The COVID-19 pandemic hit Canadian railway CN’s (NYSE: CNI) second-quarter profits, with lower rail volumes resulting in a 19% decline in quarterly revenue.
CN’s second-quarter net income on an unadjusted basis totaled C$545 million (US$405 million), or 77 cents per diluted share, compared with $1.36 billion, or $1.88 per diluted share, in the second quarter of 2019. Operating income fell 53% to $785 million.
Second-quarter revenue fell 19% to $3.2 billion as the COVID-19 pandemic lowered volumes across most commodity groups. CN also experienced lower fuel surcharge rates. But offsetting these losses were increased shipments of Canadian grain, higher Canadian coal exports via Canadian West Coast ports and freight rate increases.
Second-quarter operating expenses rose 6% to $2.4 billion. Costs of $486 million, or C$363 million after tax, that were associated with a loss on assets held for sale were partially offset by lower fuel and labor costs. Without the one-time cost charge, operating expenses would’ve been down 15% from last year.
Operating ratio, which some investors use as a measure of the financial health of a company, rose to 75.5% in the second quarter, compared with 57.5% for the same period a year ago. A lower operating ratio suggests improved financial performance.
“By being adaptable, we were able to swiftly rightsize our resources and continue to provide our essential transportation services to our customers, the economy, and the communities we serve. … The decisive actions we took early on in March, well before the pandemic impacted the North American economy, allowed us to deliver over C$1B of free cash flow during this recessionary quarter,” said CN President and CEO JJ Ruest.
He continued, “I’m pleased to reaffirm our commitment in encouraging the economic recovery through our C$2.9B capital investment plan for 2020 as well as our new investment announcement of the purchase of approximately 1,500 new, efficient, high-capacity, covered hopper cars to expand our grain export business for delivery starting in January of 2021. Our strategic long-term approach to investments, together with our continued focus on cost and deployment of innovative technology, as well as our commitment to enabling trade, position us to keep delivering long-term value to our stakeholders.”
Click here for more FreightWaves articles by Joanna Marsh.
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