CN Rail profit off 16 percent, sees better second half

VANCOUVER, British Columbia (Reuters) - Canadian National Railway (CNR.TO: Quote) reported a 16 percent drop in quarterly profit on Monday but the country's biggest railroad predicted the worst of the economic downturn was behind it.

"I think we have seen the bottom," said CN President and Chief Executive Hunter Harrison.

"I am pretty optimistic that the second half will show a better performance than in the first half," he said on a conference call with analysts.

Harrison said the "most positive sign" was a pick-up in the past seven or eight weeks in intermodal container traffic, especially on the West Coast.

CN earlier reported net income falling to C$387 million ($350 million), or 82 Canadian cents a share, in the second quarter, ended June 30, as a weak North American economy held back freight volumes, especially in its metals and minerals business.

That was down from C$459 million, or 95 Canadian cents a share, in the same period a year earlier.

Excluding a deferred income tax recovery of C$28 million and C$2 million in costs related to a recent acquisition, profit came in at C$361 million, or 76 Canadian cents a share.

Analysts, on average, had forecast a profit before items of 75 Canadian cents a share, according to Reuters Estimates.

Revenue at CN, which operates in Canada and the United States, fell 15 percent to C$1.78 billion, below the C$1.87 billion analysts had expected.