(The Canadian Press circulated the following article on June 12.)
NEW YORK — Canadian National Railway is still on track to meet its 2003 financial goals even though the strong Canadian dollar has cut more than $50 million in revenues so far, CN’s’s chief executive said Wednesday.
Hunter Harrison, who replaced Paul Tellier as CEO of Canada’s largest railway in January, told an analyst conference Wednesday that Montreal-based Canadian National is still comfortable with its financial outlook for 2003.
“We’ve gone through some challenges in 2002 that have continued in 2003,” Harrison told an analyst conference in New York.
Those challenges include lower Canadian grain shipments, volatile fuel prices and a rising Canadian dollar.
“The one I was not anticipating, and I don’t know that anybody anticipated to some degree, was the Canadian dollar and the exchange rate. That has totally taken us by surprise,” Harrison said.
“But all that in, we’re still comfortable with the guidance we have given for 2003. We’ve seen signs of pickup in the economy in the U.S.”
In April, at CN’s annual meeting, Harrison said he expected no growth in the first half of 2003 but that there would be growth in the final six months of the year in all business segments except Canadian grain and coal.
Analysts surveyed by Thomson Financial/First Call estimate the railway’s earnings for fiscal 2003 will come in at about $5.02 Cdn a share, up from $4.07 for its 2002 financial year.
In the first quarter ended March 31, the rising loonie hurt the Montreal-based railway’s revenues by about $50 million to $55 million, Harrison said, esplaning that each one-cent increase in the Canadian dollar cuts four cents from CN’s annual earnings.
But he added “I don’t think we’re going to see – and this is a personal opinion, unqualified – continuing strength of the Canadian dollar.”
The Canadian dollar has been gaining ground all year but gained momentum in the second quarter and is currently up about 10 cents US since Jan. 1. On Wednesday, the Canadian dollar traded at 73.92 cents US, up 0.47 of a U.S. cent.
Despite those challenges, Harrison said the railway expects profitability improvements in its intermodal transport operations, and anticipates an increase in grain shipments from Western Canada, which was severely affected by drought last year.
“We’re looking and positioned for a strong rebound in 2004 and 2005,” he said.
Canadian grain shipments are expected to be at about 85 per cent of historically normal levels by the fourth quarter and will rise gradually through 2004, Harrison said.
Harrison was CN’s chief operating officer since March 1998 until he took over the top spot on Jan. 1, after Tellier was lured to be president and chief executive of Bombardier Inc.
CN is one of the top six North American railways, with a network that spans the United States and Canada.
The railway’s network serves the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, La, and Mobile, Ala., as well as key cities of Toronto, Buffalo, Chicago, Detroit, and others.
Shares of Canadian National (TSX:CNR) were off nine cents to $69.85 on the Toronto stock market Wednesday.