JS Earnings Call Notes – Canadian National Railway (CNI)

Canadian National Railway (CNI) Chief Operating Officer Jim Vena said they were able to wring out more productivity out of their employees

“Our gross ton miles per crew hour worked increased by 3%. Therefore, each train handled more freight, moved faster, and our employees were more efficient in getting them from origin to destination. So a great job by the team on moving the trains.”
Canadian National Railway (CNI) Chief Operating Officer Jim Vena also highlighted his team’s cost efficiency 
“Our engineering and mechanical departments both delivered results in line with the overall results on a productivity and cost efficiency basis which helped us deliver a car velocity improvement of over 16% in the quarter and in the year of 13%.”
Their business tied to oil & energy fell off of a cliff
The crude market caused a 32% drop in crude by rail carloads and a drop of 43% in frac sand for drilling. And steel is suffering the cutback of the energy sector capital program. This same segment would be a major headwind for this year.”
Yet they have continued to increase prices in excess of inflation
We continue to produce pricing above inflation which, at this point, we would define as 3% inclusive of the impact of the negative Canadian grain cap. We are in position to support those shippers for whom the weak Canadian dollars has become a cost advantage like the manufacturers, like the service industry that are selling into the U.S. market, for example the forest product industry and the Canadian port terminal industry.”
The company also benefitted from lower fuel cost
The fuel expense stood CAD 304 million or 42% lower than last year. Fuel price was 38% lower versus last year, while volume reduction accounted for CAD 19 million betterment, as fuel productivity came in 2% better.”
They have the lowest exposure to hauling coal of any of the North American Class 1 railroads
Coal was in retreat. And in 2016, that will continue. Coal was only 4.5% of our fourth quarter of total revenue, the lowest of any railroad.  We have a very low exposure to coal, while our network allows us to serve key U.S. consumer projects. This, along with a stronger U.S. currency, provides us with a natural hedge that helps to mitigate the weak commodity environment.
Canadian National Railway (CNI) Chief CEO Claude Mongeau wants his company and his director competitor, Canadian Pacific Railway, to remain disciplined on pricing their services rather than chasing volume
It’s quite remarkable you have CN that is leading the industry, achieving new records in terms of efficiency. You have CP which, over the last four years, has done a remarkable turnaround and is in every core respect in terms of operating metric, is getting very close to our level of efficiency. There’s something to be proud here. We have two Canadian railway road really leading the way in terms of performance.  I hope that going forward, we will protect that profitability and use it to generate a capacity to invest in our networks and to grow the business, grow it through innovation and not chase volume for the purpose of chasing volume. It’s precious that we are able to achieve the efficiency level, and it’s incumbent on us to manage for the long term.”