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Canadian National Railway Co. has announced a significant decrease in profits for the three months ending on September 30. The drop in earnings is attributed to declining consumer demand, repercussions from the B.C. port workers’ strike, and a series of forest fires and floods.
The company faced challenges as overstocked inventories and a 13-day dockworkers’ strike in July impacted cargo volumes and revenue. In addition, wildfires and floods disrupted operations on both ends of the country.
CN’s net income for the third quarter dropped by 24% compared to the previous year.
Ed Harris, CN’s Chief Operating Officer, stated, “It was tough operating out there in quarter three,” emphasizing the strike and natural disruptions they faced.
The railway’s largest category, container shipping, saw a drop in revenues by over a third, partially due to reduced consumer demand for high-value products in the post-pandemic era. CEO Tracy Robinson believes that they may have seen the bottom in terms of container shipment volumes, but she noted that consumer activity remains uncertain in an ever-changing economic environment.
The strike’s impact on container volumes at the B.C. ports of Vancouver and Prince Rupert lingered into September, and there’s concern that they may have lost volumes to U.S. and Mexican alternatives.
CN’s executives are working to regain container customers and address competitive challenges posed by depressed freight rates in the trucking industry.
Despite the decline, Robinson reassured analysts that domestic container shipments maintained strong demand. She sees the current issues as temporary, but she acknowledged that the recovery in international container traffic from B.C. ports may be gradual.
While all five of CN’s bulk categories saw decreased revenue, grain revenue increased by 16%, driven by a bumper wheat crop. Auto volumes also rose due to sustained demand following supply chain disruptions caused by the COVID-19 pandemic.
CN anticipates flat to slightly negative adjusted earnings for the current year and forecasts growth of between 10% and 15% between 2024 and 2026.
In its third-quarter report, the railroad operator revealed that net income fell to $1.11 billion from $1.46 billion year-on-year. Revenues dropped 12% to $3.99 billion from $4.51 billion the previous year. On an adjusted basis, diluted earnings were down 21% at $1.69 per share, slightly below analyst expectations of $1.72 per share.
