Both of Canada’s major railways announced third quarter results for the period ended September 30. This time, the slow growth economy and low oil prices caught up with them, resulting in declining revenues. However, as a testament to the ability of both carriers to keep their eyes closely focused on the ball, cash flow generated from operations declined only nominally, and CN was able to achieve record low operating ratios.

During the quarter, CN’s revenues declined by 6 per cent to $3.014 billion. Operating expenses as a percentage of revenues declined from 53.85 per cent to 53.3 per cent. Cash flow from operations declined to $1.488 billion from $1.652 billion. “Free” cash flow, the amount remaining from operating cash flow after subtracting net investments made during the quarter and dividends paid to investors, declined to $310 million from $467 million. During the first nine months of the year, “free” cash flow declined from $1.033 billion to $923 million. From Jan 1 to Sept 30, CN spent $1.546 billion repurchasing its own shares, and paid $872 million in dividends. As of September 30, the company’s equity stood at $15.1 billion (as compared to $14.9 billion as at December 31, 2015), while total debt increased to $21.9 billion from $21.4 billion).

During the quarter, CP’s revenues declined by 9 per cent to $1.554 billion. Operating expenses declined from $956 million to $897 million. However, as a percentage of revenues, operating expenses rose from 55.9 to 57.7 per cent. “Free” cash flow of $324 million for the first nine months of 2016 fell far short of the $878 million recorded for the first nine months of 2015, and were nowhere near sufficient to fund the repurchase of its own shares ($1.2 billion), and the payment of dividends ($182 million). Accordingly, CP perfected its cash management and borrowed short term to satisfy those requirements. The company’s equity declined to $4.7 billion as at September 30 (from $4.8 billion as at December 31, 2015), while total debt decreased nominally to $14.75 billion (from $14.84 billion).

For CN, the bright spots were automotive and grains, which produced the largest revenue gains during the quarter (up 3 and 4 per cent respectively). Petroleum and chemicals came in with revenues of $532 million, down 13 per cent over the same quarter of 2015. Coal, generating revenues of $110 million during the quarter, was down by 32 per cent compared to Q3 of 2015. Metals and minerals generated revenues of $303 million during the quarter, down by 20 per cent compared to Q3 of 2015. Overall revenue tonne miles (RTM) declined by 3 per cent, while revenue per RTM was also down by 3 per cent. Carloads declined by 2 per cent. At $4,119 per carload, revenues per carload from carrying forest products rose by 4 per cent and were the highest of any category. CN’s most important revenue generator continues to be Intermodal, with third quarter revenues of $736 million, down 4 per cent from 2015.

For CP, the bright spot was forest products which produced revenues of $71 million during the quarter, up 8 per cent from Q3 of 2015. Its worst performer was crude oil, which produced revenues of only $13 million, compared to $109 million during Q3 of 2015. Intermodal, CP’s most important revenue generator, generated revenues of $347 million, up by 1 per cent over 2015.

During the quarter, both CN and CP continued to make efficiency improvements, as a result of which employee productivity rose another notch for both carriers. At CN, gross tonne miles per employee rose from 4,540 to 4,768, and labour and fringe benefits per gross tonne mile declined from 54 cents to 47 cents. Average train weights, train lengths and train velocity increased a both CN and CP, while accident rates per million train miles declined sharply at both carriers. At CN, total number of employees on September 30, 2016, was 22,166, a reduction of 7.1 per cent compared to September 30 of 2015. At CP, total employment on September 30, 2016 was 11,773, a reduction of 13.0 per cent compared to September 30 of 2015.