Canadian National Railway Co. has named sales veteran and interim leader Jean-Jacques Ruest as chief executive officer as Canada’s largest railway boosted its 2018 financial outlook, citing robust shipments from customers and exporters.
CN announced Mr. Ruest’s appointment on Tuesday morning, ahead of releasing strong second-quarter financial results after markets closed.
“Demand is extremely strong and the demand outlook for the remainder of the year is strong, as well,” Mr. Ruest said on a conference call held to discuss the results on Tuesday.
CN’s second-quarter profit rose by 27 per cent to $1.3-billion, or $1.77 a share, compared with the same period a year ago. Revenue rose by 9 per cent to $3.6-billion as carloads increased by 6 per cent.
CN said the freight increases came across a range of commodities, including grain, petroleum, metals and forest products. As a result, CN raised its 2018 profit guidance to a range of an adjusted $5.30 to $5.45 a share, compared with an earlier range of an adjusted $5.10 to $5.25.
The results come amid increasingly heated words from U.S. President Donald Trump, who has slapped tariffs on metals and some goods from Canada, China, Mexico and the European Union in an increasingly protectionist stand he says is an attempt to restore U.S. jobs. Meanwhile, talks to renegotiate the North American free-trade agreement between Canada, the United States and Mexico have not yielded a new deal.
The escalating trade war threatens to disrupt the flow of goods and dampen economic growth, posing a worry to CN and other companies that serve industrial and consumer markets. CN executives said on Tuesday the company has so far seen no impact from the tariffs or trade uncertainty on cross-border shipments.
CN employs 24,000 and operates a 32,000-kilometre network that spans Canada and reaches the U.S. Gulf Coast. CN relies on cross-border trade for about a third of its sales, and expanded its reach by buying U.S. lines to tap into the north-south flow of goods that increased under NAFTA.
Mr. Ruest’s predecessor, Luc Jobin, departed CN in March after less than two years on the job amid customer and government complaints about poor rail service.
CN’s board of directors said at the time it would conduct an international search for “a leader who will energize the team” amid “operational and customer-service challenges” that persisted through the winter.
Railway congestion, which was industry-wide and blamed on a surge in freight demand and slashed capacity, was particularly acute at CN, long known as the most efficient railway in North America.
“Back in March, the board asked me to act with a sense of urgency and the team delivered,” Mr. Ruest said.
CN said it would hire thousands of train operators and boost capital expenditures by $1-billion to $3.5-billion, adding new tracks and locomotives and improving rail yards across its network, particularly in Western Canada.
In a statement, CN chair Robert Pace said Mr. Ruest has led the company with “vision, energy and speed” to address the service problems.
Mr. Ruest, 63, has been at CN for 22 years, the past eight as chief marketing officer. He joined CN in 1996 as vice-president of petroleum and chemicals. Previously, he was director of marketing and logistics at Montreal’s Imperial Chemical Industries. He graduated from the University of Sherbrooke in 1979 with a bachelor’s degree in chemistry, according to his online profile.
Walter Spracklin, an analyst at Royal Bank of Canada, said Mr. Ruest’s appointment is positive because it “brings continuity to the management team and the company."
“We continue to have a favourable investment thesis on the Canadian National Railway Co. shares, and we expect the company will continue to improve its service, clear the backlog and realign costs in 2018,” Mr. Spracklin said in a note to clients.
Mr. Ruest was paid $4.6-million in 2017, but stands to make a lot more in the CEO’s job. Mr. Jobin, his predecessor, was paid a total of $12-million in 2017, including salary, bonuses and stock options.
CN’s share price has risen by about 10 per cent this year on the Toronto Stock Exchange, outperforming the benchmark S&P/TSX Composite Index’s gain of 1 per cent. CN’s share price was little changed after the announcement of Mr. Ruest’s appointment on Tuesday.