MONTREAL – Canadian National Railway said Tuesday it is working to restore full service to its train operations after a weekend derailment, while it looks for other ways to improve its safety record.
Chief operating officer Jim Vena told analysts on a third-quarter financial results conference call that the railway has dealt with the accident and has moved on.
“We’re going to learn what we can, we’re going to make sure we understand what happened there and do everything we can to improve our safety record even further than what we’ve done over the last few years.”
The Montreal-based company, which reported its third-quarter results, also announced a stock split.
CN’s net profit climbed 6.1 per cent to $705 million in the three months as Canada’s largest railway easily beat expectations on both earnings and revenue.
The earnings translated into $1.67 per share for the period ended Sept. 30, up from $1.52 per share, or $664 million, in the same prior-year period.
Excluding one-time changes for deferred taxes, CN’s adjusted profits grew 13 per cent to $1.72 per share or $724 million.
Revenues reached a quarterly record of nearly $2.7 billion, up from $2.5 billion in the prior year.
The increase was driven by a four per cent climb in revenue ton-miles and a three per cent increase in carloadings.
CN (TSX:CNR) was expected to report $2.64 billion of revenue and $1.62 per share in adjusted profits, according to analyst estimates.
Mongeau said the railway had a very solid safety record during the quarter with an accident ratio that was 43 per cent better than last year. It reported just 1.3 accidents per one million train miles of goods moved across the country.
The results preceded the derailment of a CN train near Gainford, Alta., where a tanker car with thousands of litres of propane burned for a fourth day.
It was the third notable CN derailment since September and followed high-profile accidents during the summer at lines operated by Canadian Pacific (TSX:CP) and Montreal, Maine & Atlantic Railway.
Chief executive Claude Mongeau said the stronger results in all key operating metrics, including record revenues, demonstrate that the railway is progressing as it hopes to finish the year on a high note.
The railway’s operating ratio improved 0.8 percentage point to 59.8 per cent.
CN said it expects the railway’s business will outpace the overall economy allowing the company to meet its full-year 2013 financial outlook. It expects earnings will increase by high single digits over the adjusted EPS of $5.61 earned last year, while delivering $800 million to $900 million of free cash.
The railway’s board approved a two-for-one common stock split in which shareholders of record Nov. 15 will receive one additional CN share, payable Nov. 29.
It also endorsed a new share repurchase program which allows the company to repurchase up to 15 million shares before adjusting for the stock split over the next year. CN has earmarked up to $1.4 billion for those purchases.
The increase in revenues was mainly attributable to higher freight volumes due to strong energy markets, market share gains and the growth in the North American economy.
Walter Spracklin of RBC Capital Markets had upgraded his rating for CN to outperform and increased his target price 21 per cent to $120 on anticipation of earnings growth over the next two years.
Crude-by-rail represented about four per cent of total revenue in the first half of the year. The railway is moving an annualized rate of 70,000 crude carloads and sees the potential to double volumes over the next two years.
CN said it expects export capacity to first be developed on Canada’s east coast as political and environmental opposition hold up terminal developments on the West Coast.
Spracklin said the railway has a competitive advantage because of CN’s exclusive rail access in the Maritimes.
On the Toronto Stock Exchange, CN shares closed down 15 cents at $109.75 on Tuesday.