Canadian National Railway profit beats Street view as costs fall

Wed Jan 27, 2016 10:55am EST
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By Allison Lampert

(Reuters) - Canadian National Railway Co (CNR.TO: Quote) reported a better-than-expected fourth quarter profit and raised its 2016 quarterly dividend by 20 percent as costs fell on lower fuel expenses.

The company, which reported 2015 adjusted profit of C$4.44 ($3.15) per share, also said it expected earnings per share to grow in the mid-single digit percent in 2016.

However, Canadian National Railway expects lower volumes during the first quarter of 2016, compared with the same period a year earlier, because of weaker demand for the transport of iron ore and crude by rail.

"We are not counting on a rebound in commodities," CN Chief Marketing Officer Jean-Jacques Ruest told analysts on a call.

Chief Executive Officer Claude Mongeau said CN has become more efficient as it faces a softer Canadian economy and increased competition with trucks because of lower fuel prices.

"We are facing an uncertain environment," Mongeau said, who has returned to work following treatment for a precancerous soft-tissue tumor in his larynx.

CN Rail's operating ratio, a key efficiency measure, improved by 3.5 points to 57.2 percent during the fourth quarter. For 2015, CN reported an operating ratio of 58.2 percent, down 3.7 points compared to 2014.

The ratio expresses operating costs as a percentage of revenue, so lower values are better.   Continued...

A Canadian National Railway train travels eastward on a track in Montreal, February 22, 2015. REUTERS/Christinne Muschi