Canadian National Railway Co. (CNR) predicted that most of the country’s grain backlog will be cleared by month’s end, easing the shipping tie-ups that sparked farmers’ complaints and spurred federal legislation.
“Our Canadian grain supply chain is fully back in sync,” Chief Executive Officer Claude Mongeau told analysts yesterday on a conference call. “We only have about one week of orders outstanding. All the ship lineups at the waterfront ports are at normal levels.”
Soaring grain cargoes helped Canadian National post a second-quarter profit that beat analysts’ estimates and led the carrier to boost 2014 profit and cash-flow targets. Grain hopper-car movements from Western Canada will probably set a record this year and exceed average annual totals by about 25 percent, the Montreal-based company said.
As much as C$20 billion ($18.6 billion) of crops was stuck on the prairies as railroads failed to meet demand, prompting regulators to order carriers to boost shipments or face daily penalties of as much as C$100,000. Agriculture Minister Gerry Ritz and Transport Minister Lisa Raitt introduced legislation in March to let the government set minimum shipment levels.
Canadian National still has “this Canadian grain thing to digest, up to Aug. 1, and there are some lingering effects in August,” Chief Marketing Officer Jean-Jacques Ruest said on the call.
Grain and fertilizer revenue soared 35 percent to C$526 million in the three months ended June 30, Canadian National said. Carloads jumped 29 percent in the period.
“We don’t have a week of outstanding orders” for railcars, Mongeau said. “We are meeting all the demand, and there should be room to store the grain when it’s harvested.”
While rail service has improved, many producers still have a lot of grain in storage, said Norm Hall, president of the Regina-based Agricultural Producers Association of Saskatchewan. Farmers in western Saskatchewan and Alberta are buying extra storage bins before the 2014 harvest because of the potential for good yields, he said.
“I’m not sure if they’re caught up yet, but there’s pretty steady movement going on,” he said in a telephone interview. “There’s still going to be a lot of grain left in the bins.”
A spokesman for the Winnipeg-based Western Grain Elevator Association, which represents grain-handlers including Glencore Xstrata Plc (GLEN)’s Viterra unit and Richardson International Ltd., wasn’t available for comment.
Canadian farmers harvested record wheat and canola crops in 2013, and supplies overwhelmed the country’s rail system and made sales almost impossible.
Mongeau said Canadian National’s grain business “should have another strong year” in 2014. About 18 million tons of grain will need to be shipped after the current crop year ends July 31, which is still 6 million tons more than the average amount, Mongeau said.
“Add to this the new crop and the need to move it and we should be moving record volumes of grain well into the spring and even summer of next year,” Mongeau said.
Canadian National said it expects to deliver a “solid double-digit” percentage increase in earnings per share from last year’s C$3.06. The railroad had earlier said it was “aiming for” earnings growth of at least 10 percent. Analysts project profit on that basis of C$3.55 a share, based on the average of 27 estimates compiled by Bloomberg.
(Source – http://www.blackseagrain.net/novosti/canadian-national-sees-effects-waning-from-grain-backlog)