VANCOUVER, British Columbia (Reuters) - A gain from a track sale and other items helped Canadian National Railway Co post a higher quarterly profit on Monday, offsetting the impact of the weak economy.
The railway remains leery of predicting when the economy will rebound, but said operational changes adopted in recent years were reflected in lower expenses in the quarter and will help even more when freight traffic rebounds.
“I‘m very encouraged, even in this environment, that this organization is going to do better than most,” Chief Executive Hunter Harrison told analysts.
Harrison, a veteran U.S. rail executive credited with making CN one of North America’s most efficient major railroads, also hinted that the company is close to naming a replacement for when he retires at the end of the year.
“I think ‘soon’ is fair,” Harrison said when asked about the timing of the announcement.
The railway said it had a net profit of C$424 million ($342 million), or 90 Canadian cents a share in the first quarter. That compared with C$311 million, or 64 Canadian cents a share, in the same quarter a year earlier.
The profit would have been C$302 million, or 64 Canadian cents a share, without one-time items such as a C$157 million gain from selling a rail corridor to the Toronto area’s transit operator and a tax recovery, the railroad said.
CN, which operates in both Canada and the United States, said revenue in the quarter was C$1.86 billion, down from C$1.93 billion, as the sagging economy caused car loadings to drop 16 percent.
CN cut its operating expenses by 2 percent to C$1.38 billion in the quarter, partly thanks to lower fuel prices, but also because of increased efficiency in its switching operations and higher train speeds.
Analysts, on average, had predicted a profit of 60 Canadian cents a share before items, with individual forecasts ranging from a high of 69 Canadian cents to a low of 38 Canadian cents, according to Reuters Estimates.
Canadian National completed the acquisition of the Chicago-area Elgin, Joliet & Eastern Railway Co. during the quarter, which caused it to record C$46 million in expenses related to the takeover that was subject to a lengthy regulatory review.
Reporting Allan Dowd, editing by Rob Wilson