Prairie harvest delays felt in CN’s revenues

The railway still booked higher overall grain/fertilizer revenue

Weather-related stalls in this fall’s Prairie grain harvest have chipped away at Canadian National Railway’s (CN) third-quarter financials, as the railway booked lower profits and revenues on “shifting traffic demands.”

Montreal-based CN on Oct. 25 reported overall net income of $972 million on $3.014 billion in revenue for the quarter ending Sept. 30, down from $1.007 billion on $3.222 billion in the year-earlier period.

CN CEO Luc Jobin said the railway “delivered outstanding results in the third quarter while facing a still sluggish North American and global economy… Despite shifting traffic demands, including a delayed Canadian grain harvest, we remained flexible and service focused.”

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CN attributed its Q3 revenue decline mainly to lower volumes of crude oil, coal and frac sand, and lower fuel surcharge rates due to lower fuel prices.

CN, which doesn’t break out its figures for Canadian or U.S. grain-handling or fertilizer traffic, reported a five per cent increase in traffic in its grain and fertilizer market segment, handling about 150,000 carloads, up from 143,000 in the year-earlier Q3.

The increased traffic translated to a four per cent increase in grain and fertilizer revenue, at $497 million, up from $479 million — but also to a one per cent decrease in revenue per carload for that segment, at $3,313, down from $3,350.

Across all market segments, CN’s Q3 traffic was down four per cent at 1.332 million carloads.

For the 2015-16 crop year, CN said, the Canadian grain crop turned out to be in line with the five-year average and the U.S. grain crop above the five-year average, but the company also expects grain crops in both Canada and the U.S. to be above their respective five-year averages.

Given those assumptions, plus others relating to crude oil prices, the exchange rate, industrial production, U.S. housing starts and U.S. motor vehicle sales, CN said Oct. 25 it expects to book a decrease in total carloads for 2016 in the “mid-single-digit range.”

CN, however, also boosted its full-year financial outlook, saying it now expects its 2016 adjusted diluted earnings per share (EPS) to rise about one per cent from last year’s levels. The company’s outlook in July had called for its 2016 EPS to be in line with fiscal 2015.

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