CN reports second quarter results

CN today reported its financial and operating results for the second quarter ended June 30, 2022. Financial performance improved year-over-year with record adjusted diluted earnings per share (EPS) of C$1.93, up 30%. For the same period, the Company reported diluted EPS up 32% to C$1.92. CN also delivered solid operational performance with improvements in key operating metrics such as origin train performance, car velocity, through dwell and record fuel efficiency, resulting in a lower operating ratio.

“I am proud of our team of railroaders and pleased with our solid performance this quarter. Our team has the network running well, demonstrating improvements in service levels to our customers, driving greater velocity and generating strong financial results. We are preparing for a busy fall and are well positioned to achieve our 2022 outlook.”

– Tracy Robinson, President and Chief Executive Officer, CN

Financial results and operating highlights

Second-quarter 2022 compared to second-quarter 2021

• Record revenues of C$4,344 million, an increase of C$746 million or 21%.
• Record operating income of C$1,769 million, an increase of 28%, and record adjusted operating income of C$1,781 million, an increase of 29%.
• Diluted EPS of C$1.92, an increase of 32%, and record adjusted diluted EPS of C$1.93, an increase of 30%.
• Operating ratio, defined as operating expenses as a percentage of revenues, of 59.3%, an improvement of 2.3-points, and adjusted operating ratio of 59.0%, an improvement of 2.6-points.
• Free cash flow for the first six months of 2022 was C$1,568 million compared to C$1,280 million for the same period in 2021.
• Injury frequency rate ⁽³⁾ increased by 43% and the accident rate ⁽⁴⁾ decreased by 24%.
• Car velocity (car miles per day) improved by 2% and through dwell (entire railroad, hours) improved by 6%.
• Fuel efficiency improved by 4% to a record of 0.838 US gallons of locomotive fuel consumed per 1,000 gross ton miles (GTMs).
• For the month of June, origin train performance, defined as the percentage of actual train departure time compared to designed train departure time at selected yards, reached 91%, an improvement of 14% compared to 80% for the same period in 2021.

Reaffirming 2022 financial outlook

CN confirms its 2022 outlook targeting to deliver approximately 15-20% adjusted diluted EPS growth in 2022. CN continues to target an operating ratio below 60% for 2022 as well as a ROIC of approximately 15%. CN maintains its free cash flow target in the range of C$3.7 billion - C$4.0 billion in 2022.

Second-quarter 2022 revenues, traffic volumes and expenses

Revenues for the second quarter of 2022 were C$4,344 million, an increase of C$746 million, or 21%, when compared to the same period in 2021. The increase was mainly due to higher applicable fuel surcharge rates, freight rate increases, higher Canadian export volumes of coal via west coast ports, higher volumes of U.S. grain and the positive translation impact of a weaker Canadian dollar; partly offset by significantly lower export volumes of Canadian grain.

Revenue ton miles (RTMs), measuring the weight and distance of freight transported by CN, increased by 2% compared to the year-earlier period. Freight revenue per RTM increased by 19% compared to the year-earlier period, mainly driven by higher applicable fuel surcharge rates, freight rate increases and the positive translation impact of a weaker Canadian dollar.

Operating expenses for the second quarter of 2022 increased by 16% to C$2,575 million, mainly driven by higher fuel prices and the negative translation impact of a weaker Canadian dollar; partly offset by lower average headcount.