Record revenues at CP, CN | Cold winter weather hampered car movement and efficiency in 2013
Canada’s major rail companies generated record-breaking revenues in 2013 in spite of a downturn in business caused by cold weather in December.
Last week, Canadian Pacific Railway reported year-end 2013 revenues of $6.1 billion, up eight percent from 2012 and a company record.
Adjusted net income was $1.1 billion, up 48 percent over 2012.
Canadian National Railway also reported record full-year revenues of nearly $10.6 billion.
Net income was reported at $2.61 billion, down from $2.68 billion in 2012.
Grain movement played prominently in the railways’ revenue figures.
At CP, freight revenue from grain movement increased to $1.3 billion in 2013, up 11 percent from the previous year.
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The railway moved 438,000 carloads of grain in 2013, an increase of five percent over 2012.
At CN, revenue from grain was $1.6 billion.
Despite record revenues, railway operations were affected by cold winter weather that hampered car movement and overall railway efficiency for most of December, said CN president Claude Mongeau.
“If you have a few periods of few days with -30 C … you lose capacity. You have to shorten trains so you need more assets and you obviously build up a backlog,” Mongeau said in a Jan. 30 conference call.
“What we’re seeing this year is just extended periods with no reprieve.….
“You have to go back to 1879 to have a month of December in Winnipeg that was this cold. In Saskatoon, there were 18 days (in December) that were less than -30 C.”
CN’s chief operating officer Jim Vena said extremely cold conditions that persisted into January will continue to have a negative impact on traffic volumes.
CN increased resources to compensate for the weather and tweaked yard procedures to improve winter efficiency.
Nonetheless, “we know we will not be able to move all of the business that (the company had hoped) … to move in the first quarter,” Vena said.
At CP, chief operating officer Hunter Harrison said the railway company will be playing catch up in the coming months to make up for business backlogs incurred in December and January.
“Clearly we had impact from weather conditions here in Canada…,” Harrison said.
“I know if this first quarter continues like it is … we’re going to have some catch up to do in the next three quarters.”
Both railways said they will continue to make strategic investments in sidings aimed at optimizing train lengths and reducing train stops and starts.
Both railways acknowledged that grain traffic in December and January was down from earlier projections.
But in the future, demand for rail service from grain shippers should be strong and consistent, with fewer demand peaks and more predictable volumes.
“When I look at the outlook for grain, I think that we’re going to move grain more consistently,” said CP’s chief marketing officer Jane O’Hagan.
“I think it’s going to be one of the crop years where we don’t have the peakiness that we’ve had in the past.
“We’ll probably have some large carryover and with an average crop (in 2014), we’re going to see strong movement throughout the year.”
Added CN’s Mongeau: “We have a huge crop and things are looking good for the balance of the year and probably well into 2015.”
