Despite the rail blockades and the COVID-19 pandemic, Canadian National (NYSE: CNI) reported higher net profits in the first quarter of 2020.
First-quarter net income totaled C$1 billion, or $1.42 per diluted share, a 28.6% increase from C$786 million, or $1.08 per diluted share, in the first quarter of 2019.
On a non-GAAP [generally accepted accounting principles] basis, adjusted first-quarter net income was C$870 million, or C$1.22 per adjusted diluted share, compared with C$848 million, or $1.17 per adjusted diluted share in the first quarter of 2019.
Canadian National’s (CN) “team of dedicated railroaders has demonstrated the Company’s ability to overcome difficult situations and keep the economy moving,” said JJ Ruest, president and chief executive officer of CN. “I am very proud of how we recovered quickly in March from the service disruptions in February. 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.”
Operating ratio (OR) in the first quarter was 65.7%, compared with 69.5% in the first quarter of 2019. A lower OR can imply improved financial performance for a company.
First-quarter revenue of C$3.5 billion was flat with the same period in 2019, while operating expenses fell by 5% to C$2.3 billion on lower labor costs and lower depreciation expenses and fuel expenses. The financial impact of February 2020 blockades and the COVID-19 pandemic dented first-quarter revenue, while freight rate increases, higher volumes of petroleum crude and increased shipments of Canadian grain, and the inclusion of TransX within the domestic market of the intermodal market group supported revenue, CN said. The blockades were unrelated to CN’s activities and were protests supporting a First Nations’ group’s objections over the proposed route of a fracked gas pipeline.
Operating income rose 13% to C$1.2 billion in the first quarter.
The railway said it is withdrawing its financial guidance given earlier this year because of the “unprecedented and extraordinary impact” of the COVID-19 pandemic on the economy. It expects to spend C$2.9 billion in capital expenditures in 2020, with C$1.6 billion for track and railway infrastructure maintenance.
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