Canada’s largest railway companies reported higher than expected earnings April 22.
They also took another opportunity to criticize Ottawa for imposing new regulations that are likely to affect railway profits.
Canadian Pacific Railway, the country’s second largest railway company, reported record first quarter net income of $254 million, or $1.44 per share. It’s up from $217 million, or $1.24 per share, in the first quarter of 2013, a 16 percent increase per share.
Canadian National Railway reported a 12 percent increase in first quarter net income. It was $623 million, up from $555 million in the same period last year.
First quarter revenues at CN were just shy of $2.7 billion, up nine percent from the first quarter of 2013.
During conference calls to investors, executives from both railway companies expressed their disappointment at Ottawa’s “knee-jerk” response to supply chain constraints that have limited the movement of prairie grain to export position this winter.
“With due respect to regulators … I’m not sure they understood really what they were dealing with,” said CP chief executive officer Hunter Harrison.
He criticized Ottawa’s move to expand railway interswitching provisions to 160 kilometres from 30 km.
“It makes very little sense to me, and it has political syrup all over it,” he said. “If you look at (the three prairie provinces) … the only other carrier that could come into our territory is Burlington Northern. I’ve talked to them several times and they’ve got their hands full trying to handle U.S. grain, so it’ll be a long time before they reach into our territory.
“Will it (interswitching) be less efficient? Yes. Did the regulators understand that? No. But once again, we had very little if any dialogue or feedback or interplay (with government) as far as suggestions of anything that should have been done to fine tune the system.”
CN president Claude Monee said Ottawa’s decision to introduce new legislation and tougher regulations “will do little to help move grain.”
“I think it is highly unfortunate that the Canadian government decided, in the heat of the moment, to react to the 100 year crop for grain … and introduce legislation that I think will do little to help move grain and sets us back in terms of sound transportation policy in Canada,” Mongeau said. “But Parliament is stubborn.”
News of record profits at CP and stronger-than projected profits at CN have evoked a predictable response among prairie farmers, who are sitting on millions of tonnes of undelivered grain and staring down a record year end stocks forecast.
“(It ) rubs me a little bit,” said Jim Wickett, a farmer from Rosetown, Sask., who served as chair of the Western Canadian Wheat Growers Association.
“Western Canada had a bumper crop and we didn’t really get to reap the benefits of that,” he told Reuters April 22. “(Railways) only ran trains when they could gain the maximum amount of profit. And as farmers we just have to sit and take it.”
CN chief financial officer Luc Jobin said business prospects remain strong based on steady demand in several key business sectors.
“We’re coming back strong from the extreme weather conditions experienced in the first quarter… Our network is quickly catching up with demand and we’re optimistic with our prospects for the balance of the year.”
The company reaffirmed its 2014 guidance aiming for double digit earnings-per-share growth from last year.