(Adds forecasts, adjusted results)
TORONTO, July 25 (Reuters) - Canadian National Railway Co CNR.TO reported slightly lower second quarter earnings on Monday as a decline in shipments cut into revenue, but said it expects volumes to improve in the months ahead.
Chief Executive Luc Jobin said the railway faced a "very challenging volume environment" in the quarter, but sees business improving in the second half.
"We expect the second quarter to be the volume trough for the year," he said in a statement, noting that the railway expects a big grain harvest in Canada.
Montreal-based CN Rail confirmed its forecast for full-year earnings per share in line with last year's C$4.44 a share.
Net income fell to C$858 million ($649.07 million), or C$1.10 a share, from C$886 million, or C$1.10 a share, a year earlier.
Revenue fell 9 percent to C$2.84 billion, as carloads fell 12 percent to 1.25 million.
Excluding the impact of deferred income tax adjustments, adjusted earnings fell to C$1.11 a share from C$1.15 a share.
Analysts, on average, had been expecting earnings of C$1.06 a share on revenue of C$2.91 billion, according to Thomson Reuters I/B/E/S.
The railway's operating ratio, a key measure of efficiency, improved to 54.5 percent from 56.4 percent a year earlier.
($1 = 1.3219 Canadian)