On the wires: MBO target Clipper shines – enough for a big premium?
“The group continues to see impressive revenue and ebit performance in the first six months ...
There were mixed fortunes for North American railroads in the first half, those north of the US border faring better in a hostile market than their southern neighbours.
First-half revenues for Canadian National showed substantial intermodal gains, and chief executive JJ Ruest noted the role of TransX’s integration in this success.
“We continue to work on cross-polymerisation opportunities between CN and TransX,” he told investors.
“These efforts are also translating into new business, such as a deal to handle all the domestic intermodal business of major retailer Hudson Bay Company.
“We are also progressing with opportunities in new markets, such as west coast transload and the intermodal terminal in Regina opening in September.”
Six-month turnover for the carrier hit US$1.3bn (up 10%) with Q2 revenue climbing 15% to $755m, despite volumes remaining flat at 1.2m teu and 663,000 teu, respectively.
Senior vice president for consumer products and supply chain Keith Richardson said agreements with Hutchison and PSA to grow intermodal volumes had helped.
“We’re very excited to have teamed up with Hutchison Ports to build a container terminal in Quebec, connected to destinations across our networks,” Mr Richardson told investors. “While this is still a few years out, we are committed to continue to grow in the international intermodal segment.
“We are also looking forward to working with PSA, the new owner of Halterm terminal in Halifax, and developing that long-term relationship to attract more business to the port.”
Earlier this month The Loadstar reported that while CSX had found itself caught up in the current intermodal difficulties, Canadian Pacific had posted better first-half results.
These seemed to confirm a trend, with Canadian National’s growth also showing marked contrast to the fortunes of US railroads such as Kansas City Southern and Union Pacific (UP).
Executive VP for marketing and sales at UP Kenny Rocker told investors “uncertainty in trade and the economy could create a tough fourth quarter”.
CN H1 revenue remained flat on last year at $3.2bn, with second-quarter revenue down 2% to 1.6bn, with Mr Rocker expecting the decline to continue.
“Domestic intermodal volume is expected to be impacted by truck competition in the second half of 2019,” he said. “This may limit opportunities for over-the-road truck conversions, but longer-term fundamentals still provide a bullish outlook for over-the-road conversions.”
The situation looked even gloomier at Kansas City Southern, which recorded a 7% decline in first-half revenue to $172.5m, while volumes slumped 8%, to 465,500 teu.
But chief marketing officer Mike Naatz remained bullish, noting signs of positivity in the figures.
“We continue to see strong growth in our cross-border intermodal business, with a 10% increase in volume and a 7% increase in revenue,” he told investors. “This was offset by decreases in domestic traffic due to truck availability, and the Lazaro volumes and revenues were up 2% and 4%, respectively.”
Certainly, second-quarter numbers looked better, with revenue down just 1%, to $92.6m, while volumes dropped 3% to 244,600 teu.