CN reports Q3-2017 net income of C$958 million, or C$1.27 per diluted share
CN increasing capital investments to meet demand and future growth
MONTREAL, Oct. 24, 2017 /CNW/ - CN (TSX: CNR) (NYSE: CNI) today reported its financial and operating results for the third quarter ended Sept. 30, 2017.
Financial results highlights
Third quarter 2017 compared to third quarter 2016
- Net income decreased by one per cent to C$958 million, while diluted EPS increased by two per cent to C$1.27.
- Adjusted net income increased by two per cent to C$989 million, with adjusted diluted EPS increasing by five per cent to C$1.31. (1)
- Operating income increased by four per cent to C$1,459 million.
- Revenues increased by seven per cent to C$3,221 million.
- Revenue ton-miles (RTMs) increased by 10 per cent and carloadings increased by 11 per cent.
- Operating expenses increased by 10 per cent to C$1,762 million.
- Operating ratio of 54.7 per cent, an increase of 1.4 points.
- Free cash flow (1) for the first nine months of 2017 was C$2,321 million, compared with C$1,743 million for the year-earlier period.
Luc Jobin, president and chief executive officer, said: "CN delivered strong third-quarter financial results as we continued to see increased demand across key business segments such as frac sand, intermodal, coal and Canadian grain. I'm proud of what our team has accomplished given the strength and speed of the volume growth we've experienced this year.
"To meet the needs of an expanding North American economy and new growth opportunities, we are increasing investments in our infrastructure and equipment by C$100 million, for a total capital program of C$2.7 billion in 2017. During the third quarter, and continuing through the rest of the year, we've been hiring across our network, particularly in Western Canada, as we remain focused on delivering superior service to our customers," Jobin continued.
"We are reaffirming our 2017 adjusted diluted EPS outlook of C$4.95 to C$5.10, compared to last year's adjusted diluted EPS (1) of C$4.59." (2)
Foreign currency impact on results
Although CN reports its earnings in Canadian dollars, a large portion of its revenues and expenses is denominated in U.S. dollars. The fluctuation of the Canadian dollar relative to the U.S. dollar affects the conversion of the Company's U.S.-dollar-denominated revenues and expenses. On a constant currency basis, (1) CN's net income for the third quarter of 2017 would have been higher by C$22 million, or C$0.03 per diluted share.
Third-quarter 2017 revenues, traffic volumes and expenses
Revenues for the third quarter of 2017 were C$3,221 million, an increase of seven per cent, when compared to the same period in 2016. Revenues increased for metals and minerals (31 per cent), coal (23 per cent), intermodal (12 per cent), automotive (four per cent) and other revenues (two per cent). Revenues declined for forest products (two per cent), and grain and fertilizers (one per cent), while petroleum and chemicals revenues remained essentially flat.
The increase in revenues was mainly attributable to higher volumes of traffic in overseas intermodal, frac sand, coal and petroleum coke exports, and Canadian grain; freight rate increases; and higher applicable fuel surcharge rates; partly offset by the negative translation impact of a stronger Canadian dollar.
Carloadings for the quarter increased by 11 per cent to 1,484 thousand.
RTMs, measuring the relative weight and distance of rail freight transported by CN, increased by 10 per cent from the year-earlier quarter. Rail freight revenue per RTM decreased by three per cent over the year-earlier period, mainly driven by an increase in the average length of haul and the negative translation impact of a stronger Canadian dollar; partly offset by freight rate increases and higher applicable fuel surcharge rates.
Operating expenses for the third quarter increased by 10 per cent to C$1,762 million, mainly due to higher costs from increased volumes and higher fuel prices, partly offset by the positive translation impact of a stronger Canadian dollar.