Canadian National Railway Company is cashing in on a commodities boom that’s fueling demand for exports from Canada.
Strong orders for goods such as metals, lumber and oil gave Canada’s largest railway a boost in the second quarter, with total freight revenue jumping 14 per cent from a year earlier. That helped the Montreal-based company post profit that was almost double that of a year ago, when the COVID-19 pandemic took hold.
The positive earnings report came as the company pursues a takeover of Kansas City Southern. It’s awaiting a decision by the Surface Transportation Board that will determine whether it can proceed with a deal.
“We should know in a couple of weeks, sometime in late July or early August, when the STB has had the time to reflect on all the things that we have filed,” Jean-Jacques Ruest, Canadian National’s chief executive officer, told analysts on a conference call Tuesday.
“We’re very confident that we have a very solid case. We are meeting the test of the voting trust and we are creating, definitely, a new competition, a new public benefit.”
Canadian National saw its biggest jump in freight revenue from automotive, which almost doubled, followed by intermodal, metals and minerals, petroleum and chemicals, and coal in the quarter. Revenue from transporting grains and fertilizers was the only business to see freight revenue fall, slipping six per cent from a year earlier.
The company plans to buy Kansas City Southern for about $30 billion after outbidding Canadian Pacific Railway Ltd. and is waiting for regulators to approve a voting trust that’s key for the deal to proceed. Ruest said he’s “confident in our ability to obtain the necessary approvals and successfully close this pro-competitive combination” in Tuesday’s statement.
The company expects to work through its bottleneck of rail cars in British Columbia within the next two to three weeks after wildfires in the western Canadian province damaged a bridge, which has since been repaired. Ongoing fires are causing movement to be slower than usual.
Canadian National had raised its guidance in April to target double-digit growth in adjusted diluted earnings per share in 2021. The company reiterated that guidance in its latest quarterly statement.
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