Canadian National Railway profit misses as harsh weather weighs on expenses

(Reuters) – Canadian National Railway Co on Monday became the latest railroad operator to blame higher operating expenses due to prolonged extreme cold weather for a lower-than-expected quarterly profit.

Rail traffic in Canada was dented by a severe winter, forcing rail operators to cease work.

Operating expenses jumped 14 percent in the first quarter, also due to a crude oil train derailment in Western Canada.

CN Rail’s operating ratio, a closely watched productivity metric that measures expenses as a percentage of revenue, rose to 69.5 percent in the first quarter from 67.8 percent a year earlier. The lower the ratio, the more efficient a railroad.

Last week, smaller rival Canadian Pacific Railway missed analysts’ estimates for quarterly profit as it spent heavily to combat a harsh winter that impacted its operations.

CN Rail also bore the brunt of Alberta’s OPEC-style decision to force production cuts to deal with a glut. As a result, demand for crude shipment took a nosedive in February, the company said.

Total carloads, the amount of freight loaded into cars, rose less than a percent in the March-ended quarter.

However, CN Rail and Canadian Pacific are set to benefit from Canada’s oil-producing province of Alberta’s move to buy rail cars to transport 120,000 barrels per day of crude oil after congested pipelines stranded much of Western Canada’s expanding crude output.

This comes as a lack of pipelines to the United States and oversupply have led Canadian energy producers to look for alternatives such as railroads to ship crude.

“Crude-by-rail is an opportunity that we expect at this point will produce growth in the second half,” Chief Executive Officer Jean-Jacques Ruest said on a post-earnings conference call.

The company said it expects North American industrial production to increase by about 2 percent this year.

Excluding one-time items, the railroad company earned C$1.17 per share, missing the analyst average estimate of C$1.18, according to IBES data from Refinitiv.

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