CN Rail lowers profit forecast as weak freight volumes weigh

Mon Apr 25, 2016 6:15pm EDT
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(Reuters) - Canadian National Railway Co (CNR.TO: Quote) lowered its full-year earnings forecast, citing weaker-than-expected freight demand in some markets and a strengthening Canadian dollar.

Canada's biggest railroad, which reported a 4.3 percent fall in first-quarter revenue, said it now expected 2016 adjusted earnings per share to match last year's C$4.44. The company in January forecast mid- to single-digits EPS growth.

Reduced freight volumes due to a slump in oil prices, a string of bankruptcies in the coal industry and increased competition from trucks have been weighing on railroad operators in Canada and the United States.

"We continue to experience high volatility and weaker conditions in a number of commodity sectors," Chief Financial Officer Luc Jobin said on an earnings call with analysts.

North American industrial production is also slowing down considerably, he said.

CN Rail said it expects its 2016 annual carload volume to decrease 4-5 percent from last year.

To counter declining freight volumes, railroad companies have been slashing costs.

Montreal-based Canadian National said its total operating expenses fell about 14 percent to C$1.75 billion ($1.38 billion)in the first quarter ended March 31.

The company said its operating ratio improved 6.8 percentage points to 58.9 percent. Operating ratio — a key metric for railroads — is operating costs expressed as a percentage of revenue.   Continued...

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