CN Reports Q3-2014 Net Income of CAD 853 Million
OREANDA-NEWS. CN (TSX: CNR) (NYSE: CNI) today reported its financial and operating results for the third quarter and nine-month period ended Sept. 30, 2014.
Third-quarter and nine-month 2014 financial highlights
Net income was CAD 853 million, or CAD 1.04 per diluted share, compared with net income of CAD 705 million, or CAD 0.84 per diluted share, for the year-earlier quarter. The Q3-2013 results included a CAD 19-million (CAD 0.02 per diluted share) income tax expense resulting from the enactment of higher provincial corporate income tax rates.
Excluding the above Q3-2013 income tax expense, Q3-2014 diluted EPS of CAD 1.04 increased 21 per cent over last year's adjusted diluted EPS of CAD 0.86. (1)
Operating income for the third quarter of 2014 increased 19 per cent to CAD 1,286 million.
Third-quarter 2014 revenues and carloadings set all-time quarterly records, with revenues rising 16 per cent to CAD 3,118 million and carloadings increasing 11 per cent to 1,475 thousand. Revenue ton-miles grew by 13 per cent.
CN's operating ratio for Q3-2014 improved by one point to 58.8 per cent from 59.8 per cent for the year-earlier quarter.
Free cash flow for the first nine months of 2014 was CAD 2,045 million, up from CAD 1,307 million for the comparable period of 2013. (1)
Claude Mongeau, president and chief executive officer, said: "CN delivered outstanding third-quarter financial results while improving customer service levels and maintaining industry-leading operating efficiencies. Solid execution by our team of railroaders enabled us to accommodate the significantly higher freight volume generated by a record Canadian grain crop, strong energy markets, and new business, particularly in intermodal and automotive.
"The results underscore CN's commitment to investing ahead of the curve in resources and rail infrastructure and playing our role as a true backbone of the economy."
Foreign currency impact on results
Although CN reports its earnings in Canadian dollars, a large portion of its revenues and expenses is denominated in U.S. dollars. As such, the Company's results are affected by exchange-rate fluctuations. On a constant currency basis that excludes the impact of fluctuations in foreign currency exchange rates, CN's third-quarter 2014 net income would have been lower by CAD 22 million, or CAD 0.03 per diluted share. (1)
Third-quarter 2014 revenues, traffic volumes and expenses
Revenues for the third quarter of 2014 increased by 16 per cent to an all-time quarterly high of CAD 3,118 million. Revenues increased for grain and fertilizers (29 per cent), petroleum and chemicals (21 per cent), metals and minerals (17 per cent), automotive (17 per cent), intermodal (14 per cent), and forest products (eight per cent). Coal revenues declined by three per cent. The increase in revenues was mainly attributable to higher freight volumes due to a record Canadian grain crop, strong energy markets, particularly crude oil and frac sand, new intermodal business including temporary diversions from U.S. west coast ports, as well as new automotive business; the positive translation impact of the weaker Canadian dollar on U.S.-dollar-denominated revenues; and freight rate increases.
Carloadings for the third quarter rose 11 per cent to 1,475 thousand, an all-time record quarterly performance.
Revenue ton-miles, measuring the relative weight and distance of rail freight transported by CN, increased by 13 per cent over the year-earlier quarter. Rail freight revenue per revenue ton-mile, a measurement of yield defined as revenue earned on the movement of a ton of freight over one mile, increased by two per cent over the year-earlier period, driven by the positive translation impact of the weaker Canadian dollar and freight rate increases, partly offset by an increase in the average length of haul.
Operating expenses for the quarter increased by 14 per cent to CAD 1,832 million. The increase was mainly attributable to increased purchased services and material expense, increased labor and fringe benefits expense, the negative translation impact of a weaker Canadian dollar on U.S.-dollar-denominated expenses and higher fuel costs.
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