E. Hunter Harrison thanks his employees for their hard work. NOT.

[CliqueofOne]

CN Rail president hails "knockout" quarter and looks ahead to record year
09:36 PM EDT Jul 20
DONALD MCKENZIE

MONTREAL (CP) - Canadian National Railway Co. president Hunter Harrison hailed the transportation giant's "knockout" second quarter on Tuesday as Canada's biggest railway reported a 34 per cent jump in profits.

The increase was sparked primarily by increased grain traffic and market share gains, the company said. "It was a knockout quarter," Harrison told a conference call after the company reported financial results for the three months ended June 30. "We set records in almost any of the (areas) you would want to measure or look at. It exceeded even my expectations."

Investors welcomed the financial report, pushing the railway's shares five per cent higher on the Toronto Stock Exchange.

In its report, CN said it earned a record $326 million or $1.14 a share for the second quarter, up from a profit of $244 million or 85 cents a share a year earlier.

Analysts who follow the company had been expecting CN to report per-share earnings of 98 cents.

Revenues grew to $1.67 billion from $1.46 billion as the railway generated higher revenues from hauling everything from metals and minerals, grain and fertilizers to forest products, and petroleum and chemicals.

Harrison laid out a five-year growth plan for CN two months ago but on Tuesday said the company would be ahead of schedule in reaching its financial goals "if things continue to go like they are."

Other positive numbers for Montreal-based CN (TSX:CNR) as of June 30 included:

- Free cash flow of $587 million.

- And an operating ratio of 65.5 per cent, down 4.6 percentage points. The figure means that for every dollar of revenues, the railway had 65.5 cents in costs.

Chief financial officer Claude Mongeau said the strength of the cash-flow performance allowed CN to finance two recent acquisitions - that of B.C. Rail, the former Crown-owned regional freight carrier based in Vancouver - and U.S.-based Great Lakes Transportation - with only $800 million US of financing.

The purchases cost between $1.5 billion and $1.6 billion Cdn in total.

Mongeau said the companies will contribute a total of about $250 million in profits before interest, taxes, depreciation and amortization in 2005.

Harrison was extremely pleased with the integration of the two companies into CN's operations, which he said is ahead of schedule.

"I think the benefits of the new acquisitions will be even more than we had first envisioned," he said. "I'm extremely bullish about the second half."

Great Lakes, a U.S. company whose acquisition was completed in early May, contributed three cents a share to the $1.14 a share quarterly profit.

On the negative side, the stronger loonie reduced CN's sales by $30 million in the second quarter and net income by $10 million.

Expenses climbed by six per cent due partly to higher labour and fringe benefit costs.

Mongeau agreed that the good times for Montreal-based CN Rail should keep rolling for the rest of the year.

"This is just an all around great quarter for us," he said. "We promised a year ago we'd have a rebound with the grain comeback and a stronger economy and that's just what we delivered.

"Overall, a very good quarter and it bodes well in terms of momentum for the second half."

Harrison said the company has contracts to negotiate with four separate unions in Canada but that he is confident there will be no labour disputes with any of them.

The company suffered through a month-long strike in the first quarter by 5,000 workers represented by the Canadian Auto Workers.

In trading on the Toronto Stock Exchange on Tuesday, CN shares rose $2.90 to $58.90, a gain of about five per cent.

CN (TSX:CNR) spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico. The railway generated nearly $6 billion in revenues last year and earned a 2003 profit of $734 million. The former Crown corporation was privatized in the mid-1990s and has grown through acquisitions into one of the six major North American railways, with nearly 21,500 workers at the end of 2003.

© The Canadian Press, 2004

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[Anonymous]

Sounds as though CN is doing pretty well. An operating ratio of 65.5 is damn good and the free cash flow of half a $Billion should allow them to finance some impressive acquisitions. CSXT perhaps??...lol....

LC

[Anonymous]

QUOTE: Originally posted by Limitedclear

Sounds as though CN is doing pretty well. An operating ratio of 65.5 is damn good and the free cash flow of half a $Billion should allow them to finance some impressive acquisitions. CSXT perhaps??...lol....

LC

The money may be flowing, but there are a whole bunch of unhappy employees out there.....

I haven't met a happy CN RTE in a long time.

[Anonymous]

Mac-

Not to sound callous but I have been an unhappy employee before, I know exactly what that is like and how it works. I also know that now, about 5 years downstream from the Conrail acquisition by NS and CSXT a lot of employees around here are a lot happier. They are making good money, work is up and things are looking better than they have in a long time. Many of the older employees have retired and those of us who have been around for a while are near the top of the pile.

The nature of railroading does n't make it a "happy" job. All of us have seen great changes in our industry. We all have a choice, we can crawl away and cry about it or try our best to make the most of our lot. I intend to continue to make the best of it. I'm sure that many at CN will do likewise. I find it hard to be too sympathetic, a good friend just left the NS and took a job with CN on one of it's former IC routes. He was given both a conductor's date and an engineer's date and now earns more than I do (he was well junior to me on our roster). He's always been a bit of a boomer and he's a good engineer. I'm glad for him, but I have a hard time rationalizing compalints when I hear stories like his.

LC

[ValleyX]

I agree, it's hard to meet a happy railroader. Mostly a bunch of gossips, whiners, complainers, new guys don't understand what all the complaining is about and after awhile, they're complaining, too. I speak from experience.

Gone to the CN, heck of a move for a guy, they are making more money than most of us, if you're young and free, you can be a boomer, although I've known some guys who just had that urge to move. Do you suppose CN is tougher than NS now?

[Randy Stahl]

Read the article in progressive railroading for insight on how the CN achieves it's operating ratio. here at home another round of lay offs 17 carmen lost thier jobs yesterday. Pay special attention to the quotes by Sahmi Fami, It's cleat that the CN is doing the same things the other class ones have done, cut maintenence, cut people, cut everywhere. Afraid it will take train collisions, fatalities to fire some of these idiot managers. Then the CN can play catch up like the UP is doing , the bottom line is sombodys going to die and I hope to hell it ain't going to be me.
Randy

[Junctionfan]

I don't know why CN big shots think they are doing so well. Look how big CN territory is and they only operated 600 trains a day. The only reason why CN is making so much money is not by operation but from labour and infrastructure cut or in my opinion amputations. CN does not have enough crews to keep up with demand, they do not maintain their track properly at all. They have a really pathetic attitude toward their over worked blue collar workers and they still continue to cut. If they truely want to make money they must reinvest in operation and maintainance. Thease wooden ties I would replace with concrete because they more durable. Sell of thease crappy fuel sucking engines that are too old and replace them with more fuel efficient ones. Hire more crews and look for customers to make some of thease trains longer and more cost effective-CN 231 is a train that has 1 dash 9 and often no more than 20 cars-that is a waste of power. Get rid of the alstom lease power-it is cheaper in the long run to own your own power. Stop buying more railroads until all territory has been properly utilized and exploited to its fullest and only than should you expand. Do more advertising and have better competetive pricing. GO TO THE CUSTOMERS don't wait for them-essentially kiss butt with them and try to get them to at lease use intermodal if not a rail spur. E Hunter Harrison is not my idea of how CN can progress beyond what they are. He must be fired and replaced with somebody else who will be more responsible and a visionary. The CEO should act as the door-to-door salesman constantly looking for new customers and not stopping till he or she get them. When will the shareholder realise that their are more profitable routes than self mutilation?

[Grinandbearit]

CN is making money for sure but sooner or later it's going to catch up with them. It's being the lack of proper track maintenance. I live near the Toronto -Montreal corridor and it is really amazing how locomotives and cars bounce down the tracks.One section of mainline track I examined had about one good tie in ten. How most of them held a spike I really don't know. Ballast was poor with mud pumped up to the surface. But the most obvious was the weeds and grass growing between the rails in almost every place you look. Not a good situation at all.

[Randy Stahl]

In the progressive RR mag the CN is bragging that some of the buisness did not return after the CAW strike. One bit was the 20 mil per year road railer deal that ran between Montreal and Toronto. CN says they don't want that buisness. Too bad they don't have open access, I could use 20mil
Randy

[CliqueofOne]

H2 would have made millions more for the shareholders if he didn't pay the employees and for the employee benefits. Has anyone else noticed that HH didn't thank the employees for the work that they did to bring in this windfall? What an ignorant and arrogant windbag. I wish I had him on my gang sometime over these last 34 years. I'd make a real man out of him or he could stay a wimp. I'd make sure he'd have a very clear understanding of what it is to put in a 10+ hour day getting down and dirty. Signal Mechanic. Signal Construction. Signal Department. Canadian National Railways. [}:)]

[BentnoseWillie]

I don't think Frisco's carmen had it all that easy in 1964. That's where EHH started railroading.

Disagree with his policy all you want (I do too at times), but at least he worked his way up. Methinks railroading could use a few more executives that have done that, though ideally they'd also spend a little more money on sidings and build better labour relations.

[Junctionfan]

QUOTE: Originally posted by BentnoseWillie

I don't think Frisco's carmen had it all that easy in 1964. That's where EHH started railroading.

Disagree with his policy all you want (I do too at times), but at least he worked his way up. Methinks railroading could use a few more executives that have done that, though ideally they'd also spend a little more money on sidings and build better labour relations.

I agree, it is remarkable what a sucess he has made in his life but I can't help wondering at what cost. No one can get as high up usually without steping on someone or braking some moral code of ethics. He does not seem to be very empathetic to the working class sepite being one himself which strikes me odd a makes me think that he is on a secret agenda against the workers or it could be more simple like he is just not a very nice person. People who constantly cause friction like that especially in a strongly unionized workplace has know business working in a major corporation like that. They can not afford to mess around when they have very demanding shareholders. Harrison has been lucky on keeping his job but if he doesn't start acting more tactful and with a little more finess, I can't see the board of directors keeping him on. He already shot down their roadrailer business.

[Randy Stahl]

I'm not blaming E Hunter Harrison entirely, the rest of the upper CN management has serious problems. For example: Sahme Fahme was quoted as saying "You cannot compromise safety or FRA requirements, but things like 90-day inspections--maybe it's overkill,"Fahme says. Can you do 180 days?If so,it'd
increase our locomotive availability."
Eventually, strike-related process reviews should net even more significant productivity gains. The railroad could eliminate as many as 1200 jobs during the next year and a half, including 500 by year end. " We learned we didn't need as many people as we thought," says Harrison.

Randy

[Anonymous]

QUOTE: Originally posted by Randy Stahl

I'm not blaming E Hunter Harrison entirely, the rest of the upper CN management has serious problems. For example: Sahme Fahme was quoted as saying "You cannot compromise safety or FRA requirements, but things like 90-day inspections--maybe it's overkill,"Fahme says. Can you do 180 days?If so,it'd
increase our locomotive availability."
Eventually, strike-related process reviews should net even more significant productivity gains. The railroad could eliminate as many as 1200 jobs during the next year and a half, including 500 by year end. " We learned we didn't need as many people as we thought," says Harrison.

Randy

I havwe to agree this sort of math from top officials is pretty scary. It seems to me that many of the Canadian Railroads have historically been a couple of decades behind the U.S. roads in making some of the efficiency changes already seen here, due largely to differences in the regulatory climate.

Problem is that ideas generated by strikes showing how certain tasks may be done over relatively short periods of time by smaller numbers of employees may well not be sustainable over the long term. It will be interesting to see how the CN fares over the next few years as it absorbs all of it's recent acquisitions.

LC