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Petrochemicals help CN buck slow economyGraham Hughes/The Canadian Press

Despite a middling economy, Canadian National Railway Co. posted a healthy third-quarter by tapping into particularly strong resource sectors, chiefly petrochemicals.

The railway also said it will continue to spend some of its available cash on buying back shares. Starting Oct. 29, CN will enter the market from time to time to spend up to $1.4-billion to repurchase a maximum of 18 million common shares.

As chief financial officer Luc Jobin noted, "while continuing to pursue other business opportunities, [the share buyback] confirms CN's commitment to create shareholder value."

For the third quarter, CN posted profit of $664-million, or $1.52 per diluted share, nearly equal to the company's performance a year ago, when it recorded profit of $659-million, or $1.46 a share.

"Petroleum and chemicals led the way with a 15-per-cent increase in revenues, largely as a result of higher shipments of crude oil originating in Western Canada," said CN's president and chief executive officer Claude Mongeau.

Despite concerns about possibly slow sectors such as coal and the malaise of the U.S. economy, CN reported year-on-year increases in coal and other resources. Petroleum and chemicals was strongest, with revenue up 15 per cent compared with the third quarter last year, and coal up 13 per cent. Other strong sectors included grain and fertilizers, with a 10-per-cent rise in revenue, and automotive shipments, up 9 per cent.

CN management anticipates continued strength in current strong sectors: robust crude shipments, the good Canadian grain yield and promising signs in housing starts.

Meanwhile, the reorganization of Canadian Pacific Railway Ltd., to be unveiled in early December, will inject more competition, but CN sees that enlivening the industry. "It's a good story," Mr. Mongeau said.

CN managers spent a good portion of a conference call Monday talking about service improvements for freight customers. The not-so-subtle subtext is possible new regulation, which CN is campaigning against, to give shippers new service guarantees. Mr. Mongeau recently called possible new rules, allowing third-party arbitrators, "a dangerous path to follow."

In the conference call, Mr. Mongeau said he would like Ottawa to use mediation to resolve any disputes between railways and freight shippers, and have the Canadian Transportation Agency handle continuing complaints, rather than allow arbitrators from outside the rail sector.

"If the government is going to legislate, then at least they should do so in a balanced way," Mr. Mongeau argued. "We don't think regulation is the right way to go."