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CN Rail withdraws profit forecast after rail blockades, COVID-19 downturn

CN Rail withdraws profit forecast after rail blockades, COVID-19 downturn

MONTREAL — Canadian National Railway Co. says it is withdrawing its profit forecast for the year due to the uncertainty fostered by the COVID-19 pandemic.

The country’s largest railway says the link between freight demand and ongoing containment measures — whose duration remains uncertain — have prompted it to scrub its 2020 guidance as well as the three-year targets it outlined last June.

Most North American railways have withdrawn or revised their outlooks in response to a virus that has upended the economy, shuttered businesses across the globe and triggered a looming recession.

CN says blockades in February and fallout from the pandemic in late March depressed freight volumes across all commodities except for crude oil and grain in the first quarter.

Net income fell 22 per cent year over year to $786 million while revenues remained flat at $3.55 billion in the quarter ended March 31.

On an adjusted basis, diluted earnings per share hit $1.22 compared to $1.17 a year earlier, beating analyst expectations of $1.09 per share, according to financial markets data firm Refinitiv.

The company says its board approved on Monday a second-quarter dividend of 57.5 cents per common share, to be paid on June 30 to shareholders of record after markets close on June 9.

The rolling blockades that halted rail traffic across large swathes of the country in February came on top of lower container volumes from China following production shutdowns triggered by the outbreak.

CEO JJ Ruest has said the deep slump in Chinese production and Canadian auto manufacturing was narrowing the flow of goods to and from Canada, hurting business at the country’s largest railway in spite of strong demand for wheat and other bulk commodities.

Analyst Walter Spracklin of RBC Dominion Securities says the blockades last winter dented volumes and pushed up its operating ratio, a metric that calculates operating expenses as a percentage of revenue.

CN shut down its eastern network on Feb. 13, one week into a blockade by Tyendinaga Mohawk protesters that cut a key rail link east of Belleville, Ont.

Provincial police cleared the demonstration at the end of February, which was part of a slew of pop-up blockades across the country launched in solidarity with Wet’suwet’en hereditary chiefs who oppose a natural gas pipeline slated to pass through their traditional territory in British Columbia.

This report by The Canadian Press was first published April 27, 2020.

Companies in this story: (TSX:CNR)

The Canadian Press