Canadian National RailwayDOUG WOJCIK
Canadian National Railway Co.'s new chief executive officer is optimistic that freight traffic will climb during gradual economic growth in 2010, sparking a decision to raise dividend payments by 7 per cent.
Claude Mongeau, who took over from the retiring Hunter Harrison on Jan. 1 as CN's CEO, said the Montreal-based railway is on track for improved earnings per share, based on early signs of a rebound in shipments.
"I have big shoes to fill, but I'm excited about the opportunity to lead CN. I have a great organization, a great team and I'm ready for the challenge," Mr. Mongeau said yesterday during a conference call.
"Someone asked me recently, and maybe he just wanted to put me at ease, but he said, 'Claude, how do you step in for a legend like Hunter Harrison?'
And I said to him, 'Well, it is tough but you try to keep your feet on the ground, you focus on protecting the legacy and you build from there.' And that's exactly what we're going to do."
Mr. Mongeau said he is forecasting "double-digit growth in diluted earnings per share in 2010," while cautioning that current economic momentum is fragile and a strong Canadian dollar would water down some of the expected gains.
But with a strong balance sheet envisaged for the foreseeable future, CN's board of directors approved a new quarterly dividend rate of 27 cents a share yesterday, up from 25.25 cents.
Shareholders of record on March 10 will receive the higher dividend on March 31.
"I have made a promise to give a dividend to Hunter," Mr. Mongeau said of his pledge to keep CN rolling.
CN also announced that it will embark on a stock buyback program, planning to repurchase up 15 million shares this year, or 3.2 per cent of shares outstanding not held by insiders.
CN and Calgary-based Canadian Pacific Railway Ltd. are both seeing early signs of recovery in freight shipments in 2010.
Twelve of 19 major commodity groups enjoyed year-over-year gains in carload shipments in the first two weeks of January, building on improvements in the fourth quarter.
Despite a five-day strike and poor weather, CN's fourth-quarter profit rose 1.5 per cent to $582-million. Quarterly revenue slid 14 per cent to $1.88-billion.
For the full 12 months of 2009, CN's profit fell 2 per cent to $1.85-billion
"We are hopeful that this economy will gain traction," Mr. Mongeau said, expressing his belief that "we have turned the corner."