MONTREAL — Canadian National had a strong finish to a year that began with congestion on its main line in Western Canada and ended with a financial and operational turnaround thanks to record spending on new capacity.
“With approximately C$1.3 billion of revenue growth in the final three quarters of the year, CN regained its position of strength and demonstrated again its ability to grow at low incremental cost. 2019 will be a year of building on this momentum,” CEO Jean-Jacques Ruest said in announcing quarterly and full-year results on Tuesday.
CN’s key operating metrics have returned to normal levels after the railroad spent $400 million to beef up track capacity in Western Canada, hire additional train crews, and acquire 60 new General Electric locomotives last year.
CN increased its capital budget to a record $3.9 billion for this year, up from last year’s record $3.5 billion, as it adds 140 GE locomotives to its fleet, embarks on more major track capacity projects, and launches new technology programs that will boost efficiency.
“We need the capital and the infrastructure to continue to deliver that superior growth that we are shooting for,” Chief Financial Officer Ghislain Houle says.
For the fourth quarter, CN’s operating income increased 19 percent, to $1.4 billion, on revenue of $3.8 billion, a 16-percent increase. Earnings per share, adjusted for the impact of one-time items, increased 24 percent, to $1.49, which beat analyst estimates.
For the full year, CN’s operating income was up 5 percent, to $5.5 billion, on record revenue of $14.2 billion, an increase of 10 percent. Earnings per share, adjusted for one-time items, rose 10 percent, to $5.50, which also topped analyst expectations.
CN’s operating ratio, adjusted for the impact of one-time items, was 61.2 percent for the quarter, an improvement of 1.5 points. For the year, CN’s adjusted operating ratio rose 1.7 points to 61.5 percent due to congestion-related costs.
CN expects its operating ratio to fall back into the high 50-percent range, Houle says.
For the quarter, CN’s traffic grew 5 percent on a carload basis and 12 percent when measured by revenue ton-miles, the favored metric of the Canadian railroads.
CN expects revenue ton-miles to grow in the high single-digit range this year, led by strength in export coal, Canadian grain, crude oil, and international intermodal traffic.
CN is now a full member of the EMP container pool with Union Pacific and Norfolk Southern, which should help domestic intermodal grow this year, says Keith Reardon, senior vice president of consumer product supply chain growth.
By joining EMP, CN will improve its intermodal access to U.S. markets by linking Western Canada with the Southeast U.S. and Eastern Canada to the U.S. Southwest, Reardon says.
“I see it as a game-changer for us,” he says.
When I looked at my crystal ball of railroading I saw the C N ( North Line ) from PORTAGE LA PRAIRIE,MANITOBA to
PRINCE RUPERT,B .C. being subjected to a lot of work,such as making sidings much longer etc.I see this in preparation for C.T.C in the not to distant future.