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Grain handle down, grain revenue up for CN

Increased revenue from hauling grain and fertilizer helped offset higher operating and income tax expenses and weaker volumes for Canadian National Railway (CN) in wrapping up fiscal 2008.

CN last week posted overall year-end profit of $1.9 billion on $8.5 billion in revenues, down from $2.2 billion on $7.9 billion in fiscal 2007. That includes fourth-quarter (Q4) net income of $573 million on $2.2 billion in revenues, down from $833 million on $1.9 billion in the year-earlier period.

“Two factors acted as shock absorbers, offsetting the impact of the
weaker volumes on our results,” CEO Hunter Harrison said in the railway’s press release Thursday.

“One was the decline in the value of the
Canadian dollar versus the American dollar, which had a net positive
translation impact on the conversion of U.S. dollar-denominated revenues and
expenses into Canadian dollars. The second was the two-month lag in CN’s fuel
surcharge catching up to lower fuel prices.”

CN posted $1.38 billion in grain and fertilizer handling revenue alone for fiscal 2008, up five per cent from 2007. CN’s Q4 grain revenue alone was up nine per cent from the year-earlier period, at $381 million.

However, the railway’s 2008 grain and fertilizer handle, 579,000 carloads, was down four per cent from 2007 levels. Q4 grain and fertilizer carloads totalled 143,000, down 12 per cent from the year-earlier Q4. In Q4 alone, that makes for a 23 per cent increase in grain freight revenue per carload, at $2,664.

The increased grain revenue in Q4 was offset by $26 million in penalties for exceeding the 2007-08 grain revenue cap set by the Canadian Transportation Agency (CTA). The agency reduced the caps for both CN and CPR after substantially reducing the amount “embedded” into the caps to cover maintenance of grain hopper cars.

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