Canadian National Railway Co. said it is reviewing its operating procedures in the wake of two major derailments and oil fires in Northern Ontario.
The Montreal-based railway also said it is boosting its spending on infrastructure by $100-million to $2.7-billion, a 4-per-cent increase that outpaces the expected 3-per-cent rise in carloads in 2015.
"Nothing compromises being able to move fast and in a safe manner, but we did have two significant derailments in the first quarter and we have been aggressive in analyzing what we do to see if anything needs to change," said Jim Vena, CN's chief operating officer. "Safety is at the cornerstone of what we do and we will not rest until we understand better what we need to change, if anything."
The spending budget includes $500-million announced last week to upgrade its network in Western Canada and new rail-truck terminal in Milton, Ont.
Claude Mongeau, chief executive officer of CN, said the efforts were part of years-long improvements at Canada's largest railway, and not a response to weaknesses in the company's 32,000 kilometres of track that reaches three coasts. "It's about safety, it's about growth, it's about capacity," he said on a conference call with analysts. "It's not about anything we have found lately."
CN posted a 14-per-cent rise in first-quarter profit on Monday, aided by a weak dollar as freight volumes rose by nine per cent.
CN said net income rose to $704-million, or 86 cents a diluted share, from $623-million, or 75 cents a share. In an earnings statement released after markets closed, CN said revenue increased by 15 per cent to $3.1-billion while revenue per ton-miles grew by seven per cent.
Analysts had expected per-share profit of 85 cents and revenue of $3.02-billion for the three months ended March 31.
CN cut its growth outlook for energy-related commodities, crude oil and frac sand, to 40,000 carloads from 75,000, after crude's plunge in price.
The growth in oil volumes moved by all railways has slowed amid the plunge in crude's price from $100 (U.S.) a barrel to less than $50 in the first quarter. (A barrel of oil was trading at $56 on Monday.)
CN had said it "had the scope" to haul 150,000 carloads of oil in 2015, double its 2013 total and 17 per cent more than 2014's 128,000. It did not break out an outlook for crude or frac sand only.
In the first quarter, CN said revenues increased for grain and fertilizers by 24 per cent, forest products by 23 per cent, automotive by 23 per cent, metals and minerals by 22 per cent, petroleum and chemicals by 13 per cent and intermodal by 11 per cent. Coal revenues fell by 13 per cent.
Analysts have said the high cost of moving oil by rail, coupled with reduced energy output, will cut revenue expectations at all railways this year.
Of the analysts surveyed by Bloomberg, 25 have "holds" on CN stock, while eight list the company as a "buy."