Canadian National Railway has finished the second quarter with a net income of CAN$717 million ($695.41 million), a rise of CAN$86 million over the same period last year.
Revenues rose by 5 percent, year over year, to CAN$2.67 billion thanks to a two-percent rise in carloadings and a five-percent increase in revenue-ton miles. The operating ratio rose by 0.4 points to 60.9 percent.
Strong energy markets and growth in the North American economy lead to higher freight volumes, and freight-rate increases also helped push up revenue. Revenues for petroleum and chemicals rose 18 percent, while coal revenues stayed flat, and automotive revenues declined by 3 percent. Grain and fertilizer revenue rose by 5 percent; revenues for forest products and metals both rose by four percent; and intermodal ended the period up by 3 percent.
With these results, Canadian National is staying the course in 2013, maintaining its plan to invest CAN$2 billion in capital programs.
“We executed strongly during the second quarter, with service and operating metrics on a steady improvement trend. This performance underscores our agenda of Operational and Service Excellence, which is key to achieve solid revenue growth at low incremental cost,” CN’s president, Claude Mongeau, said in a statement.
“Looking forward,” he continued, “despite slower volume growth than anticipated, the CN team will maintain a keen focus on growing revenues faster than the overall economy as well as on tightly managing costs to meet our full-year financial outlook.
According to the firm Cowen & Company, these results were slightly better than the industry expected in the second quarter, and the third quarter may also be somewhat positive, despite continued weakness in coal, fertilizer and grain transportation. Trouble in these three industries is not limited to CN.
“We believe the global coal price weakness could begin to affect even the low-cost producers in CN's network as it has for the U.S. Eastern carriers,” Cowen wrote in an earnings guidance. “The grain and fertilizer weakness witnessed [this year] is likely to continue through 3Q13, with 4Q13 possibly marking a positive turn as a new crop comes online.” - Jon Ross