Canadian National Profit-Boosting Efficiency May Buoy 2016
Canadian National Railway Co.’s record third-quarter efficiency may be just the start.
Canada’s biggest railroad reported a operating ratio of 53.8% for the quarter, and the gauge — which compares expenses with sales — may remain below 60% through 2016, Chief Financial Officer Luc Jobin said Oct. 27. Buoyed by lower fuel costs and higher revenue from shipments of automotive and forest products, Canadian National reported earnings excluding one-time items of C$1.26 a share — exceeding the C$1.15 average of 25 analyst estimates compiled by Bloomberg News.
“Assuming that fuel would stay at the current level, certainly we see the scope for a sub-60%” ratio in 2016, Jobin said on a conference call. “Those are the conditions and the profile that this organization can deliver.”
On an annual basis, CN's best operating ratio since 1999 was 61.8% in 2006, according to data compiled by Bloomberg.
Lower labor and insurance costs also helped CN's results. Like many North American counterparts, the rail company has had to furlough workers and look for ways to boost efficiency as it seeks to offset declining shipments of coal and grain. The company has about 1,100 fewer workers than it did a year ago, Jobin said on the call.
Jobin is coordinating the company’s leadership team after CEO Claude Mongeau took a leave of absence in August to undergo treatment for a tumor. He is due to return early next year, the company said.
