VANCOUVER, British Columbia (Reuters) - Canadian National Railway CNR.TO posted a higher fourth-quarter net profit on Tuesday and said that while it was worried about the U.S. housing market in 2008 it does not see the economy falling into a full recession.
“What we’re calling for is a soft landing,” Chief Financial Officer Claude Mongeau told analysts in a conference call, saying the railway was looking for North American GDP growth to be about 1.7 percent this year.
CN, which operates in both Canada and the United States, said a tax-related item and gains from the sale of its Montreal headquarters and its stake in a British railway boosted its net income at a time when revenue and its operating income both dropped about 3 percent.
The company also increased its quarterly cash dividend to 23 Canadian cents a share from 21 Canadian cents.
CN said it expects revenue growth next year to be in the range of 6 to 8 percent, and growth in 2008 earnings per share to be in the “range of mid- to high single digit” from its 2007 adjusted diluted EPS of C$3.40.
The railway has budgeted C$1.5 billion for capital spending in 2008.
CN reported a net profit of C$833 million ($809 million), or C$1.68 a share, for the final quarter of 2007. That compared with C$499 million, or 95 Canadian cents a share, in the same period a year earlier.
The net results included a C$284 million tax recovery due to changes in Canada’s corporate tax rates, with the gains including asset sales boosting the railway’s earnings per share in the quarter by 78 Canadian cents.
CN said operating income was C$736 million, compared with C$756 million. Revenue was C$1.9 billion, down from C$2 billion.
The railway is a major hauler of forest products, but saw revenues in that sector drop 19 percent because of the weak U.S. housing market and continued difficulties for the Canadian paper industry.
Revenues from all other shipping segments except automobiles were up in the quarter.
The company’s operating ratio, a transportation industry measure of efficiency, was flat at 62.1 percent.
Chief Executive Hunter Harrison said he remains optimistic CN will receive approval for its US$300 million purchase of the Elgin, Joliet & Eastern Railway, which has run into opposition from some suburban communities near Chicago.
Critics are upset about Canadian National’s plan to use the line to route more trains around Chicago, a change CN said will ease chronic congestion in the major North American hub and speed transit times.
Harrison hinted CN might be willing spend more to resolve fears that the increased train traffic will cause highway snarls at grade crossings.
“We’re prepared to step up and if we need to spend a little more to relieve some of those situations we would happy to take it under advisement,” he told analysts.
Reporting Allan Dowd; Editing by Rob Wilson