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CN reports Q1-2009 net income of C$424 million

04/25/2009 AT 07:52

The strengthening of the U.S. dollar affected the conversion of the Company's U.S. dollar-denominated revenues and expenses, increasing first-quarter 2009 net income by approximately C$30 million, or C$0.06 per diluted share.

Net income for first-quarter 2008, which was also adversely affected by severe weather conditions, was C$311 million, or C$0.64 per diluted share, including a deferred income tax recovery of C$11 million (C$0.02 per diluted share) resulting from net capital losses arising from the reorganization of a subsidiary. Excluding that item, adjusted first-quarter 2008 net income was C$300 million, or C$0.62 per diluted share. (1)

E. Hunter Harrison, president and chief executive officer, said: “Economic conditions during the first quarter of 2009 were challenging. Our traffic declined sharply as production cuts and reduced imports and exports coursed through the North American and global economies. But we responded quickly to the downturn, using the discipline of our Precision Railroading model to reduce expenses while maintaining quality service. Among other measures, we reduced train starts and cut discretionary expenditures.

“Amid these challenges, the weakening of the Canadian dollar vis a vis the U.S. dollar was a shock absorber, and we remained focused on generating increased shareholder value through the sale of our Weston subdivision in Toronto.

“While economic conditions remain uncertain for the foreseeable future, CN is focused on growth opportunities that extend beyond the business cycle and on continuing to deliver value to our customers.

“At the same time we are investing in the future. I am particularly proud that we completed the acquisition of the EJ&E during the quarter. The route-around-Chicago represented by the EJ&E, and the upgrades we plan for the line in the next three years, will pay dividends to CN in the years ahead through faster transit times, improved productivity and better service to customers.”

The four per cent decline in CN's first-quarter 2009 revenues was mainly due to significantly lower volumes in almost all markets as a result of current economic conditions in the North American and global economies, as well as a lower fuel surcharge resulting from year-over-year decreases in applicable fuel prices and reduced volumes. These factors were partly offset by the positive translation impact of the weaker Canadian dollar on U.S. dollar-denominated revenues, freight rate increases, and a positive change in traffic mix.

Revenue ton-miles, measuring the relative weight and distance of rail freight transported by CN, decreased 14 per cent from the same quarter of 2008.

Rail freight revenue per revenue ton-mile, a measurement of yield defined as revenue earned on a movement of a ton of freight over one mile, increased by 12 per cent from the same quarter of 2008, mainly due to the positive translation impact of the weaker Canadian dollar and freight rate increases that were partly offset by the impact of a lower fuel surcharge.

First-quarter carloadings declined 16 per cent to 954 thousand from 1,132 thousand in the year-earlier period.

The two per cent decline in operating expenses was mainly due to lower fuel costs and labor and fringe benefits expense that were partly offset by the negative translation impact of the weaker Canadian dollar on U.S. dollar-denominated expenses, as well as by higher casualty and other expense mainly due to EJ&E acquisition-related costs.

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