Both of Canada’s major railways announced third quarter results for the period ended September 30, and put in strong performances.

During the quarter, CN’s revenues increased by 14.5 per cent to $3.69 billion. However, operating expenses rose by 19.2 per cent and, as a percentage of revenues increased from 57.2 per cent to 59.5 per cent. Higher expense levels were primarily driven by higher fuel prices, and higher labour and training costs to enable the company to deal with expected increases in volumes. Cash flow from operations increased to $1.56 billion from $1.4 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 $508 million from $373 million. However, during the first nine months of the year, “free” cash flow declined to $1.20 billion from $1.44 billion. From Jan 1 to Sept 30, CN spent $1.521 billion repurchasing its own shares (about the same amount as in 2017), and paid $1.0 billion in dividends. As of September 30, the company’s equity stood at $17.6 billion (as compared to $16.7 billion as at December 31, 2017). Total debt increased to $22.6 billion from $21.0 billion (Dec 31, 2017).

During the quarter, CP’s revenues increased by 19 per cent to $1.9 billion. Operating expenses increased by 13.9 per cent, from $973 million to $1.1 billion. However, as a percentage of revenues, operating expenses declined from 61.0 to 58.4 per cent. Net income rose by 22 per cent, from $510 million to $622 million. Cash flow from operations increased from $527 million to $673 million, but “free” cash flow of $158 million was only 14 per cent in excess of the $138 million of “free” cash flow recorded in Q3 of 2017. During the quarter, the company broke with its practice of repurchasing the company’s shares, and repurchased zero shares, compared with spending $226 million on such repurchases in Q3 of 2017. For the nine months ended September 30, however, it spent $559 million on share repurchases. The company’s balance sheet improved marginally during the past nine months. The company’s equity increased to $7.13 billion as at September 30 (from $6.44 billion as at December 31, 2017), while total debt increased to $14.08 billion (from $13.7 billion).

At CN, all product categories performed well, particularly “petroleum and chemicals”. Intermodal continued to be CN’s most important revenue generator ($897 million for the quarter), and at $665 million petroleum and chemicals solidified its second position. Revenue tonne miles were up significantly for petroleum and chemicals, and coal, and marginally for forest products, grains and fertilizers, and down for metals and minerals, intermodal and automotive. Rail freight revenue per tonne mile was up an average of 10 per cent.

For CP, while all product categories performed well, the outstanding product category was “energy, chemicals and plastics”, which registered a 63 per cent increase in freight revenues. While intermodal continued to be CP’s largest single revenue generator ($406 million for the quarter), grain ($384 million) is not far behind, but both are likely to be surpassed in the near future by strong growth in oil-by-rail shipments.

At CN, efficiency indicators were largely negative. Terminal dwell time increased to 16.9 hours from 16.0 hours, and train velocity decreased significantly from 25.6 to 22.5 miles per hour. Operating expenses per gross tonne mile (GTM) were up 14 per cent, with labour and fringe benefits per GTM gross tonne miles up by 11.7 per cent. The cost of fuel was up by 33.6 per cent.

At CP, published efficiency indicators were largely positive. Average train weights and length were up, and fuel efficiency was up. However, train speeds were down, and average dwell time was up.

At CN, total number of employees on September 30, 2017, was 26,143, an increase of 11.6 per cent compared to September 30 of 2017. At CP, total employment on September 30, 2017 was 13,000, an increase of 7.1 per cent compared to September 30 of 2017.