(Source: CN press release, October 27, 2015)
MONTREAL — CN today reported its financial and operating results for the third quarter ended Sept. 30, 2015.
Third-quarter 2015 financial highlights
• Net income increased 18 per cent to C$1,007 million, while diluted EPS increased 21 per cent to C$1.26.
• Q3-2015 operating income increased 16 per cent to C$1,487 million.
• Third-quarter 2015 revenues increased three per cent to C$3,222 million. Carloadings and revenue ton-miles each declined by six per cent.
• CN’s operating ratio for Q3-2015 improved by five percentage points to a record 53.8 per cent.
• Free cash flow for the first nine months of 2015 was C$1,741 million, compared with C$2,045 million for the year-earlier period. (1)
Luc Jobin, CN executive vice-president and chief financial officer, said: “CN delivered record third-quarter results thanks to strong team execution in safely and efficiently meeting our customers’ needs while recalibrating resources to the weaker volume environment.
“We remain committed to our long-term agenda of Operational and Service Excellence, investing in the safety and integrity of our network, and fulfilling our role as a true backbone of the economy.
“With CN’s continued strong performance this year, we are pleased to reaffirm our outlook for double-digit adjusted EPS growth in 2015 versus last year’s adjusted diluted EPS of C$3.76.” (1) (2)
Foreign currency impact on results
Although CN reports its earnings in Canadian dollars, a large portion of its revenues and expenses is denominated in U.S. dollars. The fluctuation of the Canadian dollar relative to the U.S. dollar affects the conversion of the Company’s U.S.-dollar-denominated revenues and expenses. On a constant currency basis, CN’s net income for the third quarter of 2015 would have been lower by C$107 million (C$0.13 per diluted share). (1)
Third-quarter 2015 revenues, traffic volumes and expenses
Revenues for the third quarter of 2015 increased by three per cent to C$3,222 million. Revenues increased for automotive (13 per cent), forest products (12 per cent), intermodal (five per cent), petroleum and chemicals (three per cent), and grain and fertilizers (two per cent). Revenues declined for coal (13 per cent) and metals and minerals (three per cent).
The revenue performance was mainly attributable to the positive translation impact of the weaker Canadian dollar on U.S.-dollar-denominated revenues; freight rate increases; strong 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; decreased shipments of coal due to weaker North American and global demand; reduced 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; as well as lower volumes of Canadian grain versus the prior year’s record crop.
Carloadings for the quarter declined by six per cent to 1,393 thousand.
Revenue ton-miles, measuring the relative weight and distance of rail freight transported by CN, declined by six per cent over the year-earlier quarter. Rail freight revenue per revenue ton-mile, a measurement of yield defined as revenue earned on the movement of a ton of freight over one mile, increased by 10 per cent over the year-earlier period, driven by the positive translation impact of the weaker Canadian dollar and freight rate increases, partly offset by a lower applicable fuel surcharge rate and an increase in the average length of haul.
Operating expenses for the quarter decreased by five per cent to C$1,735 million, mainly due to lower fuel costs and lower casualty and other expense, partly offset by the negative translation impact of a weaker Canadian dollar on U.S.-dollar-denominated expenses.
Update on recovery of President and CEO Claude Mongeau
Claude Mongeau had successful surgery in Montreal to remove a rare type of soft-tissue tumour. Mr. Mongeau underwent a procedure to remove his larynx and a voice prosthesis was placed in his throat. He is currently receiving radiation treatment and is expected to return to work early in the new year following his complete recovery.
“Claude is upbeat, recovering well, and remains engaged in the business,” said Robert Pace, chairman of CN. “We wish him a speedy and full recovery as he focuses on his health.
“The Board has every confidence in the experienced leadership team to continue to deliver strong results, and all of us look forward to Claude’s return.”