Neither rain nor sleet kept Canadian National Railway Co. from delivering solid second-quarter profit, an impressive showing that positions the company for a rewarding remainder of 2011.
CN faced a series of challenges in the spring, including flooding in the U.S. Midwest and northern British Columbia, as well as mudslides and forest fires in Western Canada.
Despite the weather-related setbacks, the country's largest railway posted a $538-million profit for the three months ended June 30, up almost 1 per cent from the same period in 2010. Quarterly share profit rose to $1.18 from $1.13 while revenue climbed 8 per cent to $2.26-billion.
"Railroading is an outdoor sport, and we like to think of CN as one that can prevail and do well for its customers and shareholders, whether the weather is good or bad," CN chief executive officer Claude Mongeau said during a conference call Monday with industry analysts.
Mr. Mongeau said management isn't "focusing on the negative and whining about weather. We're here to please our customers and our shareholders in all weather."
Montreal-based CN noted that excluding net deferred income tax expense, its adjusted share profit in the second quarter came in at $1.26, up 12 per cent over the same period in 2010.
"We have good momentum taking us forward," Mr. Mongeau said. "In terms of financial results, we feel good about 2011 and our ability to finish the year on a very positive note."
Brisk imports at B.C. ports in Vancouver and Prince Rupert helped lift CN's second-quarter profit. The railway said the market has been bustling for "intermodal" freight, or goods transported inside standardized metal containers that are readily transferred among ships, trains and trucks.
CN, which is seen as a barometer for the economy because the carrier hauls a wide range of goods, saw its second-quarter revenue rise for a variety of freight, led by metals and minerals, intermodal, grain and fertilizers, forest products and coal.
"Intermodal was one of the first areas where we applied our new end-to-end supply chain collaboration approach," Mr. Mongeau said in a statement, referring to co-operation with partners such as ports, terminals and trucking firms. "This approach is really starting to pay off, and we hope to enjoy gains in other segments of our business where we have brought forward a similar focus on innovation and service excellence."
The railway's operating ratio, a key indicator of productivity that measures operating costs as a percentage of revenue, increased slightly to 61.3 per cent in the second quarter, compared with 61.2 per cent a year earlier. A lower operating ratio is better, but CN remains the industry leader.
Amid uncertainty about U.S. economic growth, CN confirmed its previous financial guidance issued in April, saying Monday that it expects double-digit, adjusted earnings per share (EPS) growth of up to 15 per cent this year, compared with EPS of $4.20 in 2010.
Calgary-based Canadian Pacific Railway Ltd., which will release its second-quarter results on Wednesday, has been hampered by heavy rain and flooding in Saskatchewan, Manitoba and North Dakota.
As well, "the Rockies experienced one of the deepest snow packs on record, fuelling record avalanches that repeatedly plugged east-west mainline rail corridors during the first quarter, hitting CP's results notably hard," Raymond James Ltd. analyst Steve Hansen said in a recent research note.
Major North American railways have had a gradual but bumpy recovery since the recession in 2009. In the first 28 weeks of this year, the number of carloads of goods transported by leading freight carriers increased an average of 2.5 per cent over the same period in 2010.
Canadian National (CNR)
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