Photo courtesy of CN.
|Luc Jobin, president and CEO of CN.
Photo courtesy of CN.
“Despite facing difficult winter conditions in December, CN delivered very strong fourth-quarter results and throughout 2016 demonstrated once again its ability to perform well in a mixed economic environment,” Luc Jobin, president and chief executive officer of CN, said during a Jan. 24 conference call with analysts.
Revenue was up for both U.S. and Canadian grain in the fourth quarter of 2016. In the U.S., CN moved 8,000 more cars, and the revenue was up 19%, or C$30 million, mostly due to soybean and corn exports. Canadian carloads were up 6,000, and revenue was up 13%, or C$40 million, driven by strong exports of canola and peak season pricing.
“We had solid carload performance during the month of December, where the prairie got very cold, and which is really the result of past capital investment on our network that we can now benefit,” said JJ Ruest, executive vice-president and chief marketing officer.
CN moved 87,000 cars of Canadian grain in the fourth quarter, and the company said it has a number of commercial agreements already in place with customers that will locate on CN, about two-thirds of the next wave of prairie elevator construction in the next few years.
Despite December 2016 being the second coldest month in the last five years, CN said it set an all-time record for train productivity, at 9,449 tonnes per train, which is 5% higher than the fourth quarter in 2015.
CN’s net income for the year-ended Dec. 31, 2016, totaled C$3.640 billion, equal to C$4.69 per share on the common stock, up 2.8% from C$3.538 billion, or C$4.42 per share, in fiscal 2015. Revenue for the year was C$12.037 billion, down 4.5% from C$12.611 billion.
“Overall, the economy remains challenging, but we remain optimistic and expect to see moderate growth in 2017,” Jobin said.
CN said it anticipates stronger results in 2017, but potential changes to the North American Free Trade Agreement (NAFTA) may impact its business in the future. During his campaign for presidency, U.S. President Donald Trump openly spoke about wanting to renegotiate NAFTA.
“We’ve been long trading partners with the United States, and there’s a lot going on,” Jobin said. “And there’s certainly a relationship that is very different between Canada and the U.S., versus Mexico and the U.S. So the balance of trade is much closer.”
Jobin noted that manufacturing jobs have moved out of the U.S. and Canada to Mexico.
“So if you look at what might be more effective, certainly in the automotive sector, both parts and new cars would be potentially in the cross hair of that, but that’s a very small percentage of what we actually export to the U.S. southbound,” Jobin said. “So we don’t expect any significant change, at least not in the foreseeable future.”
Jobin explained that the trade history between the U.S. and Canada has been strong and he remains cautiously optimistic.
“Generally, what we’ve been hearing from the U.S. folks is encouraging, and we’ll have to work through it,” Jobin said. “There is a free-trade agreement that predates NAFTA. And so, there’s a long standing relationship of bilateral negotiations, and working out issues.”