Canadian National Railway Co.'s profit fell by 3 per cent in the second quarter amid an industry-wide slump in railway freight.
For the three months ending June 30, Montreal-based CN said profit declined to $858-million, or $1.11 per diluted share on an adjusted basis, compared with $886-million or $1.15 in the same period a year ago. Revenue fell by 9 per cent to $2.8-billion as carload declined by 12 per cent.
Analysts had been expecting per-share profit of $1.06 on sales of $2.9-billion.
"We continued to see difficult economic conditions affecting several sectors of our business and continuing to put downward pressure in volumes and revenues," CN's chief executive officer, Luc Jobin, said in a conference call after Monday's close of markets.
He said he expects the second quarter to be the "volume trough" of 2016, and the second half will see greater shipments of grain, lumber, automotive products and refined petroleum.
"At the same time, international [container] volumes are expected to remain challenging while shipments of commodities related to oil and gas development, such as crude oil, frac sand and drilling pipe, are expected to decrease relative to last year," said Mr. Jobin, who took the top job at the end of June, replacing Claude Mongeau, who resigned for health reasons.
Christian Wetherbee, a transportation analyst at Citi Research, said CN's tight rein on costs helped the company surpass his and the Street's expectations.
CN's operating ratio, a measure of expenses versus sales, improved by 1.9 basis points to 54.5 per cent. Mike Cory, CN's chief operating officer, said the company maintained its claim to the industry's best operating ratio amid tough times by running longer, faster trains that spend less time sitting in the rail terminals.
CN said on Monday that a 4-per-cent rise in forest products revenue was offset by several product lines: coal (36 per cent); metals and minerals (17 per cent); petroleum and chemicals (16 per cent); grain and fertilizers (12 per cent); intermodal (4 per cent); and automotive (1 per cent).
The second quarter "was another tough quarter for rail volumes," said Walter Spracklin, an analyst at Royal Bank of Canada. "However, we are witnessing trends that point to a potential recovery in [the second half of 2016 in] bulk volumes."
CN has a 32,000-kilometre network that reaches three coasts in Canada and the United States. The company has recently expanded its container shipping business in the ports of New Orleans and Mobile, Ala., in a bid to tap into growing freight volumes flowing through the expanded Panama Canal.
This year, the number of railcars hauled in North America has fallen by more than 7 per cent, according to the Association of American Railroads.
Last week, Canadian Pacific Railway Ltd. said declining carloads led to a 16-per-cent drop in profit and a 12-per-cent decline in sales in the second quarter.