(Montreal) Faced with the threat of a workers’ strike, the Canadian National Railway Company (CN) lowered its profit growth forecasts on Tuesday.
The Montreal-based company, which earned $1.11 billion in the second quarter, said it was seeing international customers move shipments away from Canadian ports amid ongoing uncertainty over labour relations.
CN is awaiting a decision from the Canada Industrial Relations Board (CIRB) on whether certain shipments would be considered essential services in the event of a strike by the Teamsters Canada Rail Conference, the union that represents the company’s engineers and conductors.
Although no strike or lockout can take place until at least 72 hours after that decision is made — a decision the company expects around Aug. 9 — the situation casts a cloud over CN’s operations.
“The protracted nature of this process, which prior to the CIRB referral was expected to conclude in May, is impacting our customers and our business, particularly in the international intermodal space, where customers have taken steps to redirect vessels from Canadian ports until the labour issue is resolved,” President and CEO Tracy Robinson said Tuesday during a conference call with analysts.
Mme Robinson said the company’s second quarter was “tough.” She added that CN’s volumes were well above expectations until May, when contract negotiations between Canada’s largest railway and the union stalled.
“From the end of May, we saw a sharp reduction in our international volumes, mainly due to fears of a labor dispute,” explained Mr.me Robinson.
“This is U.S.-bound volume that has shifted to U.S. ports. So we have lighter volumes than expected in the third quarter.”
In June, Teamsters rejected an offer from CN to enter binding arbitration, a development that increased the risk of a strike. Seamus O’Regan, then Minister of Labour, who recently announced his resignation from cabinet, asked the CIRB to look into whether some shipments would continue to serve as essential services in the event of a strike or lockout.
CN said Tuesday it does not expect the situation to escalate into a full-blown strike or lockout, and its revised forecast assumes current traffic diversions will not increase.
However, the company said it was lowering its adjusted earnings per share growth forecast for the year from a previous forecast that called for earnings per share growth of about 10%.
Mme Robinson said CN expects to have more certainty on the labour front after the CIRB makes its decision. She added that the company’s position on a collective agreement with its engineers and conductors has not changed in recent months – it is still looking to create a structure around work scheduling that would improve worker availability in light of new federal rules regarding mandatory work/rest rules for critical rail employees.
Teamsters said CN is trying to increase the availability of its train crews to compensate for labour shortages. The union said the railway’s proposal would force workers to travel across the country for months at a time to fill labour shortages in remote areas of Canada.
CN said Tuesday that its net profit for the quarter was 5% lower than the $1.17 billion in the same quarter of 2023.
On an adjusted basis, the company said it earned $1.17 billion in the second quarter of 2024, or $1.84 per share, compared with $1.76 per share in the year-ago quarter.
The railroad reported revenue of $4.33 billion, a 7 percent increase year-over-year.
Its operating ratio, a key measure of rail efficiency where fewer is better, rose from 60.6% to 64% year over year.
CN’s stock price fell $2.59, or 1.54%, to close at $165.35 on Tuesday.