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Canadian National Railway Company (CNI)
Q1 2019 Results Conference Call
April 29, 2019 04:30 PM ET
Paul Butcher - Vice President of Investor Relations
JJ Ruest - President and Chief Executive Officer
Mike Cory - Executive Vice President and Chief Operating Officer
Ghislain Houle - Executive Vice President and Chief Financial Officer
Keith Reardon - Senior Vice President of Consumer Products, Supply Chain
James Cairns - Senior Vice-President, Rail Centric Supply Chain
Conference Call Participants
Chris Wetherbee - Citigroup
Steve Hansen - Raymond James
Ravi Shanker - Morgan Stanley
Cherilyn Radbourne - TD Securities
Turan Quettawala - Scotiabank
Allison Landry - Credit Suisse
Benoit Poirier - Desjardins Capital
Ken Hoexter - Bank of America Merrill Lynch
Jason Sidon - Cowan Company
Fadi Chamoun - BMO
Scott Group - Wolfe Research
Justin Long - Stephens
Walter Spracklin - RBC Capital Markets
David Vernon - Bernstein
Seldon Clarke - Deutsche Bank
Brian Ossenbeck - JPMorgan
Brandon Oglenski - Barclays
Tom Wadewitz - UBS
Previous Statements by CNI
» Canadian National Railway Company (CNI) CEO JJ Ruest on Q4 2018 Results - Earnings Call Transcript
» Canadian National Railway Co. (CNI) CEO JJ Ruest on Q3 2018 Results - Earnings Call Transcript
» Canadian National Railway Co (CNI) CEO Jean-Jacques Ruest on Q2 2018 Results - Earnings Call Transcript
With me today is JJ Ruest, our President and Chief Executive Officer, Mike Cory, our Executive Vice President and Chief Operating Officer; and Ghislain Houle, our Executive Vice President and Chief Financial Officer. Also joining us on the call today for the Q&A session is Keith Reardon, our Senior Vice President of Consumer Products, Supply Chain and James Cairns, who was just recently appointed Senior Vice-President, Rail Centric Supply Chain.
Once again, I do want you to remind you to please limit yourself to one question, so that everyone has the opportunity to participate in the Q&A session. The IR team will be available after the call for any follow-up questions.
It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, JJ
Thank you, Paul and good afternoon everyone. And welcome to our earnings conference call. After a very, very cold bitter winter, we delivered good results and have a positive outlook to report. In the first quarter, we produced adjusted EPS growth of 17%, revenue growth of $350 million and the adjusted operating ratio was 67.2. Our volume and cost was impacted by extreme and prolonged cold weather down to minus 35, minus 40 degrees Celsius, which impacted train costs and restricted revenues on mile volume growth 3%.
Our CapEx and winter operating plans, which include our air railcars produced good results at temperature as low as minus 25 degrees Celsius, which we call the Tier 1 train restriction. But when temperature dropped to Tier 3 and Tier 4, which is up minus 35 Celsius minus 40# Fahrenheit for about seven weeks, we were losing significant train capacity and in some instance, we could not operate during part of the three or four nights.
In order to protect customer service and to manage the regulatory risk as we know them, we had decided to operate this winter with some additional resource in terms of locomotive, railcars and train crews. Given the extreme winter condition that we experienced that was the right decision.
As we do after every winter, we are now taking the opportunity to right size our asset base, including the return of leased locomotives and putting railcars into storage. In addition, we are also taking to account the current softness of crude by rail, following government imposed crude production cutback.
Now, a quick review of the top line for first quarter. We had our best ever first quarter at over $3.5 billion of revenue or $350 million of top line growth. During Q1, CN's carloads were up 1.5%, the best Class 1 performer. Intermodal revenue was up 4%, automotive revenue was up 7%, coal revenue grew by 15%, cranes and grain revenue was up 8%, CN cranes and grain export tonnage is now up 1.9 million metric ton ahead of the last year to-date crop. Our CN railroaders are already getting the job done for the grain industry. U.S. grain revenue was also up 14% in the quarter.
On crude, we move on average 250,000 barrel per day back in December, but demand took a nose dive in February to less than 100,000 barrel per day after deduction in production was imposed by the province of Alberta. But CN has the capacity to move more crude. It is a national priority to get our natural resource to market, so as to protect the country's economic GDP and create jobs. Our CN railroaders are ensuring that we have the infrastructure to move any and all natural resource to world market.
Looking to the balance of the year. We have a diverse pipeline of growth opportunities ahead of us. For example, short-term during Q2, the start up of the Coalspur Vista project, a coal mine -- a coal export mine in Alberta is to start up soon. We also have the startup of the AltaGas propane export terminal in Rupert and the introduction of the new container service by ZIM Line in Rupert. We also have immediate capacity to move more crude.
In April, we are running at 145,000 barrel per day but we do have the capacity to quickly ramp up to 300,000 barrel per day. Mid-term we have some other coal business, Alberta chemical business and automotive business coming our way. At the upcoming June Investor Day, we will give you an update on our growth opportunities for the next three years. In the meantime, we are reaffirming our guidance for the year.
With that, I will turn it over to my team for them to give you an update on the winter operations and the financial details. Over to you, Mike.
Thank you very much, JJ. And first as always and especially after the challenging weather conditions they tackle day-in and day-out, I want to sincerely thank all the railroaders of CN for their efforts. Now from my perspective, the operating challenges that they face were nothing short of some of the toughest that I've seen over my career. But their overall efforts allowed us to fight through and continue to provide service to our supply chain.