CN Reports Q1-2011 Net Income

MONTREAL — CN reported its financial and operating results for the first quarter ended March 31.

— Net income increased 31 per cent from the year-earlier quarter to C$668 million, with diluted earnings per share (EPS) rising 34 per cent to C$1.45. The results included an after-tax gain of C$254 million, or C$0.55 per diluted share, from a rail-line sale to a Toronto-area transit agency.

– Excluding the gain on the rail-line sale, CN reported adjusted diluted EPS for the quarter of C$0.90, an increase of 12.5 per cent over adjusted diluted EPS of C$0.80 for the same period of 2010.

– Revenues for first-quarter 2011 increased six percent to C$2,084 million, while carloadings rose three per cent and revenue ton-miles increased five per cent.

– Operating income increased seven percent to C$645 million.

– CN’s operating ratio was 69.0 per cent, a 0.3-point improvement over
the operating ratio of 69.3 per cent for first-quarter 2010.

– Free cash flow for first-quarter 2011 was C$445 million, compared with C$493 million for the same period of 2010.

Claude Mongeau, president and chief executive officer, said: “Despite a very challenging winter, CN produced a solid first-quarter performance thanks to further, gradual improvements in the North American and global economies and a well-executed winter operating plan. CN leveraged its continued investments in extended sidings by deploying additional distributed power-equipped locomotives. Our network initiatives, along with the benefits from supply chain collaboration, helped us maintain an efficient and fluid network.

“Looking forward, CN anticipates strong demand from most business segments for the balance of the year. We will continue to work closely with our customers so that they can maximize their market opportunities.”

Revised 2011 outlook(2)

CN’s solid first-quarter results and expectation of continued improvement in economic conditions have prompted the Company to revise its 2011 financial outlook upward, despite a stronger than anticipated Canadian dollar and higher fuel prices. CN expects double-digit diluted EPS growth of up to 15 per cent in 2011, on an adjusted basis, compared with diluted EPS of C$4.20 achieved in 2010. In CN’s initial outlook of Jan. 25, 2011, the Company said it was aiming for double-digit earnings growth for 2011.

In addition, CN now expects free cash flow for 2011 to be in the order of C$1.2 billion, up from C$850 million announced in January of this year. (1) CN’s revised 2011 free cash flow outlook reflects the Company’s first-quarter performance, its higher earnings forecast for the year, cash proceeds from the first-quarter Toronto rail-line sale, and a potential C$200 million additional voluntary pension contribution.

Mongeau said: “CN continues to make strides in operating efficiency, service excellence and customer engagement. Our service innovation and supply chain collaboration thrust strengthen our transportation product and position us well to attract more freight traffic from existing and prospective customers who require reliable service to compete effectively in their end markets.”