CN’s Robinson: ‘Back-to-Basics’ Strategy Delivers

Marybeth Luczak Jan 25, 2023 at 12:52 AM

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    “As we look to 2023, we believe our back-to-basics strategy and disciplined operating model will continue to deliver despite the softening economy,” she said during a fourth-quarter and full-year 2022 financial and operating report.

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    Among CN’s fourth-quarter 2022 results:


    • Revenues were C$4.542 billion, up 21% or C$789 million from fourth-quarter 2021. The railroad said the boost was “mainly attributable to higher fuel surcharge revenue as a result of higher fuel prices, the positive translation impact of a weaker Canadian dollar, freight rate increases, and higher volumes of Canadian grain.”

    • Revenue Ton Miles (RTM)—measuring the weight and distance of freight transported by CN—increased by 6% over the same period in 2021. Freight revenue per RTM increased by 15% over fourth-quarter 2021, CN said, “mainly driven by higher fuel surcharge revenue as a result of higher fuel prices, the positive translation impact of a weaker Canadian dollar and freight rate increases.”

    • Operating expenses rose 20% to C$2.630 billion, when compared with the same period in 2021. This was “mainly a result of higher fuel prices and the negative translation impact of a weaker Canadian dollar,” CN reported.

    • Operating income came in at C$1.912 billion, up 22% from fourth-quarter 2021, or an increase of 21% over the year-ago period on an adjusted basis.

    • Diluted EPS was C$2.10, up 24% from fourth-quarter 2021, or an increase of 23% on an adjusted basis.

    • Operating ratio—defined as operating expenses as a percentage of revenues—was 57.9%, an improvement of 0.4 points over fourth-quarter 2021, or flat on an adjusted basis.

    • On the operations side, fuel efficiency improved by 1% to 0.886 U.S. gallons of locomotive fuel consumed per 1,000 gross ton miles (GTMs); car velocity (car miles per day) improved by 10%; through network train speed (mph) improved by 1%; through dwell (entire railroad, hours) improved by 9%; and train length (in feet) decreased by 7%, compared with fourth-quarter 2021.

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    Among CN’s full-year 2022 results:


    • Revenues were C$17.107 billion, up 18% or C$2.630 billion from 2021. CN said this “was mainly attributable to higher fuel surcharge revenue as a result of higher fuel prices, freight rate increases, the positive translation impact of a weaker Canadian dollar, higher Canadian export volumes of coal via west coast ports, and higher volumes of U.S. grain; partly offset by lower international container traffic volumes via the port of Vancouver as a result of supply chain congestion and significantly lower export volumes of Canadian grain in the first half of 2022.”

    • RTMs increased by 1% over 2021, and freight revenue per RTM increased by 18%, “mainly driven by higher fuel surcharge revenue as a result of higher fuel prices, freight rate increases, a decrease in the average length of haul, and the positive translation impact of a weaker Canadian dollar,” CN reported.

    • Operating expenses were C$10.267 billion, up 16% from 2021 “mainly due to higher fuel prices and the negative translation impact of a weaker Canadian dollar,” according to the railroad.

    • Operating income was C$6.840 billion, up 22% from 2021, and adjusted operating income was C$6.862 billion, up 22% from 2021.

    • Diluted EPS was C$7.44, an 8% increase over 2021. Adjusted diluted EPS was C$7.46, a 25% rise over 2021.

    • Operating ratio was 60.0%, an improvement of 1.2 points over 2021, and adjusted operating ratio was 59.9%, an improvement of 1.3 points over 2021.

    • Return on invested capital (ROIC) was 15.8%, a decrease of 0.6 points from 2021. Adjusted ROIC was 15.9%, an increase of 1.8 points over 2021.

    • On the operations side, fuel efficiency improved by 2% to 0.867 U.S. gallons of locomotive fuel consumed per 1,000 GTMs; car velocity (car miles per day) improved by 1%; through network train speed (mph) decreased by 2%; through dwell (entire railroad, hours) improved by 4%; and train length (in feet) decreased by 5%, compared with 2021.

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    2023 Outlook


    CN said it expects to deliver EPS growth in the low single-digit range “due to a softer economic outlook.” North American industrial production is assumed to be negative in 2023, according to the railroad.

    For more details, visit the CN Investors webpage.

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