CN, CP churn out profits despite weak economy

MONTREAL (Jan. 24, 2002) — Canada’s two largest railroads are churning out profits despite a weak economy.

Canadian National said this week that profits grew by 25% in fourth-quarter 2001 and by more than 10% for the year. Net income for the quarter ended Dec. 31, 2001, rose to $296 million from $237 million in the year-earlier quarter. Diluted earnings per share increased 23% to $1.48. CN’s acquisition of Wisconsin Central Transportation Corp. in October added revenue of $129 million and net income of $17 million to fourth-quarter results.

For 2001, adjusted net income rose 11% to $978 million from $879 million for 2000, with adjusted diluted earnings per share for 2001 rising 12% to $4.92. Net income, as reported, for 2001 was $1.04 billion, or $5.23 per diluted share, compared with $937 million, or $4.67 per diluted share, for 2000.

CN’s operating income for the final quarter of 2001 rose 18% to $521 million, while its operating ratio improved by 2.2 points to 66.1%.

“CN led the rail industry again in 2001 with the best operating ratio in the business and we generated a profit increase of more than 10% for the year — clear evidence that our disciplined approach to revenue growth, cost control, service and acquisitions creates real shareholder value,” said CN chief executive Paul Tellier. He said strong metals and minerals traffic, intermodal shipments, forest products panel traffic, and Canadian and U.S. grain markets helped to offset weakness in automotive shipments.

Among the operating improvements is Canadian National’s “scheduled railroad” with freight trains departing according to preset timetables rather than randomly when they have enough freight tonnage.

Canadian Pacific said its fourth-quarter net income fell to $111.1 million, or 70 cents a share, from the year-earlier $255.8 million, or $1.61 a share. The big drop was due largely to an income-tax related gain in the year-earlier period.

Excluding nonrecurring items, Canadian Pacific said its fourth-quarter income fell 5% from a year earlier to $118 million from $124 million, reflecting higher interest expense from a change in the railroad’s capital structure. The railroad became an independent company in October, when conglomerate Canadian Pacific Ltd. divided into five separate companies.

CP Rail’s total revenue for the quarter rose 2.5%, to C$950.7 million from C$928 million; but its core freight revenue was flat at C$882.2 million. With fewer employees than a year ago, CP Rail “handled the same workload as in fourth-quarter 2000 — a significant productivity improvement,” said Robert Ritchie, chief executive of the Calgary, Alberta, railroad.