(Canadian National issued the following news release on January 24.)
MONTREAL — CN today reported its financial and operating results for the fourth quarter and year ended Dec. 31, 2005.
Fourth-quarter 2005 financial highlights
– Diluted earnings per share of C$1.56, an increase of 21 per cent over diluted fourth-quarter 2004 EPS;
– Net income of C$430 million, up 14 per cent;
– Operating income of C$720 million, an increase of 19 per cent;
– Record fourth-quarter operating ratio of 61.8 per cent, a 3.2-percentage point improvement over the year-earlier quarter;
– Record full-year 2005 free cash flow of C$1.3 billion. (1)
E. Hunter Harrison, president and chief executive officer of CN, said: “I am very pleased with CN’s strong financial results for the fourth quarter and full-year 2005. They reflect disciplined execution by the CN team and its ability to overcome some major challenges during the year.
“All the pieces came together – stronger pricing, gains from our acquisitions, and solid returns from good service, cost control and improved productivity. Our business model continued to fire on all cylinders, creating substantial shareholder value. That was demonstrated by our record free cash flow of C$1.3 billion for 2005. And that performance, I’m happy to report, allowed CN’s Board of Directors to approve today a 30 per cent increase in our quarterly cash dividend and a two-for-one stock split.”
Revenues for the fourth quarter of 2005 increased nine per cent over fourth-quarter 2004 to C$1,886 million, with intermodal, metals and minerals, and automotive commodity groups registering double-digit revenue gains. Forest products, petroleum and chemicals, coal, and grain and fertilizers revenues also improved. These gains were recorded despite the unfavourable C$40-million translation impact of the stronger Canadian dollar on U.S.-dollar denominated revenues.
Operating expenses for the quarter increased by three per cent over fourth-quarter 2004 to C$1,166 million and were favourably affected by the C$20-million translation impact of the stronger Canadian dollar on U.S.-dollar denominated expenses.
Full-year 2005
Net income for 2005 was C$1,556 million, an increase of 24 per cent, while diluted earnings per share for the year increased 28 per cent to C$5.54. Operating income for 2005 rose 21 per cent to C$2,624 million. Revenues for the year increased by 11 per cent to C$7,240 million, while operating expenses increased by five per cent to C$4,616 million. The company’s 2005 operating ratio improved by 3.1 percentage points to 63.8 per cent.
CN’s 2005 revenue performance was driven largely by:
– Increased freight rates, an important part of which was due to a higher fuel surcharge resulting from increases in crude oil prices;
– The inclusion of a full year of revenues from the rail and related holdings of Great Lakes Transportation LLC (GLT) and BC Rail. CN acquired and consolidated GLT and BC Rail on May 10, 2004, and July 14, 2004, respectively;
– A return to normal intermodal volumes following a first-quarter 2004 strike.
These gains were partly offset by the unfavourable C$260-million translation impact of the stronger Canadian dollar on U.S.-dollar denominated revenues.
Revenues by commodity group and operating expenses for 2005
Forest products revenues benefited from continued solid demand for Canadian lumber and panels and an improved market position for paper, while higher intermodal revenues in part reflected strong container imports into the Port of Vancouver.
CN’s improved market position in petroleum products helped to increase petroleum and chemicals revenues, although this was partly offset by soft conditions in several market segments. Grain and fertilizers revenues improved owing to higher export shipments of U.S. corn, as well as increased shipments of Canadian barley and canola, partly offset by the decreased availability of high-quality Canadian wheat for export via west coast ports.
Strong shipments of construction materials, aluminum and Canadian steel products helped to drive increased metals and minerals revenues. Automotive revenues benefited from higher import vehicles into the ports of Vancouver and Halifax, and new finished vehicle production in the southern U.S. that began in the second half of 2004, both of which were partly offset by lower auto production at CN-served facilities in southern Ontario and Michigan. CN’s coal revenues improved primarily as a result of new metallurgical-coal mines in western Canada.
The increase in CN’s 2005 operating expenses was largely attributable to higher fuel costs, the inclusion of a full year of GLT and BC Rail expenses, and increased purchased services and material costs. These increases were partly offset by the favourable C$155-million translation impact of the stronger Canadian dollar on U.S.-dollar denominated expenses, lower equipment rents, and lower casualty and other expenses.
Canadian National Railway Company spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key cities of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.