Canadian National Announces Fourth Quarter and Year-End Results

Railroad Running Well, Targeting ~10% EPS Growth in 2024

CN (TSX: CNR) (NYSE: CNI) today reported its financial and operating results for the fourth quarter and year ended December 31, 2023.

“Through 2023, our team of dedicated railroaders leveraged our scheduled operating model to deliver exceptional service for our customers and remained resilient in the face of numerous external challenges. Looking forward, we are optimistic as CN specific growth initiatives are producing volumes. While economic uncertainty persists, we have the momentum to deliver sustainable profitable growth in 2024.”

—Tracy Robinson, President and Chief Executive Officer, CN

Financial results highlights

Fourth-quarter 2023 compared to fourth-quarter 2022

• Revenues of C$4,471 million, a decrease of C$71 million or 2%.
• Operating income of C$1,818 million, a decrease of C$94 million, or 5%.
• Operating ratio, defined as operating expenses as a percentage of revenues, of 59.3%, an increase of 1.4-points.
• Net income of C$2,130 million, an increase of C$710 million, or 50% and adjusted net income of C$1,305 million, a decrease of C$115 million, or 8%. ⁽¹⁾
• Diluted EPS of C$3.29, an increase of 57% and adjusted diluted EPS of C$2.02, a decrease of 4%. ⁽¹⁾

Full-year 2023 compared to full-year 2022

• Revenues of C$16,828 million, a decrease of C$279 million or 2%.
• Operating income of C$6,597 million, a decrease of C$243 million, or 4%.
• Operating ratio of 60.8%, an increase of 0.8 points, or an increase of 0.9- points on an adjusted basis. ⁽¹⁾
• Net income of C$5,625 million, an increase of C$507 million, or 10% and adjusted net income of C$4,800 million, a decrease of C$334 million, or 7%. ⁽¹⁾
• Diluted EPS of C$8.53, an increase of 15% and adjusted diluted EPS of C$7.28, a decrease of 2%. ⁽¹⁾
• The Company generated free cash flow of C$3,887 million, a 9% decrease. ⁽¹⁾
• Return on invested capital (ROIC) of 16.8%, an increase of 1.0-point and adjusted ROIC of 14.5%, a decrease of 1.4-points. ⁽¹⁾

Operating performance

Fourth-quarter 2023 compared to fourth-quarter 2022

Operating performance improved across most measures in the fourth quarter of 2023 when compared to the same period in 2022.

• Injury frequency rate at a record low of 0.79 (per 200,000 person hours), an improvement of 14%. ⁽³⁾
• Accident rate of 1.51 (per million train miles), an improvement of 29%. ⁽³⁾
• Fuel efficiency of 0.874 (US gallons of locomotive fuel consumed per 1,000 gross ton miles (GTMs)), an improvement of 1%.
• Through dwell of 6.9 (entire railroad, hours), an improvement of 4%.
• Car velocity of 215 (car miles per day), an improvement of 4%.
• Through network train speed (mph) of 19.6 remained flat.
• Train length of 7,951 (in feet), an increase of 1%.
• Revenue ton miles (RTMs) of 61,136 (millions), an increase of 2%.

Full-year 2023 compared to full-year 2022

The Company’s continued focus on scheduled railroading in 2023, helped by more favorable winter operating conditions partly offset by operational disruptions related to Canadian wildfires and the Canadian West Coast dock workers strike, resulted in improvements in car velocity, train speed and through dwell when compared to 2022.

• Injury frequency rate at a record low of 0.96 (per 200,000 person hours), an improvement of 13%. ⁽³⁾
• Accident rate of 1.74 (per million train miles), an improvement of 17%. ⁽³⁾
• Through dwell of 7.0 (entire railroad, hours), an improvement of 8%.
• Car velocity of 213 (car miles per day), an improvement of 9%.
• Through network train speed of 19.8 (mph), an improvement of 5%.
• Fuel efficiency of 0.874 (US gallons of locomotive fuel consumed per 1,000 GTMs), less efficient by 1%.
• Train length of 7,891 (in feet), a decrease of 3%.
• Revenue ton miles (RTMs) of 232,614 (millions), a decrease of 1%.

2024 outlook and shareholder distributions

In 2024, CN expects to deliver diluted adjusted EPS growth of approximately 10% and expects to invest approximately C$3.5 billion in its capital program, net of amounts reimbursed by customers. The Company also expects return on invested capital (ROIC) to be within the targeted range of 15%-17%.

CN reiterates its longer-term financial perspective and continues to target compounded annual diluted EPS growth in the range of 10%-15% over the 2024-2026 period driven by growing volumes more than the economy, pricing above rail inflation and incrementally improving efficiency, all of which assumes a supportive economy.⁽²⁾

The Company’s Board of Directors approved a 7% increase to CN’s 2024 quarterly cash dividend, effective for the first quarter of 2024. This is the 28^th consecutive year of dividend increases, demonstrating our confidence in the long-term financial health of the Company. In addition, the Company’s Board of Directors also approved a new Normal course issuer bid (NCIB) that permits CN to purchase, for cancellation, over a 12-month period up to 32 million common shares, starting on February 1, 2024, and ending no later than January 31, 2025.

Fourth-quarter 2023 revenues, traffic volumes and expenses

Revenues for the quarter decreased by 2% to C$4,471 million, when compared to the same period in 2022. The decrease was mainly due to lower shipments of intermodal and grain as well as lower container storage fees and lower fuel surcharge revenues as a result of lower fuel prices; partly offset by freight rate increases and higher shipments of potash, natural gas liquids and refined petroleum products.

Operating expenses for the quarter increased by 1% to C$2,653 million, when compared to the same period in 2022. The increase was mainly due to higher Labor and fringe benefits expense mainly driven by general wage increases and higher average headcount and higher personal injury and legal claim provisions; partly offset by lower fuel prices.

Full-year 2023 revenues, traffic volumes and expenses

Revenues for 2023 decreased by 2% to C$16,828 million, when compared to 2022. The decrease in revenues was mainly attributable to lower shipments of intermodal, crude oil, U.S. grain and forest products as well as lower container storage fees and lower fuel surcharge revenues as a result of lower fuel prices; partly offset by freight rate increases, higher Canadian grain export shipments and higher shipments of potash and the positive translation impact of a weaker Canadian dollar.

Operating expenses were C$10,231 million. Operating expenses remained flat mainly due to lower fuel prices; offset by the negative translation impact of a weaker Canadian dollar and higher labor and fringe benefits expense mainly driven by general wage increases and higher average headcount.

2024 key assumptions

CN has made a number of economic and market assumptions in preparing its 2024 outlook. The Company assumes slightly positive North American industrial production in 2024. For the 2023/2024 crop year, the grain crop in Canada was below its three-year average (also below when excluding the significantly lower 2021/2022 crop year) and the U.S. grain crop was above its three-year average. The Company assumes that the 2024/2025 grain crop in Canada will be in line with its three-year average (excluding the significantly lower 2021/2022 crop year) and the U.S. grain crop will also be in line with its three-year average. CN assumes RTM growth in mid-single digit range. CN assumes continued pricing above rail inflation upon contract renewals. CN also assumes that in 2024, the value of the Canadian dollar in U.S. currency will be approximately $0.75, and assumes that in 2024 the average price of crude oil (West Texas Intermediate) will be approximately in the US$70 – US$80 range per barrel.

2024-2026 key assumptions

CN has made a number of economic and market assumptions in preparing its three-year financial perspective. CN assumes North American industrial production growth of at least two percent CAGR for 2024-2026. CN assumes continued pricing above rail inflation. CN assumes that the value of the Canadian dollar in U.S. currency will be approximately $0.75 and that the average price of crude oil (West Texas Intermediate) will be approximately US$80 per barrel during this period.

For the complete press release, click here.

About Canadian National

CN is a world-class transportation leader and trade-enabler. Essential to the economy, to the customers, and to the communities it serves, CN safely transports more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year. CN’s network connects Canada’s Eastern and Western coasts with the U.S. South through an 18,800 mile rail network. CN and its affiliates have been contributing to community prosperity and sustainable trade since 1919. CN is committed to programs supporting social responsibility and environmental stewardship.

Contact:

Jonathan Abecassis – Director, Public Affairs and Media Relations – media@cn.ca – (438) 455-3692

Source: Canadian National Railway Company