Tuesday, Canadian National Railway Company (CNI, CNR.TO) said its third quarter earnings declined from a year ago, largely as a result of lower freight volumes stemming from depressed North American, as well as global economies and the impact of a lower fuel surcharge.
In a separate development, the company announced the induction of Claude Mongeau as a director to its board, effectively immediately. Mongeau, executive vice-president of Canadian National Railway, will succeed Hunter Harrison as Canadian National Railway president and chief executive officer on January 1, 2010.
The Montreal, Canada-based company's third quarter net income declined to C$461 million or C$0.97 per share from C$552 million or C$1.16 per share a year earlier. Adjusted net income was C$446 million or C$0.94 per share, down from C$511 million or C$1.07 per share from the prior-year period.
Net income for both years included deferred income tax recoveries, C$15 million or C$0.03 per share for the latest quarter, and C$41 million or C$0.09 per share for the year-ago quarter.
The company noted that the year-over-year increase in the U.S. dollar relative to the Canadian dollar affected the conversion of CN's U.S.-dollar-denominated revenues and expenses, increasing third-quarter 2009 net income by approximately C$15 million or C$0.03 per share.
Quarterly revenues declined 18% to C$1.845 billion from C$2.257 billion in the year ago period.
Hunter Harrison, president and chief executive officer, said, "The third quarter of 2009 was another challenging one for CN, with significant weakness across markets affecting our freight volumes. Revenue ton-miles for the quarter declined 11 per cent, but that was a sequential improvement over the 14 per cent RTM reduction in the second quarter of this year."
The company attributed the reduction in third-quarter 2009 revenues largely to significantly lower freight volumes in almost all markets as a result of prevailing economic conditions in the North American and global economies, and the impact of a lower fuel surcharge due to year-over-year decreases in applicable fuel prices, as well as lower freight volumes.
All commodity groups witnessed revenue declines - metals and minerals 32%, automotive 25%, forest products 24%, intermodal 20%, petroleum and chemicals 11%, coal 9%, and grain and fertilizers 9%.
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, decreased by 9% in the third quarter, largely due to the impact of a lower fuel surcharge and an increase in the average length of haul. These factors were partly offset by the positive translation impact of the weaker Canadian dollar and freight rate increases.
The company announced a fourth-quarter 2009 dividend on its common shares outstanding. A quarterly dividend of C$0.2525 per common share will be paid on December 31, 2009, to shareholders of record at the close of business on December 10, 2009.
For the nine months ended September 30, 2009, the company posted net income of C$1.272 billion or C$2.69 per share, down from C$1.322 billion or C$2.74 per share in the corresponding period last year. Adjusted net income was C$1.109 billion or C$2.34 per share for the latest period, compared to C$1.247 billion or C$2.58 per share a year ago.
Year-to-date, the company generated revenues of C$5.485 billion, down from C$6.282 billion in the previous year.
Among the peers, Railroad operator CSX Corp. (CSX) said its third quarter profit declined from last year, hurt by lower volume, as well as, lower fuel surcharge recovery, amid a broad-based weakness in the economy. The Jacksonville, Florida-based company reported net earnings of $293 million or $0.74 per share for the third quarter, down from $382 million or $0.94 per share in the prior year quarter, while analysts expected earnings of $0.71 per share. Revenues declined 23% to $2.29 billion from $2.96 billion in the same quarter last year.
Norfolk, Virginia-based Norfolk Southern Corp. (NSC) is expected to report third-quarter earnings results on Tuesday, October 27. Wall Street anticipates earnings of $0.79 per share for the quarter, with estimates ranging between $0.70 and $0.94 per share, lower than last year's earnings of $1.37 per share. Revenues for the quarter are estimated to be $2.06 billion.
Omaha, Nebraska-based Union Pacific Corp.(UNP) is scheduled to release third quarter earnings on Thursday, October 22. Analysts expect the company to post earnings of $1.00 per share, with estimates between $0.89 and $1.09 per share, lower than last year's earnings of $1.38 per share. Revenues for the quarter are estimated to be $3.71 billion.
CNI closed Tuesday's regular trading on NYSE at $52.45, down $0.65 or 1.22%, on a volume of about 992 thousand shares. In the after hours, the stock further lost $0.85 or 1.62% and traded at $51.60. In the 52-week period, the stock has been trading between $29.39 and $53.12 on a 3-month average volume of about 1.35 million shares.
On TSX, the stock closed regular trading at C$55.04, up C$0.30 or 0.55%, on a volume of about 425 thousand shares.
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