MONTREAL — The head of Canadian National Railway Co. remained cautious on Tuesday about a pickup of the North American economy, but sounded optimistic about the company’s first-quarter results, according to a wire service.
CN’s Paul Tellier remarks came shortly after the Bank of Canada expressed confidence in the economy by raising its interest rates by a quarter of a percentage point to 2.25 percent, the first central bank in the Group of Seven industrialized nations to start reversing last year’s aggressive rate cuts.
CN is Canada’s largest railway and North America’s no. 5, and its C$5.7 billion ($3.6 billion) a year freight business is closely linked to the overall state of the economy.
“(In) the first quarter, we did not bad at all, except for grain,” Tellier told reporters after the company’s annual meeting in the Atlantic port city of Halifax, Nova Scotia, held one week before the publication of CN’s first-quarter results.
As expected, grain shipments suffered from the drought in the Canadian prairies that reduced the crop by 15 percent to 18 percent, he said.
For the rest of the year, Tellier said, economists’ outlooks remained too foggy to deliver a clear growth forecast.
“There are too many uncertainties, including fuel prices,” he said.
Analysts polled by Thomson Financial/First Call expect CN to deliver, on average, first-quarter earnings of C$1.14 a share on April 23, up from C$1.03 in the year-ago period.
For the year, CN said in January it was expecting profit growth to stand between 5 percent and 10 percent, short of the 12 percent growth posted in 2001.
CN also said on Tuesday it had signed a deal with the Electro-Motive Division of General Motors to remanufacture the diesel engines of 300 mainline locomotives, or almost 30 percent of its fleet.
The railway did not disclose the value of the six-year deal, but executives said the cost was covered by its C$1 billion capital expenditures budget.
CN said last month it would buy 60 new locomotives from General Electric Transportation Systems, to be delivered by the end of 2004. The new 4,400 horsepower units will replace older and less efficient ones, allowing better asset utilization and yielding lower fuel consumption and pollution, the company said.
The railway has acquired 384 new locomotives since it started to upgrade its mainline fleet in 1995. The average age of the fleet has since fallen to 13 years from 18 years, it said.
CN’s stock was up 25 Canadian cents at C$77.00 on the Toronto Stock Exchange on Tuesday afternoon. The stock, which was the top performer of the TSE 35 last year, is off 10 percent from its year-high of C$85.53, reached last month.