MONTREAL – Canadian National Railway says it remains on track to deliver double-digit earnings growth for the year as net earnings surged 18 per cent in the third quarter despite lower volumes shipped.
The country’s largest railway beat expectations as it reported more than $1 billion in profits in the three months ended Sept. 30, up from $853 million a year earlier. Its diluted earnings per share rose 21 per to $1.26 from $1.04.
Revenues grew three per cent to $3.22 billion despite a six per cent decrease in volume measured by carloadings and revenue ton-miles. It benefited from a lower Canadian dollar.
The weaker Canadian dollar increased net income by $107 million or 13 cents per share, the company said in its earnings report issued Tuesday after markets closed.
CN (TSX:CNR) had been expected to earn $1.14 per share on $3.2 billion of revenue, according to analysts polled by Thomson Reuters.
The Montreal-based company said its operating ratio improved to a record 53.8 per cent from 58.8 per cent in the third quarter of 2014. Operating ratio is a measure of efficiency in which a lower number is better.
“We continue to be confident in terms of CN’s prospects for the year, notwithstanding the fact that we’re experiencing weaker conditions than expected in some markets,” executive vice-president Luc Jobin said during a conference call.
“As we look to the future, North American economic conditions are favourable, consumer confidence remains solid and should support continued progress in housing, automotive and intermodal segments.”
He said the railway is expecting a two per cent decrease in volume for the year but pricing is on track to exceed inflation.
The railway reaffirmed its outlook for double-digit adjusted EPS growth in 2015 above the $3.76 per share earned in fiscal 2014.
During the quarter, the railway benefited from lower labour costs as the number of employees was down 1,100 or 4.5 per cent. This included 200 more workers on layoff during the quarter to reach 800. Some of them will return during the winter and to offset attrition.
Revenues increased for automotive (13 per cent), forest products (12 per cent), intermodal (five per cent), petroleum and chemicals (three per cent) and grain and fertilizers (two per cent). Revenues declined for coal (13 per cent) and metals and minerals (three per cent).
Meanwhile, the company said chief executive Claude Mongeau had successful surgery to remove a rare type of soft-tissue tumour. The procedure also removed his larynx and a voice prosthesis was placed in his throat. He is receiving radiation treatment and is expected to return to work early next year.
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Note to readers: This is a revised story. It specifies that the weaker loonie increased profits by $107 million.