CN Rail CFO warns of ‘softening’ economy, with consequences for railways


LAGUNA BEACH, Calif. – A Canadian National Railway Co. executive says a “softening” economy is contributing to weaker freight volumes, despite record revenues last quarter.

Chief financial officer Ghislain Houle says traffic in the third quarter, which ends Sept. 30, is looking “flattish” compared to the same period last year.

Houle, speaking Wednesday at a transportation conference in Laguna Beach, Calif., says that an earlier outlook of high single-digit growth in revenue ton miles — a key industry metric — for the year is “probably not in the cards” anymore.

He says weaker volumes of wheat, coal and lumber are partly to blame for CN’s more sluggish pace as a cold, wet spring hampered growing conditions, low natural gas prices weakened demand for coal-generated electrical power and the mountain pine beetle continued to exacerbate B.C.’s forestry sector downturn.

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A CN locomotive moves in the railway yard in Dartmouth, N.S. on Monday, Feb. 23, 2015. The head of Canadian National Railway Co.'s finances says a "softening" economy is contributing to weaker volumes, despite record revenues last quarter. THE CANADIAN PRESS/Andrew Vaughan

A CN locomotive moves in the railway yard in Dartmouth, N.S. on Monday, Feb. 23, 2015. The head of Canadian National Railway Co.’s finances says a “softening” economy is contributing to weaker volumes, despite record revenues last quarter. THE CANADIAN PRESS/Andrew Vaughan

LAGUNA BEACH, Calif. – A Canadian National Railway Co. executive says a “softening” economy is contributing to weaker freight volumes, despite record revenues last quarter.

Chief financial officer Ghislain Houle says traffic in the third quarter, which ends Sept. 30, is looking “flattish” compared to the same period last year.

Houle, speaking Wednesday at a transportation conference in Laguna Beach, Calif., says that an earlier outlook of high single-digit growth in revenue ton miles — a key industry metric — for the year is “probably not in the cards” anymore.

He says weaker volumes of wheat, coal and lumber are partly to blame for CN’s more sluggish pace as a cold, wet spring hampered growing conditions, low natural gas prices weakened demand for coal-generated electrical power and the mountain pine beetle continued to exacerbate B.C.’s forestry sector downturn.

Houle stressed medium- and long-term growth potential at CN Rail, pointing to the Port of Prince Rupert, where container volume grew about 40 per cent to 26.7 million tonnes over the last two years as it upgrades container and bulk terminals for increased capacity.

He also says the Port of Halifax’s Halterm container terminal — snapped up last month by Singapore-based port giant PSA International Pte Ltd. — is operating at one-fifth of its capacity, leaving room for growth.

Companies in this story: (TSX:CN)