Canada’s largest railway has named a longtime former rival as its new president and CEO to succeed embattled chief executive J.J. Ruest as the company looks to build on a profitable year that nonetheless saw major hurdles.
Tracy Robinson – the first woman to helm the company in its 103-year history – will step into the top spot on Feb. 28 as Ruest departs following the failed takeover attempt of U.S. railway Kansas City Southern last year.
Robinson is joining the company from TC Energy Corp., where she served as an executive since 2014 after spending 27 years at Canadian Pacific Railway Ltd. in roles that ran the gamut from railway operations to finance.
Ruest will stay on in an advisory role until March 31, CN said in a release Tuesday.
Truce with TCI
The CEO, whose retirement was announced in October, had been a target for replacement by activist shareholder TCI Fund Management Ltd. – with which CN announced a rapprochement Tuesday.
As part of the resolution agreement, CN has pledged to appoint two new independent board members before its next annual general meeting. In exchange, TCI has withdrawn its demand for a special meeting of shareholders. It was previously slated for March 22, when it hoped its four nominees would be elected in a board overhaul – and promised to support the election of all CN’s board nominees in 2022 and 2023, the railway said.
The board also appointed former Quebec premier Jean Charest as a director and Shauneen Bruder as vice-chair, with Robinson entering the boardroom as well.
The appointments came as CN reported 17 percent year-over-year growth in profit last quarter, with revenue boosted by higher fuel and freight rates despite a weaker grain crop and severe flooding in British Columbia.
Along with CP, CN struggled to cope with the mudslides and washed-out rail links following deluges in B.C. in November and December, when transport of goods narrowed to a trickle for weeks amid round-the-clock repair efforts.
The damage to revenue amounted to between $120 million and $130 million, chief financial officer Ghislain Houle said on a call with analysts Tuesday evening. A cold snap in December prompted shorter trains and slower speeds, blocking a quick recovery as freight volume on lines in and out of the Vancouver port remained relatively low.
“We’re not going to get it all back, of course,” said supply chain vice-president James Cairns.
However, the railway said it expects to deliver approximately 20 percent growth in adjusted diluted earnings per share in 2022, even as it invests about 17 percent of revenues in its capital program.
Robinson is no “outsider” to railroading, Ruest said, despite her coming over from a challenging role as president of Coastal GasLink. The natural gas pipeline under construction in B.C. has faced opposition among Wet’suwet’en hereditary chiefs, sparking rallies over the past two years and rail blockades in early 2020.
Ruest also said he is leaving the company in a good spot, stressing an operating ratio – a measure of the railway’s efficiency that divides operating expenses by net sales – that improved by 3.5 points for a fourth-quarter record of 57.9 percent.
Barclays analyst Brandon Oglenski questioned whether CN had been “a little bit complacent on costs” during Ruest’s four years driving the train company, to which the CEO replied: “Complacency is not part of the CN culture.”
In the release, Robinson said she “couldn’t be more excited” about the opportunities ahead. She also said she has begun French lessons “to ensure I am able to fully embrace the experience of living in Quebec” and communicate with CN employees and customers.
Language issues in the province’s corporate world exploded in November after Air Canada chief executive Michael Rousseau exposed his ignorance of French in public remarks that sparked an uproar.
The railway raised its quarterly dividend 19 per cent to 73.25 cents per share, CN said Tuesday.
The Montreal-based company reported net income of nearly $1.2 billion or $1.69 per diluted share in the quarter ended Dec. 31, up from $1.02 billion or $1.43 per diluted share a year ago. Revenue totalled $3.75 billion, up from $3.66 billion.
On an adjusted basis, CN said diluted earnings per share increased to $1.71 from $1.43, beating expectations of $1.53 per share, according to financial markets data firm Refinitiv.
Full-year profits rose 37 percent year over year to $4.89 billion while revenues increased five percent to $14.48 billion, CN said.