July 23, 2019 / 8:24 PM / 3 months ago

UPDATE 3-Canadian National Railway profit beats on higher crude, grain shipments

(Adds conference call comments, background; updates shares)

By Shradha Singh

July 23 (Reuters) - Canadian National Railway Co beat analysts’ estimates for quarterly adjusted profit on Tuesday, as the country’s largest railroad operator shipped higher volumes of crude, refined petroleum products and grains.

Revenue in the petroleum and chemicals segment, including crude-by-rail shipments, rose about 25% in the second quarter, while revenue in the grain and fertilizers unit rose 8.4%.

CN’s U.S.-listed shares were up 2.4% at $93.30 after the bell.

Pipeline congestion has helped crude by rail shipments recover recently, despite narrower differentials between U.S. and Canadian crude after Alberta government’s mandated crude production cuts.

The newly-elected Alberta government has promised to scrap C$3.7 billion worth of crude-by-rail deals by the former government, calling them poor values for taxpayers.

Although talks with the private sector are currently underway, the crude-by-rail programme is not expected to start in July as originally planned.

“I think the real determining factor ... is going to depend on whether the transfer of contracts is timed with the reduction of curtailment or exclusion of curtailment for crude-by-rail barrels,” said James Cairns, a senior executive on a post-earnings conference call.

“We are very hopeful that is going to happen and could see some very positive news here this summer.”

The two largest contracts signed were with Canadian National Railway Co and smaller rival Canadian Pacific to move crude by rail.

Canadian Pacific last week beat estimates for quarterly profit on the back of higher crude, chemicals and plastics volume as well as cost controls.

CN’s total carloads, the amount of freight loaded into cars, rose 2% in the three months ended June 30.

Operating ratio, a closely-watched productivity metric that measures expenses as a percentage of revenue, improved to 57.5% from 58.2% a year earlier. The lower the ratio, the more efficient a railroad.

Net income rose 4% to C$1.36 billion, or C$1.88 per share in the quarter, including a deferred income tax recovery of $112 million.

On an adjusted basis, CN earned C$1.73 per share, beating analysts’ average estimate of C$1.65, according to IBES data from Refinitiv.

The Montreal-based company’s revenue rose 9% to C$3.96 billion.

$1 = 1.3138 Canadian dollars Reporting by Shradha Singh in Bengaluru; Editing by Bernard Orr and Sriraj Kalluvila

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