(The Toronto Star published the following Canadian Press article on January 21.)
MONTREAL — Profits at Canadian National Railway fell 23 per cent last year, partly due to $252 million in fourth-quarter charges to cover asbestos claims in the United States and the cost of 1,146 job cuts announced last month.
As well, the poor Canadian grain harvest cut $220 million from yearly revenues, and the hurt will carry on into 2003, the new chief executive said today.
Canada’s biggest railway earned $800 million or $3.97 a share in 2002, compared with $1.04 billion or $5.23 per share in 2001.
Excluding unusual items in both years, the 2002 profit was $1.05 billion, up 8 per cent.
Revenue rose 8 per cent to $6.1 billion, reflecting the acquisition of Wisconsin Central and a strong performance by most units.
Operating expenses increased to $4.64 billion from $3.97 billion as CN integrated Wisconsin Central. The operating ratio – an efficiency measure of expenses as a proportion of revenue – worsened to 69.4 per cent, compared with 68.5 per cent in 2001.
Hunter Harrison, who replaced Paul Tellier as chief executive Jan. 1, said continued weakness in Prairie grain shipments “is going to present some real challenges for us” in 2003, especially if Alberta and Saskatchewan do not get normal rainfall in April and May.
Despite its lower net profit, CN said free cash flow rose 16 per cent to $513 million, and it raised its quarterly dividend by 16 per cent, or 3.5 cents per share, to 25 cents.
The dividend yield is 1.6 per cent at Tuesday’s closing price for CN shares (TSX: CNR) fell $1.15 to $61.22.
CN also is continuing a share buyback and is putting some cash aside for acquisitions.
Harrison said he has nothing specific in mind, but “if opportunities arose we could take advantage of them.”
Last year’s traffic showed increases in petroleum and chemicals, automotive, intermodal and forest products shipments, partly offset by continued weakness in Canadian grain and coal revenues.
“For 2003, we remain cautious about CN’s prospects, given uneven North American economic growth, uncertain precipitation levels in Western Canada, and potentially volatile international energy prices,” Harrison said.
For the fourth quarter, net earnings plunged to $22 million or 11 cents a share, from $296 million or $1.48 per share in the year-ago period, as a result of the one-time charges.
Quarterly revenues increased one per cent to $1.55 billion.
Harrison, who was based in Chicago as chief operating officer under Tellier, said he has found a place to live in Montreal.
“I’ve been running ragged,” he acknowledged in a southern drawl. “We’ve got some exciting times ahead of us.”