CN Rail is optimistic that Canada won’t be hurt by potential NAFTA changes
MONTREAL — Canadian National Railway says it’s “cautiously optimistic” the country won’t be hurt by potential changes to NAFTA even though the automotive sector could be in the crosshairs of U.S. President Donald Trump.
“We don’t expect any significant change, at least not in the foreseeable future and I think most of our customers… are thinking the same sort of optimistic yet cautious approach,” CN chief executive Luc Jobin said in a conference call.
Jobin added that 17 per cent of the railway’s business is within the U.S., which will give it opportunities to grow if manufacturing expands and jobs are created south of the border.
The country’s largest railway also expects to transport three to four per cent more volumes of cargo throughout the year, even though it continues to experience some volatility and weaker conditions in a number of commodity sectors.
“As we look into 2017, North American economic conditions are improving, with favourable consumer confidence which supports progress in many sectors,” said CN’s chief financial officer Ghislain Houle.
The railway transported 87,000 carloads of grain in the quarter and has high hopes for the agricultural commodity. Although crude and frac sand volumes have improved of late, he said the sector should remain relatively muted for the year.
CN Rail raised its dividend by 10 per cent after reporting a better-than-expected profit for its fourth quarter.
The railway said Tuesday it will now pay a quarterly dividend of 41.25 cents per common share, up from 37.5 cents per share.
The increased payment to shareholders came as CN reported a profit of $1.02 billion or $1.32 per share in its fourth quarter on sales of $3.22 billion.
That compared with a profit of $941 million or $1.18 per share on $3.17 billion in sales a year ago.
Adjusted profits were $1.23 per share, two cents above forecasts by analysts polled by Thomson Reuters.
“These results continue to show how CN is adapting to changing market conditions,” Jobin said.
The ratio of revenue to operating expenses improved by 0.6 percentage points to a record low of 56.6 per cent compared with 57.2 per cent a year ago.
For the full year, CN Rail (TSX:CNR) earned $3.64 billion or $4.67 per diluted share on $12 billion in revenue. That compared with a profit of $3.54 billion or $4.39 per share on $12.6 billion in revenue in 2015.
During the quarter, carloadings increased three per cent and revenue ton-miles increased four per cent.
“That is an encouraging sign that the worst of the market correction and several commodity sectors is behind us and brighter prospects lay ahead,” Jobin said.
The country’s largest railway said its expects adjusted earnings this year to increase by about five per cent to approximately about $4.82 per diluted share.
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