CN Rail CEO says crude by rail may help earnings in early 2020

MONTREAL (Reuters) - Canadian National Railway Co's CNR.TO chief executive on Wednesday said crude-by-rail shipments may help earnings during the first three months of 2020, despite softer market conditions overall.

FILE PHOTO: A Canadian National Railway train travels eastward on a track in Montreal, February 22, 2015.. REUTERS/Christinne Muschi/File Photo

CN, Canada’s largest railroad, is ramping up its service following a crippling eight-day strike that ended last week, as it cuts jobs in response to softer economic conditions and less demand for freight services.

“This year, crude by rail still hasn’t got its traction, which it may early year,” CN CEO JJ Ruest said at the Credit Suisse Industrials Conference.

Crude by rail may actually affect “our first quarter positively,” he added, given a possible rise in production next year.

Alberta Premier Jason Kenney has said he may allow more oil production next year, but pipelines are congested, leaving rail as the main transport alternative.

“We have the capacity, especially out west,” said Ruest, adding the railroad would also be able to move higher grain shipments.

Canada relies on CN and its smaller rival Canadian Pacific Railway CP.TO to move products such as crops, oil, potash, coal and manufactured goods to domestic ports and the United States.

The chief executive of CP, which did not suffer a strike, told analysts at the same conference that crude by rail increased during the fourth quarter.

“We’re going to exit the fourth quarter with our highest ever crude-by-rail month with fundamentals that just strengthened that in 2020,” said CP CEO Keith Creel.

CN’s Ruest said it had not lost business permanently because of the work stoppage, the biggest Canadian rail strike in a decade, but some business had to find its way to customers through other modes of transport.

On Tuesday, CN cut its adjusted profit growth target for 2019, citing shipment delays from the eight-day strike. [L4N28D2UJ]

“It’s an expensive strike,” Ruest said.

The strike saw about 3,200 conductors and yard workers hit picket lines demanding improved working conditions and rest breaks. Union members must still vote on the deal.

Reporting By Allison Lampert in Montreal. Additional reporting by Rod Nickel in Winnipeg and Dominic Roshan K.L. in Bengaluru; Editing by Chizu Nomiyama and Steve Orlofsky