’s intermodal business also performed well, benefiting from strong container imports via the Port of Vancouver, as did our coal business, which saw shipments from new metallurgical-coal mines in Western Canada.”
Harrison noted that grain and fertilizer revenues were affected by decreased availability of high-quality grain in Canada, while automotive business experienced lower production at some of the southern Ontario production facilities the company serves.
The chief executive officer also said CN (TSX:CNR) posted a record second-quarter operating ratio of 61.2 per cent, down 4.3 percentage points from a year earlier.
“Our employees are performing strongly and we expect to continue to deliver solid benefits to shareholders,” he said.
Analyst Randy Cousins called the second quarter “superb” and noted the company operates very smoothly.
“How well your railroad runs has a significant impact on profitability,” said Cousins, who works at BMO Nesbitt Burns.
“Stuff is delivered on time, it’s picked up on time, it moves at the right speed.”
The first half of the year saw completion of the integration of recent acquisitions BC Rail and GLT as well as relative labour peace with the signing of collective agreements with various unions.
Second-quarter revenues increased by 10 per cent to $1.84 billion, while six-month revenues climbed 14 per cent to $3.54 billion.