(Source: Canadian National press release, January 24, 2017)
MONTREAL — CN today reported its financial and operating results for the fourth quarter and year ended Dec. 31, 2016.
Fourth-quarter 2016 financial highlights
• Net income increased eight per cent to C$1,018 million, while diluted EPS increased 12 per cent to C$1.32, compared with the fourth quarter of 2015.
• Adjusted net income increased one per cent to $952 million, with adjusted diluted EPS increasing four per cent to C$1.23. (1)
• Operating income increased three per cent to C$1,395 million.
• Revenues increased by two per cent to C$3,217 million. Carloadings increased three per cent, and revenue ton-miles increased four per cent.
• The operating ratio improved by 0.6 points to 56.6 per cent.
Full-year 2016 financial highlights
• Net income increased three per cent to C$3,640 million, with diluted EPS rising six per cent to C$4.67.
• Adjusted net income remained essentially flat at C$3,581 million, while adjusted diluted EPS increased three per cent to C$4.59. (1)
• Operating income rose one per cent to C$5,312 million.
• Revenues decreased by five per cent to C$12,037 million. Carloadings and revenue ton-miles both declined by five per cent in 2016.
• The operating ratio for 2016 improved by 2.3 points to 55.9 per cent.
• Free cash flow (1) was a record C$2,520 million, compared with C$2,373 million for 2015.
Luc Jobin, president and chief executive officer, said: “Despite facing difficult winter conditions in December, CN delivered very strong fourth-quarter results and throughout 2016 demonstrated once again its ability to perform well in a mixed economic environment.
“We saw weaker volumes during the year, but quickly adjusted as our dedicated team of railroaders maintained its focus on operational efficiency, while continuing to provide quality service to our customers and improve our safety performance.”
2017 outlook, increased dividend (2)
Jobin said: “Overall, the economy remains challenging, but we remain optimistic and expect to see moderate volume growth in 2017.”
CN expects to deliver EPS growth in the mid-single-digit range in 2017 over adjusted diluted EPS of C$4.59 in 2016. (1) CN will continue to invest in the safety and efficiency of its network, with a 2017 capital investment program of approximately C$2.5 billion, which includes increased spending for Positive Train Control technology in the United States.
The Company’s Board of Directors today approved a 10 per cent increase to CN’s 2017 quarterly cash dividend.
Fourth-quarter 2016 revenues, traffic volumes and expenses
Revenues for the quarter increased by two per cent to C$3,217 million. Revenues increased for grain and fertilizers (14 per cent), automotive (four per cent), and intermodal (one per cent). Revenues declined for metals and minerals (six per cent), coal (six per cent), petroleum and chemicals (five per cent), while revenues for forest products remained flat.
The revenue increase was mainly attributable to higher volumes of Canadian grains and U.S. soybeans, refined petroleum products, finished vehicles, and petroleum coke; as well as freight rate increases. These factors were partly offset by lower volumes of crude oil, U.S. thermal coal, and drilling pipe; and lower applicable fuel surcharge rates.
Carloadings for the quarter increased three per cent to 1,369 thousand.
Revenue ton-miles (RTMs), measuring the relative weight and distance of rail freight transported by CN, increased by four 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, decreased by three per cent.
Operating expenses for the quarter increased by one per cent to C$1,822 million. The increase was primarily due to higher casualty and other expenses, and higher depreciation and amortization expense, partly offset by lower pension expense and lower costs resulting from operating productivity gains, including cost-management initiatives.
Full-year 2016 revenues, traffic volumes and expenses
Revenues for 2016 decreased by five per cent to C$12,037 million. Revenues increased for automotive (six per cent), forest products (four per cent), and grain and fertilizers (one per cent), but were more than offset by revenue declines for coal (29 per cent), metals and minerals (15 per cent), petroleum and chemicals (11 per cent), and intermodal (two per cent).
The decrease in total revenues was mainly attributable to lower volumes of crude oil, coal and frac sand; as well as lower applicable fuel surcharge rates. These factors were partly offset by the positive translation impact of the weaker Canadian dollar and freight rate increases.
Carloadings declined five per cent to 5,205 thousand.
RTMs decreased by five per cent. Rail freight revenue per RTM remained flat compared to 2015, driven by lower applicable fuel surcharge rates and an increase in the average length of haul; offset by the positive translation impact of a weaker Canadian dollar and freight rate increases.
Operating expenses for 2016 decreased by eight per cent to C$6,725 million. The decrease was mainly due to lower costs resulting from operating productivity gains, including cost-management initiatives and decreased volumes of traffic; lower pension expense; and lower fuel prices, partly offset by the negative translation impact of a weaker Canadian dollar on U.S.-dollar-denominated expenses.
The operating ratio was 55.9 per cent in 2016, an improvement of 2.3 points over the 2015 operating ratio of 58.2 per cent.