Grain, fertilizer traffic add to record gross for CN

Increased revenue from grain and fertilizer handling helped boost Canadian National Railway to record gross revenues in both its fourth quarter and fiscal 2011.

CN on Tuesday reported $2.457 billion in total net income on record revenues of $9.028 billion for fiscal 2011, up from $2.104 billion profit on $8.297 billion in fiscal 2010.

Profit for Montreal-based CN’s fourth quarter (Q4) ending Dec. 31 rose to $592 million on record revenues of $2.377 billion, up from $503 million on $2.117 billion in the year-earlier period.

"Our broad-based service innovation benefited our customers and enabled us to grow our business faster than the overall economy and close the year with record carloadings and revenues," CN CEO Claude Mongeau said in a release.

Operating expenses for the year rose 8.7 per cent to $5.732 billion — particularly in fuel, up 34.7 per cent at $1.412 billion, though the company said its increased revenues also include a higher fuel surcharge.

Revenues from CN’s grain and fertilizer business segment totalled $1.523 billion in fiscal 2011, up seven per cent from $1.418 billion in the previous year. Q4 grain and fertilizer revenues were up three per cent at $413 million.

Grain and fertilizer carloads for the year, however, were up just two per cent at 592,000, making for revenue per carload of $2,573, up five per cent. Q4 grain and fertilizer carloads in fact dropped seven per cent to 152,000, for revenue per carload of $2,717, up 11 per cent from the year-earlier period.

"Although the economic recovery may be affected by global uncertainty, CN believes the gradual improvement in the North American economy will continue in 2012," Mongeau said.

"Despite significant headwinds from additional pension expense of about $120 million in 2012, CN is aiming to achieve a growth of up to 10 per cent in diluted earnings per share (EPS) over adjusted diluted EPS of $4.84 for 2011."

CN said its outlook for the coming year assumes 2012-13 grain crops in both Canada and the U.S. will be "in line with five-year averages."

As for the 2011-12 crop, U.S. corn and soybean production is slightly below — and exports are projected to be significantly below — the prior year’s crop, CN said. Canadian 2011-12 grain production and export forecasts are moderately above the prior year’s crop, the company added.

With those assumptions among others, CN said it would target total carload growth in the "mid-single digit range, along with continued pricing improvement above inflation."

CN’s outlook also assumes a Canadian-U.S. exchange rate to be "around parity for 2012," and that the price of crude oil (West Texas Intermediate) for the year will be in the range of US$100 per barrel.

CN said it plans to invest about $1.75 billion in capital programs, of which over $1 billion is to be targeted on track infrastructure.

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