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CN profit up 156pc due to US tax cut, sales up 2pc on box growth

THE Canadian National Railway's 2017 net profit increased 156 per cent to C$2.61 billion (US$2.1 billion), drawn on revenues of C$3.2 billion, up two per cent.

Included in net profit was a deferred income tax recovery of C$176 billion, resulting from the enactment of a lower US federal corporate income tax rate.

Revenue increases were attributed to higher container traffic via the ports of Prince Rupert and Vancouver, and increased volumes of frac sand (aka "tar sands"), freight rate increases as well as and higher applicable fuel surcharge rates.

"Our growth continues to outpace the strengthening economy, and I am pleased with the results our dedicated team generated in 2017," said CN president and CEO Luc Jobin.

"Throughout the year we faced rapidly changing market demands and in the fourth quarter dealt with challenging operating conditions, including harsh early winter weather across the network, impacting our performance," he said.

Revenue ton-miles (RTMs) increased by one per cent and carloadings increased seven per cent. Operating expenses increased nine per cent to C$1.9 billion.

CN said it will to invest in the safety and efficiency of its network with a capital programme in 2018 of C$3.2 billion. The programme is highlighted by C$700 million for investments to increase capacity, including the acquisition of 60 new locomotives, track infrastructure expansion, and improvements at intermodal terminals.

The capital programme also includes C$1.6 billion for track infrastructure maintenance supporting safety and efficiency, and C$400 million for continued installation of Positive Train Control in the United States.

The board also approved a 10 per cent increase to CN's 2018 quarterly cash dividend, effective for the first quarter of 2018.

Although CN reports earnings in Canadian dollars, a large portion of its revenues and expenses is denominated in US dollars. The fluctuation of the Canadian dollar relative to the US dollar affects the conversion of the company's US-dollar-denominated revenues and expenses.

Fourth quarter revenue increased two per cent to C$3.2 billion, when compared to the same period in 2016. Revenues increased for metals and minerals (20 per cent), intermodal (13 per cent), coal (seven per cent) and automotive (one per cent).

But revenues declined for grain and fertilisers (10 per cent), petroleum and chemicals (five per cent), forest products (two per cent) and other revenues (one per cent).

These factors were partly offset by the negative translation impact of a stronger Canadian dollar; lower export volumes of US soybeans and reduced shipments of crude oil.

Carloadings for the quarter increased by seven per cent to 1.46 million. Revenue ton miles, measuring the relative weight and distance of rail freight transported by CN, increased by one per cent. Rail freight revenue per RTM also increased by one per cent.

Revenues in 2017 increased for metals and minerals (25 per cent), coal (23 per cent), intermodal (12 per cent), automotive (nine per cent), grain and fertilisers (six per cent), other revenues (five per cent), and petroleum and chemicals (two per cent). But they declined for forest products (one per cent).