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For the second consecutive quarter, Canadian National Railway felt the impact of the COVID-19 pandemic when the Class I, Montreal-based railroad announced third-quarter earnings Oct. 20.
Canadian National reported net income of C$985 million or C$1.38 a share, a drop of nearly 17.6% compared with 2019’s C$1.19 billion or C$1.66 a share.
Third-quarter revenue dipped 11% to C$3.4 billion from C$3.8 billion a year ago.
The results were below what financial analysts polled by Investing.com were anticipating when they projected an earnings-per-share price of C$1.45 on revenue of C$3.48 billion.
Railroad officials acknowledged the quarter was difficult because of the pandemic, but they believe long-term prospects are improving.
“CN’s people never stopped working since the beginning of the pandemic, and I am proud of the essential transportation service they have provided,” CEO JJ Ruest said in a statement. “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.”
Operating ratio slumped to 59.9 from 57.9 last year in the third quarter. The metric, which is operating expenses as a percentage of revenue, is used to measure efficiency. The lower the ratio, the greater the company’s ability to generate profit.
Several Class I railroads have adopted precision scheduled railroading principles, crafted by Hunter Harrison. The railroad executive, who died in 2017, used them to help turn around companies where he was CEO, including CN.
CN also reduced its headcount by 12% or 3,282 employees to a quarterly average of 23,177, compared with 27,269 last year. That meant savings of C$32 million, outlaying C$662 million for labor and fringe benefit expenses, compared with C$694 million in the same period last year.
With a worldwide glut of diesel fuel, CN also saved C$9.98 million in the third quarter, as it utilized 12.8 million fewer gallons and paid on average C$2.27 a gallon compared with C$3.05 last year.
The railroad said revenue declined in six of the seven areas that it measures:
- Automotive sector, 18% to C$177 million from C$217 million.
- Intermodal, 3% to C$992 from C$1.018 million.
- Coal revenue, 30% to C$118 million from C$168 million.
- Forest products, 6% to C$421 million from C$450 million.
- Metals and minerals, 20% to C$342 million from C$425 million.
- Petroleum and chemicals, 25% to C$591 million from C$788 million.
Only grain and fertilizers saw an increase. That sector was up 10% year-over-year to C$608 million from C$552 million.
As Canada’s only coast-to-coast railroad, CN handles some of the nation’s biggest exports, including lentils, potash, canola, field peas, flax and oats. Much of the cargo is moved from the sprawling agriculture sector west to the Pacific and east to the Atlantic.
Canadian National ranks No. 20 on the Transport Topics Top 50 Global Freight carriers list.
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