Saturday, January 27, 2007

Potential of Rupert Port keeping CN optimistic for 2007

While the Canadian economy may weaken in 2007, CN Rail is still pretty bullish on things for the railway, partly due to the expectation of the containerization of the Port of Prince Rupert.

With a profit increase of 34 per cent, clocking in at 2.09 billion dollars, the railway is proving to be a pretty good investment for those that are putting their pennies into the railroad these days.

Hunter Harrison, CEO of CN conducted a conference call to discuss the railroads fourth quarter results and where the Chairman sees 2007 going for CN.

The Daily News provided the details on CN’s results and predictions.

By Leanne Ritchie
The Daily News
Thursday, January 25, 2007
Page one

CN Rail is coming off a record performance in 2006 with high expectations for continued earnings growth this year, despite the prospect of a weakening Canadian economy.

The Montreal-based railway raised a quarterly dividend by 29 per cent on Tuesday as it announced profits rose 16 per cent to $499 million in the fourth quarter and annual profit in 2006 was up 34 per cent to $2.09 billion.

“I’m extremely optimistic about the outlook for 2007,” CEO Hunter Harrison said in a conference call to discuss its fourth-quarter results.

“This story is a long way from being over.”

James Foote, executive vice-president of sales and marketing for CN, pointed to two factors that suggest a positive revenue outlook for the company in 2007. They include a solid demand and service reliability supporting sustainable growth and price volume and the opening of the Fairview Container Terminal in 2007.

The company is targeting revenue growth of five to six per cent in the coming year.

For 2006, CN Rail reported record annual revenues of $7.72 billion in 2005. In the fourth quarter, revenues rose to $1.94 billion from $1.89 billion.

“These accomplishments were achieved in the face of some severe weather conditions during the fourth quarter of the year that disrupted our main lines and the operations of key customers in Western Canada,” said Harrison.

“The strength of 2006 positions CN well for 2007. The year ahead is one of opportunity for the company, and we’ll have the people, network capacity, locomotives and freight cars in place to take advantage of new traffic.”

Company executives went on to explain that revenues benefited from strength in coal, grain and fertilizers, intermodal, petroleum and chemicals, and metals and minerals.

Revenues from grain ships were up by 14 per cent, coal shipments up by 24 per cent and intermodal shipments by six per cent.

In fact, grain shipments were so good, that in late in 2006 it was announced that CN must pay Ottawa $2.7 million because their revenue from transporting Western grain exceeded federally-imposed caps.

Ottawa established the revenue cap in 2000, and it applies to sales generated from the movement of grain from terminals at Vancouver, Prince Rupert, Churchill, Man., and Thunder Bay, Ont.

However, revenues for 2006 were affected by the unfavourable C$255 translation impact of the stronger Canadian dollar on U. S. Dollar-denominated revenues.

CN earlier estimated its 2007 capital spending will be about $1.6 billion, up four per cent from 2006, including $1 billion for trackage to increase average speed and capacity and raise productivity. That includes double stack clearances on the B. C. North Line ready for the Prince Rupert intermodal terminal opening in the second half of 2007.

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