Harsh winter, grain backlog take toll on CN in Q1

Canadian National posted a net income of C$741 million on revenues of C$3.2 billion for the quarter, down 16 percent and 0.4 percent year-over-year, respectively.    Canadian National’s net income for the first quarter of 2018 tumbled 16 percent year-over-year to $741 million Canadian (U.S. $577 million), the company reported Monday.
   Both of Canada’s Class I railways, which also includes Canadian Pacific, encountered headwinds from a brutal winter and have been facing heat from the agricultural industry over an ongoing backlog of grain shipments.
   CN’s revenues for the quarter slipped 0.4 percent year-over-year to C$3.2 billion. “The decrease in revenues was mainly attributable to reduced RTMs resulting from challenging operating conditions, including harsh winter weather and low network resiliency, as well as the negative translation impact of a stronger Canadian dollar, partly offset by higher applicable fuel surcharge rates and freight rate increases,” CN said.
   CN closed out the quarter with 24,812 employees, up from 22,549 employees at the end of last year’s first quarter.
   Despite a rough first quarter, CN Interim President and CEO JJ Ruest said the company has now turned a corner. “Our metrics are showing sustained, sequential improvement, and that momentum will build as we continue to expand track capacity, add crews and bring on new locomotives,” he said.
   Ruest said that CN increased its capital program to C$3.4 billion for 2018, with C$400 million being invested in new track infrastructure, particularly in Western Canada.
   CN originally planned to invest about C$3.2 billion in its capital program for the year, which still would have been a record amount for the company.
   Just last week, CN revealed it will acquire 350 premium boxcars to serve growing demand from industrial customers across its North American network. They are expected to be delivered in late summer with all cars in service by the end of 2018.
   In a March 22 response letter to the U.S. Surface Transportation Board, which had sent a notice to each of the seven Class I railroads on March 16 over service concerns, Ruest said that the first 60 of 200 new locomotives ordered from GE will start arriving in June 2018. He also mentioned how in order to boost capacity immediately, CN had also leased 130 locomotives, which came online during the first three months of this year.
   Ruest was appointed interim president and CEO of CN in March with the departure of Luc Jobin.
   CN said Monday its board of directors approved a second-quarter 2018 dividend on the company’s common shares outstanding.
   On June 29, a quarterly dividend of C$0.4550 per common share will be paid to shareholders of record at the close of business on June 8.
    CP also experienced a tough first quarter as net earnings plunged 19.3 percent year-over-year to C$348 million. U.S. railroads fared better, with CSX nearly doubling its net earnings from the first quarter of last year to $695 million, while Kansas City Southern posted a net income of $145 million, practically unchanged from $147 million for the first quarter of 2017.
   Although it is unclear when BNSF will release its first-quarter 2018 results, Norfolk Southern is scheduled to reveal its figures Wednesday, followed by Union Pacific on Thursday.