CN Rail boosts dividend 18 per cent as it forecasts strong performance in 2019

MONTREAL — Canadian National Railway Co. boosted its dividend by 18 per cent after reporting that its revenues surged 10 per cent last year and forecasting another strong year ahead that builds on burgeoning shipments of oil, coal and grain as well as container traffic.

The Montreal-based company will increase the quarterly payout to 53.7 cents on March 29 to shareholders of record on March 8. It also plans to repurchase up to 22 million shares over the coming year.

CN Rail’s ongoing expansion includes employing 1,250 more conductors this winter than last as well as adding 140 more high-powered locomotives from GE Transport that are set to arrive in 2019, on top of the 60 that came on line last year.

Revenue from petroleum and chemicals shot up 50 per cent year over year last quarter, driving a 20 per cent increase for the full year to $2.66 billion. With Enbridge’s Line 3 not set to come online until late this year and the Trans Mountain expansion facing uncertainty, Canadian railways can expect continued high demand for oil shipments, analysts say.

“CN regained its position of strength and demonstrated again its ability to grow at low incremental cost,” chief executive Jean-Jacques Ruest said on a conference call with analysts. “2019 will be a year of building on this momentum.”

Senior vice-president Doug MacDonald said he expects “significant growth” in coal revenues, with two new coal mines adding to traffic and a third acquired by CST Canada Coal Ltd. last July slated to start this year.

“At the same time, we expect we are doing very well in grain,” MacDonald said, citing record shipment numbers in recent months.

The expanded port at Prince Rupert, B.C., where CN has laid track directly on the dock, is another reason for long-term optimism. It offers shippers a swift route to Asia, avoiding the congestion of Vancouver and Los Angeles. Meanwhile, more grain is being stuffed into shipping containers and dropped on carriers bound for China, said analyst Dan Sherman of Edward Jones.

During the fourth quarter, the country’s largest railway earned $1.09 billion on an adjusted basis or $1.49 per diluted share, beating analysts’ expectations. That compares to adjusted earnings of $897 million or $1.20 per diluted share for the quarter ended Dec. 31, 2017.

Net income for the quarter fell 56 per cent to $1.14 billion from $2.61 billion at the same time last year. Revenue rose 16 per cent year over year to $3.81 billion.

Analysts on average had expected an adjusted profit of $1.47 per share for the quarter, according to Thomson Reuters Eikon.

For the full year, net income declined 20 per cent per cent to $4.33 billion because of a deferred income tax recovery a year ago resulting from a lower U.S. federal corporate income tax rate. Adjusted profits were up seven per cent to $4.06 billion or $5.50 per diluted share, compared with $3.8 billion or $4.99 per share in fiscal 2017.

Revenues rose to $14.3 billion in 2018 from $13 billion a year earlier

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