CN Reports 1Q Net Income of C$555 Million, Down From C$775 Million in 1Q 2012
Date Posted: April 23, 2013
Montreal—CN (TSX: CNR)(NYSE: CNI) reported April 22 its financial and operating results for the first quarter ended March 31, 2013.
Claude Mongeau, president and chief executive officer, said: “CN faced a number of operational challenges in the first quarter, including extreme cold and heavy snow in Western Canada, which hampered operations, congested the network and constrained volume growth.
"We’ve turned the corner since then, improving train velocity and reducing freight car dwell times in yards across the network to restore the service level expected by our customers.
“CN will emerge stronger from this first-quarter experience.
"To improve network resilience, particularly given our expectation of continued strong volume growth, CN is undertaking several capacity enhancement projects in its Edmonton-Winnipeg corridor.
"These and other productivity initiatives will increase CN’s planned 2013 capital spending to C$2 billion, an increase of C$100 million over our original 2013 plan.”
2013 financial outlook
CN is maintaining the 2013 financial outlook it issued on Jan. 22, 2013, except for its revised plan to invest approximately C$2 billion in capital programs in 2013, compared with the previous plan to invest C$1.9 billion.
Approximately C$1.1 billion of the total expenditure will be targeted on track infrastructure to maintain a safe and fluid railway network.
In addition, the Company will invest in projects to support a number of productivity and growth initiatives.
Foreign currency impact on results
Although CN reports its earnings in Canadian dollars, a large portion of its revenues and expenses is denominated in U.S. dollars.
As such, the Company’s results are affected by exchange-rate fluctuations.
There was minimal impact on CN’s first-quarter 2013 net income on a constant currency basis.
First-quarter 2013 revenues, traffic volumes and expenses The five per cent rise in first-quarter revenues was mainly attributable to freight rate increases and higher freight volumes, due in part to growth in the North American and Asian economies, partly offset by operational challenges that constrained volumes.
Revenues increased for petroleum and chemicals (17 per cent), intermodal (seven per cent), metals and minerals (three per cent), forest products (two per cent), automotive (two per cent), and grain and fertilizers (one per cent).
Coal revenues declined one per cent.
Carloads increased by two per cent while revenue ton-miles, measuring the relative weight and distance of rail freight transported by CN, increased three per cent over the same quarter in 2012.
Rail freight revenue per revenue ton-mile, a measurement of yield defined as revenue earned on the movement of a ton of freight over one mile, increased two per cent over the first quarter of 2012, driven by freight rate increases, partly offset by an increase in the average length of haul.
Operating expenses increased nine per cent in the first quarter of 2013, mainly due to higher labor and fringe benefits expense, increased purchased services and material expense, increased fuel costs, as well as operational challenges including harsher winter conditions in Western Canada.
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