MONTREAL -- Canadian National Railway Co. (TSX:CNR) expects a stronger second half of the year will allow Canada's largest railway to meet its yearly earnings target despite reporting an 11 per cent drop in quarterly profit.
Net earnings for the second quarter ended June 30 were $459 million, or 95 cents per share, compared with $1.01 per share last in the same period last year, when CN reported a profit of $516 million.
Included in the earnings were tax recoveries of five and six cents in each year. They were dragged down by soaring fuel costs and the appreciation of the Canadian dollar.
Revenues rose four per cent to $2.1 billion. Adjusted for currency changes, revenues increased by eight per cent.
The earnings came in above analysts' expectations, who had forecast second-quarter profit of 87 cents per share, according to Thomson Financial.
"From an operating standpoint we had outstanding performance," CEO E. Hunter Harrison said in a conference call.
CN's second-quarter income took a hit of $25 million, or five cents per diluted share, from the high loonie. The earnings also included deferred income tax recoveries of $23 million, compared to $30 million last year, as a result of continued reductions in corporate income tax rates in Canada.
"Despite of some of the head winds, I'm very, very encouraged about the second half of the year in spite of what appears to be a less than robust economy."
Volatility in fuel prices caused the railway's fuel expenses to soar by 60 per cent as there was a lag in the application of fuel surcharges. The railway paid US$124 per barrel of fuel compared to US$65 a year earlier.
-- The Canadian Press
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