(Source: CN press release, January 26, 2016)
MONTREAL — CN today reported its financial and operating results for the fourth quarter and year ended Dec. 31, 2015.
Fourth-quarter 2015 financial highlights
• Net income increased 11 per cent to C$941 million, while diluted EPS increased 15 per cent to C$1.18.
• Operating income increased seven per cent to C$1,354 million.
• Revenues decreased by one per cent to C$3,166 million. Carloadings declined eight per cent, and revenue ton-miles declined five per cent.
• The operating ratio improved by 3.5 points to 57.2 per cent.
Full-year 2015 financial highlights
• Net income increased 12 per cent to C$3,538 million, with diluted EPS rising 14 per cent to C$4.39.
• Adjusted net income increased 16 per cent to C$3,580 million, while adjusted diluted EPS increased 18 per cent to C$4.44. (1)
• Operating income rose 14 per cent to C$5,266 million.
• Revenues increased four per cent to C$12,611 million. Carloadings declined two per cent, and revenue ton-miles decreased three per cent.
• The operating ratio for 2015 improved by 3.7 points to 58.2 per cent.
• Free cash flow was a record C$2,373 million, compared with C$2,220 million for 2014. (1)
Claude Mongeau, president and chief executive officer, said: “CN generated strong fourth-quarter and full-year 2015 results despite the weak volume environment. Our solid performance is testament to the strength of CN’s franchise and diversified portfolio of businesses. I am particularly proud that CN’s team of railroaders quickly recalibrated resources to respond to weaker volumes, while protecting customer service.”
2016 outlook, increased dividend
Mongeau said: “Although the economic environment remains challenging, CN will continue to leverage its franchise strength and industry-leading efficiency. For 2016, the Company expects to deliver mid-single digit EPS growth over adjusted diluted 2015 EPS of C$4.44. (1) CN will continue to invest in the safety and efficiency of its network, with a 2016 capital investment program of approximately C$2.9 billion, including the negative impact of foreign exchange and increased spending for Positive Train Control technology.
“Given CN’s strong balance sheet and solid financial prospects, I am pleased to announce that the Company’s Board of Directors today approved a 20 per cent increase in CN’s 2016 quarterly common-share dividend. CN has increased its dividend per share by 17 per cent per year on average since its privatization in 1995 and continues to move towards a target payout ratio of 35 per cent.”
Fourth-quarter 2015 revenues, traffic volumes and expenses
Revenues for the quarter decreased by one per cent to C$3,166 million. Revenues increased for automotive (13 per cent), forest products (12 per cent), intermodal (five per cent), and grain and fertilizers (one per cent). Revenues declined for metals and minerals (21 per cent), coal (16 per cent), and petroleum and chemicals (four per cent).
The decrease in total revenues was mainly attributable to reduced shipments of energy-related commodities due to a reduction in oil and gas activities, lower volumes of semi-finished steel products and short-haul iron ore, decreased shipments of coal due to weaker North American and global demand, and lower U.S. grain exports via the Gulf of Mexico; as well as a lower applicable fuel surcharge rate. These factors were partly offset by the positive translation impact of the weaker Canadian dollar on U.S.-dollar-denominated revenues, freight rate increases, and solid overseas intermodal demand.
Carloadings for the quarter declined eight per cent to 1,325 thousand.
Revenue ton-miles (RTMs), measuring the relative weight and distance of rail freight transported by CN, declined by five per cent, while rail freight revenue per RTM, a measurement of yield defined as revenue earned on the movement of a ton of freight over one mile, increased by five per cent.
Operating expenses for the quarter decreased by seven per cent to C$1,812 million. The decrease was primarily due to lower fuel expense, lower accident-related costs and cost-management efforts, partly offset by the negative translation impact of the weaker Canadian dollar on U.S.-dollar-denominated expenses.
Full-year 2015 revenues, traffic volumes and expenses
Revenues for 2015 increased four per cent to C$12,611 million. Revenues increased for automotive (16 per cent), forest products (13 per cent), intermodal (five per cent), grain and fertilizers (four per cent), and petroleum and chemicals (four per cent). Revenues declined for coal (17 per cent) and metals and minerals (three per cent).
The rise in total revenues was mainly attributable to the positive translation impact of the weaker Canadian dollar on U.S.-dollar-denominated revenues; freight rate increases; and solid overseas intermodal demand, higher volumes of finished vehicle traffic, and increased shipments of lumber and panels to U.S. markets. These factors were partly offset by a lower applicable fuel surcharge rate; and decreased shipments of energy-related commodities including crude oil, frac sand and drilling pipe, lower volumes of semi-finished steel products and short-haul iron ore, reduced shipments of coal due to weaker North American and global demand, as well as lower U.S. grain exports via the Gulf of Mexico.
Carloadings declined two per cent to 5,485 thousand.
RTMs decreased by three per cent. Rail freight revenue per RTM increased eight per cent over 2014, driven by the positive translation impact of the weaker Canadian dollar and freight rate increases, partly offset by a significant increase in the average length of haul, particularly in the second half of the year, and a lower applicable fuel surcharge rate.
Operating expenses for 2015 decreased by two per cent to C$7,345 million. The decrease was mainly due to lower fuel expense and cost-management efforts, partly offset by the negative translation impact of a weaker Canadian dollar on U.S.-dollar-denominated expenses.
The operating ratio was 58.2 per cent in 2015, an improvement of 3.7 points over the 2014 operating ratio of 61.9 per cent.