CN reports third-quarter 2002 financial results

by Canadian Shipper

Canadian National has reported third-quarter 2002 net income of $268 million, a 12 per cent increase over adjusted net income of $240 million for the same quarter of 2001.

Third-quarter 2002 operating income increased 13 per cent to $484 million. Revenues for the period rose 13 per cent to $1,503 million, while operating expenses were $1,019 million.

CN President and Chief Executive Officer Paul M. Tellier said: "CN met the challenge this quarter, turning in good financial results in the face of devastating drought conditions that continue to weigh heavily on our Western Canadian grain franchise. Solid gains in our service-sensitive businesses — automotive, petroleum and chemicals, intermodal and forest products and the consolidation of Wisconsin Central revenues more than offset depressed bulk commodity revenues. The performance of our merchandise and intermodal units is particularly satisfying because they will continue to drive much of CN’s growth.

Increased automotive revenues reflected stronger motor vehicle production in Canada and the United States, while petroleum and chemicals revenues benefited from the inclusion of WC revenues and continued strength in the petroleum segment, which experienced higher sulfur shipments and market share gains in various sectors, Tellier explained. Increased intermodal revenues reflected improved domestic performance from growing markets in Canada and the U.S., and growth in the overseas segment despite stagnant trade. Forest products revenue gains were driven by the inclusion of WC revenues and increased lumber and panels traffic, in line with a strong North American housing market. Improved market conditions in the Canadian pulp and paper industry also contributed to third-quarter forest products revenue growth.

"CN will continue to drive productivity improvements and leverage its strong service capabilities to generate growth, but it remains cautious about near-term business prospects. Tough conditions will continue to prevail in our grain and coal businesses. Despite this, CN is determined to deliver improved results in 2003."

Six of CN’s seven business units registered revenue gains during the most recent quarter: forest products (30 per cent); petroleum and chemicals (22 per cent); automotive (20 per cent); metals and minerals (17 per cent); intermodal (12 per cent), and coal (six per cent). Grain and fertilizers revenues declined by 15 per cent.

Total carloadings for the third quarter of 2002 rose 14 per cent to 1,043 thousand.

CN’s operating ratio for the most recent three-month period was 67.8 per cent, compared with 67.5 per cent for the year-earlier quarter.

The increase in operating expenses for third-quarter 2002 was largely attributable to the consolidation of WC expenses and higher expenses for labor and fringe benefits and equipment rents, which were partially offset by lower fuel costs.

Looking at CN’s performance to date, net income for the first nine months of 2002 increased 14 per cent to $778 million from adjusted net income of $682 million for the comparable period of 2001.

Operating income for the first nine months of 2002 was $1,380 million, compared with $1,259 million excluding the effect of a special charge to operations to recognize the costs of a workforce adjustment program for the same period of 2001. Including the charge, operating income was $1,161 million for last year’s nine-month period.

Nine-month 2002 revenues increased 11 per cent to $4,563 million, while operating expenses were $3,183 million. Excluding the special charge, operating expenses for the first nine months of 2001 were $2,856 million; including it, they were $2,954 million.

Five of CN’s seven business units reported increased revenues for the first nine months of 2002: forest products (29 per cent); petroleum and chemicals (23 per cent); metals and minerals (20 per cent); automotive (18 per cent), and intermodal (six per cent). Grain and fertilizers revenues declined 13 per cent, and coal revenues declined four per cent.

Total carloadings for the first nine months of 2002 increased 10 per cent to 3,101 thousand.

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