CN Operating Revenue Declines , Forestry Blamed

By 250 News

Weak forest products revenue and the challenging can/us dollar exchange rate are blamed today for revenues remaining flat at CN rail.

The company reported revenue at c$2,023 million today with several commodity groups helping offset significant weakness in forest products.

Operating revenues declined 9% to 768 million while CN’s operating ratio increased by 3.5% to 62.0 %.

E. Hunter Harrison, president and chief executive officer, said: “CN’s third-quarter results are a solid achievement given the challenges we faced during the period. Revenues in our forest products segment – CN’s largest commodity group by revenue – declined 13 per cent as a result of weak market conditions and mill closures, the impact of a stronger Canadian dollar and lower fuel surcharge revenues.

“The stronger Canadian dollar not only affected forest products but also our other businesses. Clearly, few of us expected that the Canadian dollar would surge beyond parity with the U.S. dollar during the quarter. Despite these challenges, we are fortunate to have a diversified portfolio of businesses and we were able to register volume and revenue growth in Canadian coal, grain and fertilizers, petroleum and chemicals, and automotive.

“In the near term, CN anticipates continued weak market conditions in a number of segments, particularly forest products and construction materials. In addition, we will continue to confront the financial impact of the Canadian dollar/U.S. dollar exchange rate and its effect on our customers. However, as a result of anticipated gains from the closing of our Central Station Complex and English Welsh and Scottish Railway transactions during the fourth quarter, CN expects to achieve full-year 2007 diluted earnings per share growth of about five per cent. Excluding these transaction gains, 2007 adjusted diluted earnings per share are expected to be flat versus 2006.”

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