CN’s Q4 grain handle down in ‘challenging conditions’

(Photo courtesy CN)

U.S. income tax reform more than offset “challenging” conditions, including reduced grain handle, in Canadian National Railway’s fourth fiscal quarter.

Montreal-based CN on Tuesday reported net income of $2.611 billion on total revenues of $3.285 billion for its fourth quarter ending Dec. 31, up from $1.018 billion on $3.217 billion in the year-earlier Q4.

The railway’s full-year net income for 2017 reached $5.484 billion on $13.041 billion in total revenues, up from $3.64 billion on $12.037 billion in 2016.

“Throughout the year we faced rapidly changing market demands and in the fourth quarter dealt with challenging operating conditions, including harsh early winter weather across the network, impacting our performance,” CN CEO Luc Jobin said in a release.

CN also saw “negative translation impact” from a stronger Canadian dollar, plus lower export volumes of U.S. soybeans and reduced shipments of crude oil.

Against those conditions, CN booked a deferred income tax recovery of $1.764 billion from “the enactment of a lower U.S. federal corporate income tax rate,” the company said.

The company also reported higher international container traffic via Prince Rupert and Vancouver and increased volumes of frac sand in the quarter, plus increased freight rates and fuel surcharges.

On top of its freight rate and surcharge hikes, CN’s increase in full-year revenues was credited to higher volumes of traffic in overseas intermodal, frac sand, coal and petroleum coke exports and Canadian grain, the company said.

In the grain and fertilizers segment, CN moved about 161,000 carloads in its fourth quarter, down from 177,000, and booked revenue per carload of $3,634, down from $3,655. Full-year grain and fertilizer carloads were up three per cent at 619,000, with revenue per carload of $3,577, up from $3,485.

Looking ahead to 2018, Jobin said the company expects further volume growth as the “economic backdrop remains favourable in North America.” CN’s outlook for this year calls for adjusted earnings per share of $5.25-$5.40, up from $4.99 in 2017.

The outlook assumes the 2018-19 grain crops in Canada and the U.S. will be in line with their three-year averages, where both countries’ crops came in above their three-year averages in 2017-18.

CN on Tuesday also laid out plans for a “record” $3.2 billion capital spending program in 2018, calling for $700 million toward capacity expansion, including 60 new locomotives; track infrastructure such as double track and siding extensions in its West Coast to Chicago corridor; and improvements at intermodal terminals including Toronto, Memphis and Joliet.

The capital program also calls for about $1.6 billion in track infrastructure maintenance, including replacement of 2.1 million rail ties and over 600 miles of rail and work on rail bridges. — Network

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