MONTREAL – Canadian National Railway reported a higher than expected net profit in the first quarter but said lower commodity shipments weighed on revenue and have prompted a downward revision to the company’s 2016 financial outlook.
The country’s largest railway said net earnings in the three months ended March 31 were up 13 per cent at $792 million or $1 per diluted share, compared with $704 million or 86 cents per diluted share in the comparable 2015 period.
But revenue slumped four per cent to $2.964 billion from $3.098 billion, with declines of two per cent in grains and fertilizers, 10 per cent in petroleum and chemicals, 18 per cent in metals and minerals and 42 per cent in coal.
Automotive shipment revenues grew 18 per cent and forest products rose 11 per cent.
“We had a good start to the year,” CEO Claude Mongeau said during a conference call.
“We remain constructive about our prospects for the full year, even though there are some challenges out there.”
Analysts polled by Thomson Reuters had expected net income of $734.99 million or 92 cents a share on revenue of $3.015 billion.
Crude rail volume dropped by half to 14,000 carloads, with pricing making crude by rail the least profitable of the various commodities CN ships.
Its frac sand business was down 45 per cent and coal was cut in half, accounting for 3.1 per cent of total business, the lowest of any railway.
CN said it expects crude and frac sands volumes to continue to decline until reaching a bottom later this year, with coal hitting a low in late 2017.
In its financial report issued Monday after markets closed, CN said its profits got a $57 million lift from the lower Canadian dollar.
The company’s operating ratio, a metric that tracks operating expenses as a percentage of revenue in which a lower number is better, fell to a record 58.9 per cent for a first quarter, down from 65.7 per cent a year ago.
Meanwhile, CN (TSX:CNR) said weaker than expected freight demand in certain markets and the strengthening of the Canadian dollar relative to the U.S. dollar have prompted a downward revision to CN’s 2016 financial outlook.
Under its revised outlook, CN now aims to deliver 2016 earnings per share in line with last year’s adjusted diluted earnings per share of $4.44. That compares with a Jan. 26 outlook that called for mid-single digit growth in earnings per share this year.