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(Source: Canadian National Railway press release, April 26, 2022)

MONTREAL — CN today reported its financial and operating results for the first quarter ended March 31, 2022. CN delivered sound operating and financial performance across the board, with adjusted diluted earnings per share (EPS) of C$1.32, up 7%. For the same period, the Company reported diluted EPS down 4% to C$1.31.

“CN has an incredible tri-coastal network, the best on the continent. Our team of experienced railroaders demonstrated resilience in the first quarter, managing through severe winter weather conditions and supply chain disruptions to deliver solid results. I am encouraged by the cadence that we developed at the end of the quarter as we lifted out of winter operations. Looking ahead, our immediate focus is on restoring CN’s network to its full capacity and running a scheduled railroad with an emphasis on velocity. I am confident that we will have a strong year and deliver on our 2022 financial outlook.” — Tracy Robinson, President and Chief Executive Officer, CN.

Financial results and operating highlights

First-quarter 2022 compared to first-quarter 2021

  • Revenues of C$3,708 million, an increase of C$173 million or 5%.
  • Operating income of C$1,227 million, a decrease of 8%, and adjusted operating income of C$1,237 million, an increase of 4%. (1)
  • Diluted EPS of C$1.31, a decrease of 4%, and adjusted diluted EPS of C$1.32, an increase of 7%. (1)
  • Operating ratio, defined as operating expenses as a percentage of revenues, of 66.9%, an increase of 4.4-points, and adjusted operating ratio of 66.6%, an increase of 0.3-points. (1)
  • Free cash flow for the first three months of 2022 was C$571 million compared to C$539 million for the same period in 2021. (1)
  • Injury frequency rate (3)improved by 18% and the accident rate (4)increased by 93%.
  • Car velocity (car miles per day) decreased by 12%.
  • Fuel efficiency remained flat at 0.910 US gallons of locomotive fuel consumed per 1,000 gross ton miles (GTMs).

Updated 2022 financial outlook (2)

Due to challenging operating conditions in the first quarter as well as worldwide economic uncertainty, CN now expects to deliver approximately 15-20% adjusted diluted EPS growth (compared to its January 25, 2022 target of 20%). (1) CN is now targeting an operating ratio below 60% for 2022 (compared to its January 25, 2022 target of approximately 57%) as well as approximately 15% of ROIC. (1) CN is also now targeting free cash flow in the range of C$3.7 billion – C$4.0 billion in 2022 (compared to its January 25, 2022 target of approximately C$4.0 billion). (1)

First-quarter 2022 revenues, traffic volumes and expenses

Revenues for the first quarter of 2022 were C$3,708 million compared to C$3,535 million for the same period in 2021, reflecting strong demand, despite reduced RTMs resulting from the significantly smaller Canadian grain crop, persistent global supply chain disruptions and challenging operating conditions, including harsher winter weather. The increase of 5%, was mainly due to higher applicable fuel surcharge rates, freight rate increases, higher Canadian export volumes of coal via west coast ports and higher export volumes of U.S. grain; partly offset by significantly lower export volumes of Canadian grain and lower international container traffic volumes via the ports of Vancouver and Prince Rupert.

RTMs, measuring the weight and distance of freight transported by CN, declined by 8% compared to the year-earlier period. Freight revenue per RTM increased by 15% compared to the year-earlier period, mainly driven by a significant decrease in the average length of haul, higher applicable fuel surcharge rates and freight rate increases.

Operating expenses for the first quarter of 2022 increased by 12% to C$2,481 million, mainly due to higher fuel costs due to the rapid rise in fuel prices as well as the recovery of the loss on assets held for sale recorded in the first quarter of 2021 resulting from the Company entering into an agreement for the sale of non-core lines; partly offset by lower average headcount.