CN rail trains at a train yard in Vaughan, Ont. on June 20, 2022.Nathan Denette/The Canadian Press
Canadian National Railway Co. CNR-T on Tuesday reported a nearly one-quarter drop in profits last quarter, citing falling consumer demand and fallout from the B.C. port workers’ strike in July.
The chief executive officer of Canada’s largest railway said overstocked inventories and the 13-day job action dented its cargo volumes and revenue last quarter, as did wildfires and flooding at both ends of the country.
“I believe we’ve seen the bottom on volumes,” Tracy Robinson told investors on a conference call, referring to container shipments. Nonetheless, she said consumer activity “continues to be murky” amid an uncertain economic environment.
Container volumes at the B.C. ports of Vancouver and Prince Rupert did not recover in August, dropping by 23 per cent and 59 per cent, respectively, according to RBC Capital Markets analyst Walter Spracklin. That trend lingered into September.
“The Canadian West Coast port strike this summer prompted vessel operators to divert away from Canadian ports entirely, to other destinations such as Los Angeles and Lazaro Cardenas” – Mexico’s largest seaport – Mr. Spracklin said in an Oct. 13 note to analysts.
“In our view, the Canadian West Coast ports are at risk of having lost volumes longer-term to U.S. and Mexican alternatives.”
CN chief marketing officer Doug MacDonald said the company is working to woo customers back to Canadian ports and rail lines following the costly shutdown of the country’s biggest sea trade gateway.
“We continue to see a hangover effect,” he said.
Ms. Robinson sought to reassure analysts despite the one-third year-over-year drop in revenues from container shipping – the railway’s biggest category, slightly above petroleum and grain.
“We think this is a temporary issue,” the CEO said, acknowledging that any ramp-up in container traffic from B.C. ports may be gradual.
On Tuesday, CN reported net income in its third quarter fell 24 per cent to $1.11-billion from $1.46-billion in the same period a year earlier.
Revenues decreased 12 per cent to $3.99-billion from $4.51-billion the year before, the Montreal-based company said.
On an adjusted basis, diluted earnings were down 21 per cent at $1.69 a share from $2.13 a share last year, slightly below analyst expectations of $1.72 a share, according to financial data firm Refinitiv.
Executives said CN continues to expect flat to slightly negative adjusted earnings this year, while forecasting growth of between 10 per cent and 15 per cent between 2024 and 2026.