CN Rail Income Jumps

TORONTO - Jul 20/06 - SNS -- CN today reported a net income of CDN $729 million on revenues of $1,946 million for the second quarter ending June 30, up from a net of $416 million on revenue of $1,838 million last year.

This lifted net income for the first half of the current fiscal year to $1,091 million on revenue of $3,793 million, compared to a net of $715 million on revenues of $3,544 million the first half of the previous fiscal year.

CN said the increase in revenues reflected was "largely due to freight rate increases for all commodity groups, including a higher fuel surcharge resulting from an escalation in crude oil prices, and volume growth led by CN's grain and intermodal commodity groups. Revenue gains were partly offset by the unfavorable $100-million translation impact of the stronger Canadian dollar on U.S. dollar-denominated revenues."

Operating expenses increased 1% to $1,141 million, mainly due to increased fuel costs, purchased services and material expense, and depreciation. Partly offsetting these factors were lower casualty and other expense and equipment rents, as well as the favorable $55-million translation impact of the stronger Canadian dollar on U.S. dollar-denominated operating expenses.

Intermodal revenues increased 17% during the quarter, benefiting from growth in international container traffic, primarily from Asia, and increased transborder and domestic movements. Grain and fertilizers revenues rose 16%, driven in part by higher shipments to export markets of Canadian wheat, U.S. corn, and Canadian canola and canola meal.

Metals and minerals revenues increased 7%, reflecting increased volumes of iron ore, and strong shipments of long steel products and machinery and dimensional loads. Petroleum and chemicals revenues, benefiting from improvements in traffic mix, increased 4%.

Coal revenues grew by 2%, largely as a result of the expansion of metallurgical coal mines in western Canada, offset partly by lower shipments of U.S. coal and Canadian exports of petroleum coke. Forest products revenues declined 1%, in part because of reduced shipments of pulp and paper, while automotive revenues declined 6% on account of production slowdowns by domestic producers, partly offset by higher shipments of import vehicles via CN-served ports.