Two CN trains are seen at a rail intersection in North Vancouver, B.C. May 10, 2012. THE CANADIAN PRESS/Jonathan Hayward
January 22, 2013 - 7:18 AM
MONTREAL - Canadian National Railway (TSX:CNR) is boosting its dividend by 15 per cent after ending 2012 on a strong note with a higher fourth-quarter profit and record-high quarterly revenue.
The country's largest railway said it earned $610 million or $1.41 per diluted share for the period ended Dec. 31, in line with analyst estimates.
That compared to $1.32 per share or $592 million a year earlier. Excluding an income tax recovery last year, adjusted profits were $581 million and $1.30 per share.
Revenues grew by 6.6 per cent to a record $2.53 billion, from $2.38 billion a year ago.
The Montreal-based North American railway said its strong results and positive outlook support a higher quarterly cash dividend of 43 cents per common share.
President and CEO Claude Mongeau said the railroad capped a strong year by delivering "impressive" fourth-quarter results.
"Thanks to our supply chain collaboration focus and solid execution, CN's growth last year continued to outpace that of the overall economy, generating the highest volumes and earnings in company history," he said in a news release.
"In 2012, we experienced strong growth in commodities related to oil and gas, particularly crude oil, and saw continued market share gains in overseas and domestic intermodal. CN also benefited from strong coal and petroleum coke exports, increased wheat and soybean exports, as well as higher lumber and panels shipments to the United States."
Mongeau said the railway anticipates a gradual improvement in the economy in 2013 and further growth opportunities in intermodal, energy and other resource markets.
"Despite the challenge of an approximate $150-million headwind related to increased pension expense and the impact of depreciation studies, CN is aiming for high single-digit growth in 2013 diluted earnings per share over adjusted diluted earnings per share of $5.61 for 2012."
It also expects to generate $800 million to $900 million in free cash flow, including a normalized, higher level of cash taxes.
CN's profits would have been $11 million or three cents per share higher in the quarter, but $14 million lower for the year excluding fluctuations in the value of the Canadian dollar.
Coal led the segment revenue growth at 15 per cent, followed by petroleum and chemicals (13 per cent), grain and fertilizers (11 per cent), intermodal (seven per cent), and automotive (five per cent). Revenues declined for forest products (two per cent), and metals and minerals (one per cent).
Carloadings for the quarter rose three per cent to 1.27 million.
Revenue ton-miles, measuring the relative weight and distance of rail freight transported by CN, increased by eight per cent over the year-earlier quarter.
For the full year, CN earned $2.68 billion, or $6.12 per share, compared to $2.46 billion or $5.41 per share in 2011. Revenues grew to $9.92 billion, up from $9.03 billion a year earlier.
Adjusting for one time items, the full year profit increased 16 per cent to $5.61 per share or $2.46 billion, up from $4.84 per share or $2.2 billion in the prior year.
Analysts polled by Thomson Reuters expected adjusted earnings per share of $5.60 on revenue of $9.93 billion.
CN's industry-leading operating ratio improved 1.1 points to 63.6 per cent in the fourth quarter and 62.9 per cent for 2012. The ratio measures the percentage of revenue used to fund operations, so the lower the number the better.
Its free cash flow exceeded $1 billion after $700 million in voluntary pension plan contributions, down from $1.17 billion in 2011.
Total operating expenses increased by five per cent to $1,612 million.
Higher 2012 revenues were largely due to increased freight volumes caused by a growth in the North American and Asian economies, the railways' performance in several segments and the positive impact of labour disruptions at a key competitor.
Carloadings for the year increased four per cent to 5.1 million, while revenue ton-miles increased by seven per cent over 2011, while rail freight revenue per revenue ton-mile increased by three per cent.
Total operating expenses for 2012 increased by nine per cent to $6.2 billion, mainly due to higher labour and fringe benefits expense, increased purchased services and material expense, as well as increased fuel costs.
On the Toronto Stock Exchange, CN's shares lost 43 cents at $94.33 in early Tuesday morning trading.
News from © Ross Marowits, 2013