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A CN locomotive moves in the railway yard in Dartmouth, N.S., in this file photo.Andrew Vaughan

Canadian National Railway Co.’s profit fell by 16 per cent for a tumultuous first quarter in which Canada’s largest railway ousted its top executive amid criticism over poor service from customers and governments.

Montreal-based CN cut its profit outlook for 2018 owing to weak sales and the length of time it will take to restore its network.

“Our service has been challenged since the fall. Our [first-quarter] results reflect those challenges,” said Jean-Jacques Ruest, interim chief executive officer, on a conference call with analysts to present financial results that were released after markets closed on Monday.

CN said net income in the three months ended March 31 declined to $741-million, compared to the year-earlier quarter, while revenue fell by $12-million to $3.2-billion.

CN’s closely watched operating ratio, comparing sales and expenses, rose by six percentage points to 67.8 per cent. (Lower is better.)

On an adjusted basis, earnings a share fell by 13 per cent to $1. Analysts expected $1.02 a share.

The results follow a trying period for CN and its customers. CN and other North American carriers face criticism from federal governments in Canada and the United States as well as major shippers for poor service amid rising freight volumes in a winter that was, in some areas, unusually cold and snowy.

In March, CN replaced its CEO Luc Jobin and apologized to its grain customers.

The interim CEO, Mr. Ruest, said CN is taking steps to improve service. CN is raising its spending to $3.4-billion this year to expand its track and yard capacity to reduce congestion. In addition to new locomotives and boxcars, CN is hiring 775 conductors after adding 250 late last year.

He said faster trains and the end of winter have improved performance in March, but not enough to offset the higher costs and network bottlenecks in the earlier months.

Operating expenses for the first quarter climbed by 9 per cent to $2.2-billion, driven by winter conditions that require shorter, slower trains as well as training expenses and higher fuel prices.

Mike Cory, CN’s operating chief, predicted it would be the fourth quarter before the benefits of new crews, engines and track upgrades would be fully realized.

CN’s share price fell by 6 per cent in the past six months on the Toronto stock market, compared with a 2-per-cent drop on the TSX Composite Index. The share price of rival Canadian Pacific Railway Ltd. has been volatile but little changed over the same period.

CN said it is reducing its 2018 per-share profit guidance to a range of $5.10 to $5.25, from $5.25 to $5.40

Year-to-date, CN hauled 3 per cent more carloads compared with the same period a year ago. This rise is led by an increase in containers and coal cars. The number of cars containing farm products fell by 23 per cent while forest-products shipments declined by 5 per cent, according to CN.

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