Lower revenues in the second quarter of 2023 put pressure on overall profits for Canadian railway CN.

CN reported second-quarter 2023 adjusted net income of CA$1.17 billion (US$886 million), or $1.76 per adjusted diluted earnings per share, compared with $1.33 billion, or $1.93 per adjusted diluted earnings per share, for the second quarter of 2022. 

CN’s financial figures are reported in Canadian dollars.

Revenues were $4.06 billion in the second quarter of 2023, down 7% year over year (y/y) amid lower volumes of intermodal crude oil, U.S. grain exports and forest products, CN (NYSE: CNI) said in a late Tuesday afternoon news release. The railway said the volume decline was driven in part by lower demand for freight services to move consumer goods, as well as customer outages caused by Canadian wildfires. Lower ancillary services and a decline in fuel surcharge revenues also contributed. 

But revenue declines were partially offset by freight rate increases, a weaker Canadian dollar and higher export volumes of Canadian grain, CN said. 

Meanwhile, operating expenses were nearly $2.46 billion, down from nearly $2.58 billion for the second quarter of 2022, amid lower fuel prices. Higher labor and fringe benefits and a weaker Canadian dollar partially offset CN’s expenses in the second quarter. 

Operating income was $1.6 billion, down 10% y/y, while operating ratio rose to 60.6% from 59.3%. Investors sometimes use OR to gauge a company’s financial health, with a lower OR implying improved health. CN defines OR has operating expenses as a percentage of revenues.

Despite lower profits, service metrics improved. Network train speeds rose 3% to 19.9 mph, while through dwell was 6.8 hours, an improvement of 6%, CN said. 

CN said it now expects weaker than anticipated volumes in the second half of 2023. Because of that and because of its second-quarter results, CN now expects flat to slightly negative y/y growth in adjusted earnings per share for 2023.

“CN’s disciplined approach to scheduled railroading continues to deliver for our customers. As volumes evolve, we will continue to refine our plan to optimize efficiency and drive further improvements to customer service,” CN President and CEO Tracy Robinson said in the release. “Our goal to accelerate sustainable, profitable growth through 2026 and beyond remains on track.”

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