Both of Canada’s major railways announced third quarter results for the period ended June 30. At both carriers, revenue growth lagged the growth rate of operating expenses, as challenging winter conditions increased operating expenses, and as both companies increased hiring and training activities to increase network capacity. CP suffered from interruptions resulting from labour negotiations and strike notices.

During the quarter, CN’s revenues increased by 9.1 per cent to $3.63 billion. Operating expenses increased by 10.3 per cent and, as a percentage of revenues increased from 57.5 per cent to 58.2 per cent, a significant change from the 54.5 per cent of the second quarter of 2016. Net income rose from $1.03 billion to to$1.31 billion. Cash flow from operations was up to $1.68 billion from $1.5 billion, and “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 $640 million from $501 million. During the first six months of the year, “free” cash flow fell sharply from $1.04 billion to $626 million. From Jan 1 to June 30, CN spent $1.0 billion repurchasing its own shares (about the same as in 2017), spent $1.03 billion repaying debt, and paid $670 million in dividends. As of June 30, the company’s equity stood at $17.4 billion (as compared to $16.7 billion as at December 31, 2017). Total debt increased to $22.4 billion from $21.0 billion (Dec 31, 2017).

During the quarter, CP’s revenues increased by 6.5 per cent to $1.75 billion. Operating expenses increased by 8.8 per cent, from $1,032 million to $1,123 million. Cash flow from operations increased from $611 million to $711 million, while “free” cash flow rose modestly from $205 million to $222 million. Net income declined from $480 million to $436 million. From Jan 1 to June 30, CP spent $559 million repurchasing its own shares (a sharp increase from 2017 levels), spent $739 million repaying debt, and paid $163 million in dividends. However, the company also issued $691 million in new long-term debt and commercial paper. Primarily as a result of reigning in the company’s share repurchases in 2017, CP’s balance sheet has improved considerably since 2016. As at June 30, the company’s equity increased to $6.6 billion (from $6.4 billion as at December 31, 2017), while total debt decreased to $14.1 billion (from $13.7 billion). During the quarter, CP’s operating ratio lost a few notches from 62.8 per cent to 64.2 per cent.

For CN, all business segments did well, except automotive, which posted nominal declines. Revenue tonne miles increased by 7 per cent and freight revenues per revenue tonne mile (RTM) were up by 2 per cent. Intermodal revenues, CN’s most important revenue category, were up by 6 per cent.

For CP, the outstandingly bright spot was energy, chemicals and plastics, which saw its revenue tonne miles increase by 29 per cent. Revenue tonne miles generated by shipments of fertilizers and sulphur Potash registered a 10 per cent decline, and were also carried at revenue rates that were 11 per cent lower than a year earlier. Automotive did well, increasing RTMs by 11 per cent, and enjoying a 4 per cent increase in revenues per RTM.

At CN, efficiency indicators turned down, resulting from difficult winter operating conditions. Terminal dwell time was up significantly (17.0 hours versus 14.6), and train velocity was down (22.7 mph versus 26.1). Operating expenses per gross tonne mile (GTM) were up by 4.9 per cent, while labour and fringe benefits per GTM gross tonne miles remained unchanged.

At CP, published efficiency indicators were ambiguous. Terminal dwell time increased from 5.8 to 6.7 hours, and average train speeds slowed from 23.3 to 21.4 mph. However, average train lengths and weights increased.

At CN, total number of employees on June 30, 2018, was 25,654, an increase of 11.1 per cent compared to a year earlier. Gross tonne miles (GTM), in thousands, per employee declined from 5,076 to 4,816 for the three months ended June 30. At CP, total employment on June 30, 2018 was 12,830, an increase of 5.3 per cent compared to June 30 of 2017. Gross tonne miles (GTM), in thousands, per employee increased slightly from 5,237 to 5,276 for the three months ended June 30.