Canadian National Railway Co.'s new boss is speeding up spending plans for new track and drivers as the carrier faces mounting pressure from customers to fix capacity shortages.
Canada's biggest railroad will lay double tracks so it can run parallel trains on some routes, and siding rails to allow trains to pass on a single track. Canadian National also will have 800 new train conductors ready for duty by July, interim Chief Executive Officer Jean-Jacques Ruest said Wednesday.
"We need to rebuild the capacity to meet the demand which is in front of us," Ruest said at a JPMorgan conference in New York – his first public appearance since succeeding Luc Jobin on March 5. In the meantime, CN needs "to do better with the resources that we have."
Track expansions will focus on key corridors between the West Coast of Canada and Chicago to handle rising shipments of Canadian grain, forest products, petrochemicals and fertilizers, he said. Construction will start in April and run through the end of the fourth quarter.
Ruest took over as CEO after the company struggled to cope with a surge in freight volumes that slowed operations and angered customers from farmers to oil producers. Canadian National recently earned a public rebuke from key customer Halliburton Co., which said rail service delays would hurt earnings at the oilfield-services company.
Canadian National fell 0.2 per cent to $96.24 at 11:45 a.m. in Toronto. That extended the stock's decline for the year to 7.2 per cent, the worst performance among the largest publicly traded North American railroads.
Vowing to fix its service problems, Canadian National said in January it would boost its 2018 capital-spending budget to a record $3.2-billion. The Montreal-based company in December said it would buy 200 locomotives –– including about 60 this year. It's since leased another 130, almost all of which are now in service.
"We need to rebuild just a bit so that we can enter the next winter with enough capacity," Ruest said.
Some spending that had been planned for early 2019 could be moved up to this year, Ruest also said. For instance, some rolling stock deliveries may be brought forward to December, he said, without being more specific.
Operations in March are showing an improvement over last month, which was "really, really challenging," the CEO said Wednesday. Train velocity and dwell time – the amount of time that railcars sit idle in yards – will get better now that disruptions from extreme cold in Western Canada are over, he added.
For now at least, the new man in charge said Canadian National is sticking to its goal of boosting 2018 adjusted profit to at least $5.25 a share from last year's $4.99.
"We're not throwing in the towel two months after" issuing the guidance, Ruest said. "There is still some time. In the fourth quarter we will have all the resources." Canadian National's board has set no specific timeline to find the next permanent CEO, Ruest added.
"The search will be very wide, and the board is not putting themselves on any clock," he said. "I'm on the clock in terms of performing in the next two months to get our railroad back, to produce some good operating metrics, good customer service and get our volumes up and our costs down."