Both of Canada’s major railways felt the effects of a weak economy and reported minor drops in revenues for the quarter ended March 31. However, through cost reductions to match the reduced revenues, both were able to produce outstanding results.

During the quarter, CN’s revenues declined by 4.4 per cent to $3.0 billion. However, operating expenses fell by 14.2 per cent, causing net income before income taxes to rise from $704 million during the first quarter of 2015 to $792 million during Q1 of 2016. Cost reductions were driven by lower fuel prices, a reduction in personnel count, and further operating efficiencies. Cash flow from operations increased to $1,065 million during the period, up from $992 million during the same period of 2015. “Free” cash flow, the amount remaining from operating cash flow after subtracting net investments made during the quarter and dividends paid to investors, increased to $303 million from $272 million during the first quarter of 2015.

CP’s revenues also declined by 4.4 per cent during the quarter to $1.6 billion. Operating expenses were reduced by 11.0 per cent. Net income of $540 million was recorded during the quarter, up significantly from $320 million during the comparable period of 2015. Cash flow from operations declined substantially from $555 million during the first quarter of 2015 to $218 million during the quarter just ended. However, the latter was largely based on the company’s decision to reduce its outstanding trade debt by a much greater than usual amount, and because the company’s net income included a large (non-cash) foreign exchange gain. “Free” positive cash flow declined from $286 million to cash consumption of $54 million.

By sheer coincidence, the operating ratio (consisting of the ratio of operating expenses measured against revenues) of both carriers declined to 58.9 per cent during the quarter. In the case of CP, this achievement represented an all-time record.

CN’s revenue tonne miles declined by 9 per cent during the quarter, but freight revenues per revenue tonne mile were up by 4 per cent. CN’s brightest spots were automotive and forest products, with quarterly revenues rising by 18 and 11 per cent respectively. Revenue tonne miles for those categories rose by 8 and 9 per cent and revenue per revenue tonne mile for those categories increased by 9 per cent and 1 per cent respectively. Overall carloads were down by 7 per cent, but freight revenues per carload were up by 3 per cent.

CN’s average number of employees declined to 22,694 from 25,064 during the period, compared to Q1 of 2015. In addition, terminal dwell time declined from 16.9 hours to 14.4, and train velocity increased from 24.9 miles per hour to 27.5.

For CP, the bright spot were forest products (revenues up by 25 per cent) and fertilizers and sulphur (revenues up by 14 per cent). Carriage of crude oil produced 28 per cent lower revenues than in Q1 of 2015. Overall revenue tonne miles decreased by 5 per cent, but freight rates per revenue tonne mile were flat. Total carloads were down by 4 per cent, and freight revenues per carload were down by 1 per cent.