CN Profit Falls 16 Percent

Canadian National Railway’s profit fell 16 percent in the second quarter to $352 million, but President and CEO E. Hunter Harrison cited “signs that several markets are stabilizing” with hopes of second-half improvement.

The largest railroad in Canada and owner of large U.S. properties saw revenue fall 15 percent from a year earlier to $1.62 billion, while traffic in carloads plunged 22 percent.

Cost cuts included ending the quarter with 1,430 fewer workers than in June 2008, for a 7.3 percent reduction to 21,717.

CN had after-tax costs of about $1.8 million from its first-quarter acquisition of short line Elgin, Joliet & Eastern Railway outside Chicago, part of a plan to pull through traffic of intermodal trains and other cargo off congested CN tracks in the downtown to use EJ&E’s less crowded route arcing westward.

Harrison said the short line purchase also helped lift CN’s hauls of coal in the quarter by 10 percent and boost coal revenue 4 percent, its only cargo category to see a revenue gain.

As to the freight market, Harrison said “the current economic environment continues to affect our business significantly and we remain focused on adjusting our expenses accordingly.” But with signs of stability in some areas, “we hope the economy will begin to recover in the second half of this year,” he said.

CN’s results were aided by a deferred income tax gain from lower provincial taxes. It also received an escrow payment at the quarter’s end linked to a March sale of some rail property at Toronto to the area transit agency.

Contact John D. Boyd at jboyd@joc.com.