NEW YORK -- Canadian National Railway is still on track to meet its 2003 financial goals even though the strong Canadian dollar has cut more than $50 million in revenues so far, CN's chief executive said yesterday. Hunter Harrison, who replaced Paul Tellier as chief executive of Canada's largest railway in January, said yesterday Montreal-based Canadian National is still comfortable with its financial outlook for 2003.
"We've gone through some challenges in 2002 that have continued in 2003," Harrison told an analyst conference in New York.
Those challenges include lower Canadian grain shipments, volatile fuel prices and a rising Canadian dollar.
"The one I was not anticipating, and I don't know that anybody anticipated to some degree, was the Canadian dollar and the exchange rate. That has totally taken us by surprise," Harrison said.
"But all that in, we're still comfortable with the guidance we have given for 2003. We've seen signs of pickup in the economy in the U.S."
In a presentation, Harrison indicated the railway expected earnings per share growth of as much as five per cent in 2003 and from 10 to 15 per cent in 2004 and 2005.
In April, Harrison said he expected no growth in the first half of 2003, but that there would be growth in the final six months of the year in all business segments except Canadian grain and coal.
But analysts surveyed by Thomson Financial/First Call estimate CN's earnings for fiscal 2003 will be about $5.02 Cdn a share, excluding unusual items, down from the comparable figure for the 2002 financial year of $5.22 a share.
A five per cent rise from CN's earnings in 2002 would add about 26 cents a share.
In the first quarter ended March 31, the rising loonie hurt the railway's revenues by about $50 million to $55 million, Harrison said, explaining that each one-cent increase in the Canadian dollar cuts four cents from annual per share earnings.
But he added, "I don't think we're going to see -- and this is a personal opinion, unqualified -- continuing strength of the Canadian dollar."
As a result of the rising value of the Canadian dollar, Morgan Stanley yesterday trimmed its 2003 earnings per share estimates for the railway by four per cent to $5.10 Cdn from $5.30 a share. It reduced its 2004 estimates to $6 from $6.25.
The brokerage also said in its report the seven cent US rise in the loonie so far in the second quarter will cut CN's quarterly earnings by seven cents Cdn a share.
The stronger dollar could also cut the growth of shipments of Canadian goods to export markets, Morgan Stanley said, trimming $100 million in chemical, forest product and industrial revenues from its 2004 expectations.
Morgan Stanley notes it didn't lower its estimates further because it believes the grain crop could be stronger than expected and because the lower U.S. dollar cuts some of CN's expenses.
