(Reuters) - Canadian National Railway Co (TO:CNR) (N:CNI) on Tuesday cut its adjusted profit forecast for the year and said it expects the first half of 2020 to be "challenging" as freight demand in North America takes a hit from a weakening economy.
Chief Executive Officer Jean-Jacques Ruest said on a conference call with analysts that he expects things to get better in the second half of 2020.
"It's a crystal ball for next year, it's not clear yet," he added.
CN Rail now expects full-year adjusted earnings per share growth in the high single-digit percentage range compared with an earlier estimate of low double-digit range.
The company also expects slightly negative volume growth in 2019 in terms of revenue ton miles (RTMs) compared to its earlier estimates of mid single-digit volume growth. RTMs measures the relative weight and distance of freight transported by a railroad.
Revenue from the petroleum and chemicals segment, which also includes its crude-by-rail shipments, rose 18% to C$788 million with crude revenue up 34%.
However, the company cautioned that with the delay in government contracts and ramp up in crude shipments, it does not expect to see the same level of crude shipments in the fourth quarter compared to the year ago.
"We're going to be slightly down, I think, in crude-by-rail volume going Q3 and Q4 unless something changes," said a senior company executive James Cairns.
Canadian railroad operators, which had earlier reaped the benefits of oil producers looking for alternatives to ship booming production in the backdrop of pipeline congestion, have seen softer crude-by-rail volumes after Alberta's output cuts in addition to government contracts not ramping up as quickly as expected.
Alberta's government is trying to offload on to the private sector nearly C$4 billion ($3 billion) of crude-by-rail contracts that were signed by the former government, amounting to 120,000 barrels-per-day of crude.
However, the largest Canadian railroad operator, reported a better-than-expected profit for the third quarter due to higher freight rates.
Excluding one-time items, the railroad company earned C$1.66 per share, beating the average analyst estimate of C$1.62, according to IBES data from Refinitiv.
The company's net income rose 5.4% to C$1.20 billion, or C$1.66 per share, in the quarter ended Sept. 30.
Revenue from intermodal shipments rose 13% to C$1.02 billion ($778.92 million) in the third quarter, driving the total revenue up 4% to C$3.83 billion, which however missed estimates of C$3.87 billion.