(Source: CN press release, October 23, 2018)
MONTREAL — CN today reported its financial and operating results for the third quarter ended Sept. 30, 2018.
Financial results highlights
Third-quarter 2018 compared to third-quarter 2017
• Net income increased by 18 per cent to C$1,134 million.
• Diluted earnings per share (EPS) increased by 21 per cent to C$1.54.
• Adjusted net income increased by 11 per cent to C$1,102 million. (1)
• Adjusted diluted EPS increased by 15 per cent to C$1.50. (1)
• Operating income increased by eight per cent to C$1,492 million. (2)
• Revenues increased by 14 per cent to C$3,688 million.
• Revenue ton-miles (RTMs) increased by four per cent and carloadings increased by three per cent.
• Operating expenses increased by 19 per cent to C$2,196 million. (2)
• Operating ratio of 59.5 per cent, an increase of 2.3 points over the third-quarter 2017. (2)
• Free cash flow for the first nine months of 2018 was C$1,881 million, compared with C$2,321 million for the year-earlier period. (1)
• 22 of 27 capacity expansion projects completed this year.
“Our dedicated engineering team delivered, putting more than 80 per cent of our infrastructure expansion projects fully in service at a time when the network was under heavy traffic,” said JJ Ruest, president and chief executive officer of CN. “Our 2018 resource investments are substantially advanced, giving our railroaders the tools they need to provide industry-leading service to all of our customers now and for the long haul.
“We continue to see strong opportunities ahead, across multiple existing rail commodities and new supply chain services,” Ruest added. “The balance of our expansion projects remains on track for completion before winter and our one team is energized to execute our proven operating model as we meet the growing economic needs of our customers.”
Reaffirmed 2018 financial outlook (3)
CN still aims to deliver 2018 adjusted diluted EPS in the range of C$5.30 to C$5.45, versus last year’s adjusted diluted EPS of C$4.99, (1) and now assumes RTM growth for the year to be approximately five per cent.
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 2018 would have been lower by C$26 million, or C$0.04 per diluted share. (1)
Third-quarter 2018 revenues, traffic volumes and expenses
Revenues for the third quarter of 2018 were C$3,688 million, an increase of C$467 million or 14 per cent, when compared to the same period in 2017. Revenues increased for petroleum and chemicals (C$133 million or 25 per cent), grain and fertilizers (C$76 million or 15 per cent), intermodal (C$70 million or eight per cent), forest products (C$68 million or 15 per cent), metals and minerals (C$61 million or 15 per cent), coal (C$34 million or 25 per cent), other revenues (C$20 million or 10 per cent) and automotive (C$5 million or three per cent).
The increase in revenues was mainly attributable to higher applicable fuel surcharge rates, freight rate increases, the positive translation impact of a weaker Canadian dollar, as well as higher volumes.
RTMs, measuring the relative weight and distance of rail freight transported by CN, increased by four per cent from the year-earlier quarter. Rail freight revenue per RTM increased by 10 per cent over the year-earlier period, mainly driven by higher applicable fuel surcharge rates, freight rate increases and the positive translation impact of a weaker Canadian dollar.
Carloadings for the quarter increased by three per cent to 1,525 thousand.
Operating expenses for the third quarter increased by 19 per cent to C$2,196 million, (2) mainly driven by higher fuel prices, higher labor costs as a result of an increase in headcount and higher training costs for new employees, higher costs as a result of increased volumes of traffic and operating performance below 2017 levels, and the negative translation impact of a weaker Canadian dollar.
Full press release and additional information available at the link above.