While both of Canada’s major railways felt the effects of a weak economy, CN produced another quarter of stellar results, while CP produced more modest results.
During the quarter, CN’s revenues increased by just over 8 per cent to $3.3 billion. However, operating expenses rose by almost 9 per cent. Net income before income taxes rose from $1,099 million during the first quarter of 2016 to $1,183 million during Q1 of 2017. Cash flow from operations increased to $1,265 million during the period, up from $1,065 million during the same period of 2016. “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 $547 million from $303 million during the first quarter of 2016.
CP’s revenues increased by less than one per cent during the quarter to $1.6 billion. Operating expenses were reduced by 0.7 per cent. Net income of $431 million was recorded during the quarter, down by 20 per cent from $540 million during the comparable period of 2016. Cash flow from operations rose from $218 million during the first quarter of 2016 to $311 million during the quarter just ended. “Free” cash flow rose from negative $54 million to $11 million.
At CN, the operating ratio (consisting of the ratio of operating expenses measured against revenues) rose from 58.9 per cent to 59.4 per cent during the quarter. At CP, the operating ratio declined from 59 per cent to 58.1 percent – however, this positive achievement was due, in part, to a $51 million recovery of compensation associated with the early departure of the previous CEO. Without that recovery, the operating ratio would have been 61.3 per cent.
CN’s revenue tonne miles increased by 14 per cent during the quarter, and carloads were up by 9 per cent, but freight revenues per revenue tonne mile were down by 6 per cent. CN’s brightest spots were coal and grains and fertilizers, with quarterly revenues rising by 39 and 16 per cent respectively. Revenue tonne miles for those categories rose by 60 and 24 per cent. However, revenue per revenue tonne mile for those categories dropped by 14 per cent and 6 per cent respectively.
CN’s average number of employees declined from 22,694 to 22,396 during the period. Terminal dwell time increased from 14.4 hours to 15.6, and train velocity decreased from 27.5 miles per hour to 25.7.
For CP, the bright spot was metals, minerals and consumer goods (revenues up by 37 per cent), followed by grain (revenue up by 26 per cent). Carriage of energy products, chemicals and plastics produced 38 per cent lower revenues than in Q1 of 2016. Overall revenue tonne miles were flat, but freight rates per revenue tonne mile rose slightly from 4.51 cents per RTM to 4.57 cents. Total carloads were up by 2.3 per cent.
CP’s average number of employees declined 6 per cent from 12,434 during Q1 of 2016 to 11,648. Terminal dwell time increased from 6.9 hours to 7.1, and train velocity decreased from 23.4 miles per hour to 22.3.