Lower volumes in the third quarter as a result of the coronavirus pandemic put pressure on Canadian railway CN’s (NYSE: CNI) third-quarter profit.
Net income was C$985 million (US$751 million), or $1.38 in adjusted diluted earnings per share, in the third quarter of 2020 compared with $1.2 billion, or $1.66 in adjusted diluted earnings per share, in the third quarter of 2019. This was a year-over-year decline of nearly 18%. All figures are in Canadian dollars.
An 11% drop in total revenue pulled CN’s overall profit lower. Total revenue was $3.4 billion in the third quarter, compared with $3.8 billion a year ago. Of that, third-quarter freight revenue slipped 10% to $3.2 billion.
“The decrease in revenues was mainly due to lower volumes across most commodity groups caused by the ongoing effects of the COVID-19 pandemic and lower applicable fuel surcharge rates, partly offset by freight rate increases as well as increased shipments of Canadian grain,” CN said.
But operating expenses fell 8% to $2 billion amid lower fuel and labor costs and decreased purchased services and material expenses.
Operating income fell 15% to nearly $1.4 billion. Operating ratio, which some use to measure the financial health of a company, rose to 59.9% in the third quarter, compared with 57.9% last year. A lower operating ratio can imply improved financial health.
“CN’s people never stopped working since the beginning of the pandemic and I am proud of the essential transportation service they have provided,” said CN President and CEO JJ Ruest. “As we look at the fourth quarter and beyond, we continue to see sequential improvements and momentum, leading us to have a cautious optimism about the future. We remain confident in our ability to continue delivering long-term shareholder value.”
Service metrics were mixed in the third quarter. Network train speed slipped to 17.8 miles per hour compared with 18.7 mph a year ago. Through dwell, which represents dwell time along the entire railroad, rose to 9.6 hours from 7.7 hours.
But train lengths rose to 8,987 feet from 8,462 feet year-over-year, while train weight increased to 9,635 tons from 9,259 tons.
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