TRAINS: David Lassen
MONTREAL — After increasing momentum in the fourth quarter, Canadian National today expressed optimism for volume recovery in 2021 as intermodal, grain, and some carload segments are seeing strong growth.
CN expects volume to grow by around 5% in 2021 amid record Canadian grain tonnage, demand for lumber and propane, and international and domestic intermodal gains driven by e-commerce and refrigerated grocery shipments.
“While the recovery remains uneven across the markets we serve, we are pleased by the momentum in volume demand that grew during the fourth quarter and continues to grow,” CEO JJ Ruest says. “We are increasingly optimistic about 2021 and we are reinstating our full-year financial outlook.”
CN expects its earnings to grow in the high single-digit range this year, with an operating ratio below 60%. Its capital budget is $3 billion, the same as 2020, and includes capacity expansion projects west of Edmonton, Alberta, that executives did not specify on the railway’s earnings call. Also included: Investments in technology such as more capable train inspection portals and more autonomous track inspection cars.
CN expects to begin construction on its Milton Logistics Hub outside Toronto this year after the long-sought project won government environmental approval last week. The $250 million intermodal terminal will open in 2023. [See “Canadian National’s proposed Toronto-area intermodal terminal wins government approval,” Trains News Wire, Jan. 25, 2021].
Fourth quarter volume increased 7% on a carload basis, or 10% when measured by revenue ton-miles, the preferred metric of the Canadian railways. Grain was up 20%, while intermodal grew an industry-leading 15%.
For the quarter, CN’s operating income increased 16%, to $1.4 billion, as revenue rose 2%, to $3.6 billion. Earnings per share grew 14%, to $1.43, when adjusted for the impact of one-time items. CN’s operating ratio improved 3.8 points, to 61.4%, adjusted for one-time items.
For the full year, CN’s operating income fell 15%, to $4.7 billion, as revenue declined 7%, to $13.8 billion. Earnings per share, adjusted for one-time items, sank 8%, to $5.31. The operating ratio was 61.9%, adjusted for one-time items, an increase of 0.2 points.
CN’s key operating metrics were mixed during the quarter, as gross ton miles rose 9% compared to a year ago. Terminal dwell declined 1%, and train length and weight both rose 2%. But car miles per day dropped 1% and overall train speed declined 4%. CN’s industry leading fuel efficiency improved 6%.
Ruest says CN will continue to focus on managing its capacity, increasing profit margins, and deploying technology that makes the railway safer and more efficient, as well as easier for customers to do business with.
