Canadian National Railway reported fourth quarter earnings of C$941 million and full-year profits of C$3.54 billion in 2015, year-over-year increases of 11 percent and 12 percent, respectively, despite a weak rail freight market.
Canadian National Railway Co. increased profits for the fourth quarter and calendar year in 2015 despite weak demand across the North American rail freight industry.
The Montreal-based railroad reported fourth quarter earnings grew 11 percent to C$941 million (U.S. $667.18 million) despite revenues declining 1 percent to C$3.17 billion compared to the fourth quarter of 2014. Revenues increased for CN’s automotive (13 percent), forest products (12 percent), intermodal (5 percent), and grain and fertilizers (1 percent) segments, but fell for metals and minerals (21 percent), coal (16 percent), and petroleum and chemicals (4 percent).
Diluted earnings per share (EPS) for the fourth quarter increased 15 percent to C$1.18 per share.
CN attributed the decrease in total revenues primarily to reduced shipments of energy-related commodities like crude oil and gas, lower volumes of semi-finished steel products and short-haul iron ore, decreased coal shipments, and lower U.S. grain exports via the Gulf of Mexico; as well as a lower applicable fuel surcharge rate. Total carloadings fell 8 percent to 1.33 million and revenue ton-miles, a measure of the relative weight and distance of rail freight transported, were down 5 percent in Q4 2015.
For the full year in 2015, the railway posted a profit of C$3.54 billion on C$12.61 billion in revenues, year-over-year increases of 12 percent and 4 percent, respectively. Yearly revenues increased for automotive (16 percent), forest products (13 percent), intermodal (5 percent), grain and fertilizers (4 percent), and petroleum and chemicals (4 percent), but decreased for coal (17 percent) and metals and minerals (3 percent).
Full year diluted EPS increased 18 percent to C$4.44 per share, a record for the company.
“The rise in total revenues was mainly attributable to the positive translation impact of the weaker Canadian dollar on U.S.-dollar-denominated revenues; freight rate increases; and solid overseas intermodal demand, higher volumes of finished vehicle traffic, and increased shipments of lumber and panels to U.S. markets,” said CN. “These factors were partly offset by a lower applicable fuel surcharge rate; and decreased shipments of energy-related commodities including crude oil, frac sand and drilling pipe, lower volumes of semi-finished steel products and short-haul iron ore, reduced shipments of coal due to weaker North American and global demand, as well as lower U.S. grain exports via the Gulf of Mexico.”
Carloadings fell 2 percent overall on the year, while revenue ton-miles were down 3 percent.
“CN generated strong fourth-quarter and full-year 2015 results despite the weak volume environment,” Claude Mongeau, president and chief executive officer, said in a statement. “Our solid performance is testament to the strength of CN’s franchise and diversified portfolio of businesses. I am particularly proud that CN’s team of railroaders quickly recalibrated resources to respond to weaker volumes, while protecting customer service.”
Freight railroads across North America suffered in the second half of last year from a severe drop off in volumes of key commodities like coal and crude oil. Rival Canadian railway Canadian Pacific, for example, said last week it would eliminate 1,000 jobs and cut capital expenditures by $400 million this year in response to falling profits and revenues. CP’s fourth quarter 2015 net income and revenues were down 29.3 percent and 4 percent, respectively, from the fourth quarter of 2014.
And Norfolk Southern Railway, the number four operator in the U.S. and current CP takeover target, this morning reported its net income fell 29.4 percent in Q4 2015 as operating revenues dropped 12 percent from the prior year.
Looking ahead to 2016, CN projects mid-single digit EPS growth despite a continued challenging economic environment for the rail industry, said Mongeau.
“CN will continue to invest in the safety and efficiency of its network, with a 2016 capital investment program of approximately C$2.9 billion, including the negative impact of foreign exchange and increased spending for Positive Train Control technology,” he added.
Mongeau also announced a board-approved 20 percent increase in the company’s quarterly common share dividend for 2016, bringing the dividend up to C$1.50 per common share on an annualized basis. “CN has increased its dividend per share by 17 per cent per year on average since its privatization in 1995 and continues to move towards a target payout ratio of 35 per cent,” he said.
CN bucks freight rail trend, ups profits in 2015
