A dip in grain and fertilizer traffic bit into Canadian National Railway’s (CN) otherwise improved third-quarter profits, the company reported Tuesday.
The railway, overall, reported net income of $552 million on revenues of $2.26 billion for its Q3 ending Sept. 30, up from $485 million on $2.02 billion in the year-earlier period.
The company moved 1.217 million carloads of freight in the quarter, up from 1.204 million in the year-earlier Q3, although revenue ton miles (the sum of ton-miles handled, based on total weight of the commodities inside the railcars) were down at 45.35 million, compared to 46.48 million in the previous Q3.
The company, in a release Tuesday, credited its improved profits to freight rate increases, of which about two-thirds were related to a higher fuel surcharge resulting from year-over-year increases in applicable fuel prices. It also saw higher volumes in some of its commodity groups.
But CN’s revenue from grain and fertilizer traffic in the quarter was down one per cent at $327 million, compared to revenue increases of 41 per cent in coal, 29 per cent in metals and minerals, 24 per cent in intermodal traffic and nine per cent in petroleum and chemicals.
The railway moved 10 per cent fewer carloads of grains and fertilizers, at 137,000 for the quarter. Revenue ton miles dropped 17 per cent for grains and fertilizers to 9.38 million.
CN cited “depleted stockpiles” as the reason for reduced grain volumes. The company said its total gains were also offset by weakness in forest products and the effect of hurricanes on traffic in the southern U.S.
“Looking forward, the uncertain economic landscape in North America and around the world will pose challenges to CN and its customers,” CN CEO Hunter Harrison said in the company’s release.
However, he said, “we believe CN is well positioned to weather the headwinds — we have a unique business model anchored on precision railroading, and a strong freight franchise with growth prospects in intermodal, bulk commodities and energy-related developments in Western Canada.”
CN shares closed Tuesday on the TSX at $48.14, down from $49.65 at their close Monday and from their Tuesday high of $50.14.