MONTREAL – Canadian National Railway Co. felt the heat of wildfires and labour disputes last quarter, as the company looks to rebound from the resulting cargo backlogs and lost business.
The slower freight flow and higher costs associated with July’s devastating forest fire in Jasper, Alta., and CN’s coast-to-coast work stoppage in August tamped down third-quarter profits by two per cent year-over-year, the company said Tuesday.
“The Alberta wildfires came with some additional expenses which, combined, came through in our margin performance this quarter,” CEO Tracy Robinson told analysts on a conference call.
Executives noted that the railway’s busiest corridor runs through Jasper, which saw a third of its buildings reduced to rubble and ash.
“There was a two-day period when the fires were burning that we just couldn’t run any trains at all” — though two of CN’s three firefighting trains, Neptune and Trident, arrived on the scene to battle the blaze — said Derek Taylor, who heads field operations.
“Once the worst of the fires passed, we were still severely limited in our operations.”
A month later, the phased shutdown of operations at both CN and rival Canadian Pacific Kansas City Ltd. culminated in a simultaneous lockout in late August, spooking shippers and stranding cargo.
“On the demand side, the noise created by the labour situation clearly had an impact on our business in the quarter,” said Robinson, pointing to container shipments in particular — CN’s biggest segment.
Despite the obstacles, the railway’s second- and third-biggest categories enjoyed much higher revenues, as petroleum and chemicals as well as grain and fertilizers jumped 11 per cent and nine per cent year-over-year, respectively.
CN said it moved more than 2.81 million tonnes of grain from Western Canada in September, beating the previous monthly record and despite a four-day grain workers strike in British Columbia.
Lower sales from its smaller coal and auto segments partly offset the oil-and-wheat windfall, while falling lumber prices yielded flat revenues for forest products.
“The macro is lighter than what we expected coming into 2024, and maybe even a bit softer than what we thought on our last call back in July,” Robinson acknowledged, citing economic “challenges.”
“We’re seeing this play out in our merchandise business, especially in construction-related commodities as well as in automotive.”
In September, CN lowered its financial forecast for the year. It expects to deliver adjusted diluted earnings per share growth in the low single-digit range, compared to its July expectation of mid-to-high single-digit increases.
The volatility that surrounds events ranging from next month’s U.S. presidential election to a warming planet to the conflicts in Ukraine and the Middle East all pose problems for predictability, Robinson said.
“Without a doubt, it’s getting more and more difficult,” she said. “We need to be very responsive to changes.”
To boost savings amid lower volumes, the country’s largest railway has stopped hiring, furloughed workers in some areas and begun to see its headcount “gradually come down as we experience attrition” — not replacing employees when they leave — said Patrick Whitehead, in charge of network planning.
The company also said it continues to keep its eye on labour unrest at the Port of Montreal, where nearly 1,200 dockworkers launched a strike on overtime shifts on Oct. 10.
On Tuesday, CN reported that third-quarter revenues rose three per cent to $4.11 billion from $3.99 billion the year before.
However, net income slipped to $1.09 billion in the three months ended Sept. 30, down from $1.11 billion in the same period a year earlier.
On an adjusted basis, diluted earnings increased nearly two per cent to $1.72 per share from $1.69 per share last year, in line with analysts’ expectations, according to financial markets firm LSEG Data & Analytics.
This report by The Canadian Press was first published Oct. 22, 2024.
Companies in this story: (TSX:CNR)
