CN Rail revenue falls 6.5 percent as freight volumes decline

Tue Oct 25, 2016 6:58pm EDT
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By Allison Lampert

(Reuters) - Canadian National Railway Co reported a 6.5 percent fall in quarterly revenue on Tuesday as it moved lower volumes of crude oil, coal and fracking sand.

Canada's largest railroad said carloads fell 4.4 percent in the third quarter ended Sept. 30, and it expected total carloads for 2016 would decrease in the mid single-digit range.

CN also announced a new share repurchase program and declared a fourth-quarter 2016 dividend of thirty-seven-and-one-half cents.

U.S. grain revenue was up 20 percent during the quarter, while Canadian grain revenue was down 5 percent, partly because of a later than expected harvest of this year's crop, said CN's Chief Marketing Officer Jean-Jacques Ruest.

"We are now running at record weekly carloads for Canadian grain," Ruest told analysts. "We anticipate upside in grain through to the third quarter of 2017."

Canadian National said its operating ratio, a key metric, dropped to a record 53.3 percent, from 53.8 percent, a year earlier. The lower the ratio, which measures operating costs as a percentage of revenue, the more efficient the railroad.

Douglas Burtnick, deputy head of North American equities for Aberdeen Asset Management Inc, which owns around 300,000 shares of CN, said the company's record low operating ratio would be difficult to maintain going forward, given factors like competition and colder weather.

"We do continue to expect the environment to be tough, and suspect that the record OR for this quarter will be very difficult to repeat down the road," he wrote in an email.   Continued...

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