CN Rail network beginning to recover in March from weak winter, says interim CEO

A Canadian National locomotive is seen Monday, February 23, 2015 in Montreal. (Ryan Remiorz / The Canadian Press)

MONTREAL -- Canadian National Railway Co. is beginning to recover from a turbulent end to 2017 and deep winter freeze that curtailed its service, the railroad's interim CEO said Wednesday.

Jean-Jacques Ruest told an investor conference Wednesday that February was among the worst months in the company's history as volume decreased and costs rose.

But train speeds have picked up and the railway is moving more freight which will help customer service and satisfaction, he said.

"So all these things are saying that the month of March is slightly better," he told the J.P. Morgan Aviation, Transportation & Industrials Conference in New York.

"It will not be enough to cover the month of January and February. But we're heading in that direction."

The Montreal-based railway hasn't changed its guidance for the year because Ruest says there is still time to catch up.

The company has apologized for failing to keep grain shipments moving reliably by rail, and said it's mobilizing more train cars and workers to clear the backlog.

CN Rail announced Wednesday that it plans to manage congestion in Western Canada by temporarily restricting the flow of rail cars to gain fluidity and speed, particularly between Edmonton and Winnipeg.

That includes controlling the flow of empty rail cars into Western Canada, managing flow for frac sand orders to avoid further congestion and returning empty propane cars from short-term staging locations.

Ruest said extreme winter weather starting in December isn't alone to blame.

He said CN Rail entered the challenging winter season a spent force after experiencing 14 per cent revenue ton mile growth in the first nine months of 2017.

"We entered the fourth quarter without really any gasoline left in the tank. So the last two months of the year we were sort of flat. And we've been flat since then."

Ruest said he expects the transportation sector, including trucking, will face capacity pressure from increased volume growth.

CN Rail is spending an extra $500 million this year, half of which will be used to upgrade its network and increase transit times between Chicago and the Canadian west coast.

The work to add more sidings and double tracks in spots will start in April and be completed by November.

It has ordered new locomotives and will have an extra 130 leased units within weeks.

It is also hiring 2,000 workers, including hundreds of conductors.

Ruest said that by the fourth quarter, CN should be back to where it was 12 to 18 months ago.

Ruest was appointed earlier this month to take over from Luc Jobin, who was dismissed after about two years as CEO.

The 23-year veteran CN Rail executive said the company's board plans to take its time conducting a global search from within the rail industry and manufacturing world to lead the country's largest railway.

"The search will be very wide and the board is not putting themselves on any clock," he told analysts.