CN revises 2020 outlook after posing 'solid' quarterly results
CANADIAN National Railway (CN) has posted 'solid' first-quarter financial and operating results, despite experiencing rail blockades and the start of a global pandemic and recession during the period
CANADIAN National Railway (CN) has posted 'solid' first-quarter financial and operating results, despite experiencing rail blockades and the start of a global pandemic and recession during the period.
The Class I freight railway headquartered in Montreal reported that revenue remained flat at C$3.5 billion (US$2.5 billion) during the quarter compared with the year-ago period.
CN logged an operating ratio of 65.7 per cent, an improvement of 3.8 points or 1.5 points on an adjusted basis, during the quarter. Operating income jumped 13 per cent, or 4 per cent on an adjusted basis, to C$1.2 billion, compared to the same period last year.
Operating expenses for the quarter decreased 5 per cent to C$2.3 billion, driven mainly by lower labour costs, depreciation expense and fuel expense.
Said CEO JJ Ruest: 'Our network is very fluid, and we are continuing the temporary right-sizing of our resources to match the weaker demand caused by the global recession. We are committed to providing long-term shareholder value by delivering on our strategic capacity investments for growth and by deploying technological innovations.'
In early March, CN began calling back to work most of its employees temporarily laid off in eastern Canada because of protest blockades that occurred on its rail lines over several weeks in the first quarter. Protestors had set up the blockades across the country in a show of solidarity for the Wet'suwet'en Nation, whose hereditary chiefs opposed the construction of a natural gas pipeline through northern British Columbia. Canadian authorities announced March 1 they had reached a tentative agreement with the indigenous group.
No sooner had the railway begun to recover from the blockades when the World Health Organisation on March 11 declared the COVID-19 outbreak a global pandemic.
CN officials attributed its flat revenue during the quarter in part to the impact the blockades and pandemic had on volume. The pandemic's 'unprecedented and extraordinary impact' on the economy prompted CN to revise its 2020 financial outlook, company officials said, reported Progressive Rail Roading of Milwaukee.
'The economic outlook, and therefore overall demand for transportation services, are highly correlated with the duration of containment measures and the impacts on businesses and consumers, which at this point remain uncertain,' they said. 'As a result, CN is withdrawing its 2020 financial guidance and three-year targets provided at the 2019 Investor Day.'
The railway scaled back 2020 capital expenditures by C$200 million to C$2.9 billion, but remains committed to spending C$1.6 billion on track maintenance this year despite the uncertain business conditions.