Canadian Manufacturing

CN plans additional $100M investment to improve safety

Announcement comes as Canada's largest railway analyzes two significant Northern Ontario derailments in the past quarter



MONTREAL—Canadian National Railway plans to spend an extra $100 million this year to improve rail safety while it continues to analyze two significant derailments in Northern Ontario that hit its network in the past quarter.

CN now plans to spend $2.7 billion as it tackles additional rail infrastructure safety projects. Last week it announced plans to invest $500 million in its feeder network.

“It is a long-term program to make sure that the growth that we see coming off of our Western Canada feeder network that we have the infrastructure to do it safely,” CEO Claude Mongeau said Monday from Memphis, Tenn., where CN is holding its annual meeting on April 21.

CN said it is studying the recent derailments to see if any changes are required but Mongeau said the investments are not related to the recent events.

The country’s largest railway launched its fiscal year with strong first-quarter results.

Milder winter weather in Western Canada and strong freight demand contributed to a 13 per cent increase in net profits _ up 28 per cent when adjusting for a rail sale last year.

CN earned $704 million or 86 cents per diluted share for the period ended March 31, compared with $623 million or 75 cents per share last year. A higher U.S. dollar raised net income by $56 million or seven cents per share.

Excluding last year’s sale of a rail line, the Montreal-based railway’s adjusted profits increased from $551 million or 66 cents per diluted share.

Revenues grew 15 per cent to $3.1 billion from $2.7 billion in the first quarter of 2014.

The company had been expected to earn 85 cents per share in adjusted profit on $3.035 billion of revenues, according to analysts polled by Thomson Reuters.

While weather was milder in Western Canada, the railway said it faced lots of snow and difficult winter conditions in the east end of its network.

CN said it hopes strong U.S. consumer demand and a weaker loonie will propel Canadian exports and increase overall carloads by three per cent to offset weaker energy markets.

Mongeau said the company’s focus on helping customers “win in the marketplace” is resonating.

“It’s helping us outpace the economy and outpacing the rest of the industry in terms of growth,” he told analysts after markets closed.

Revenues increased for grain and fertilizers (24 per cent), forest products (23 per cent), automotive (23 per cent), metals and minerals (22 per cent), petroleum and chemicals (13 per cent) and intermodal (11 per cent). Coal revenues declined by 13 per cent.

CN moved 30,000 carloads of crude in the quarter, down from 33,000 in the fourth quarter, but up from 28,500 a year ago. Frac sand revenue rose almost 70 per cent from last year as carloads grew to 23,000 from 15,000, but down from 29,000 in the fourth quarter.

CN Rail said its revenue ton-miles grew by seven per cent and carloadings were up nine per cent. Its operating ratio, which tracks operating expenses as a percentage of revenue, reached a record for the quarter, improving to 65.7 per cent, a decline of 3.9 percentage points under a measure in which lower is better.

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