‘We’re not panicking’: Pipeline blockades not clogging finances: CN
Canadian National Railway executives downplayed the effect the ongoing rail blockades will have on its annual financial results at an investor conference on Wednesday, even as it sent temporary layoff notices to 450 employees in Eastern Canada.
CN is maintaining its annual guidance that both volumes shipped and profit will grow in 2020, chief financial officer and executive vice-president Ghislain Houle said at a Barclays Investment Bank event in Miami.
“We still remain cautiously optimistic,” Houle said. “Yes, there’s a little bit more noise in the first quarter than what we’re used to, but again it’s only a month and a half.”
The blockades started on Feb. 6 in protest of the Coastal Gaslink natural gas pipeline slated for construction in B.C. through Wet’suwet’en territory, where hereditary chiefs dispute the pipeline route and consultation process.
Other blockades were erected in support at various locations across Canada. The blockade on CN’S mainline east of Belleville, Ont., near Tyendinaga Mohawk territory has cut off east-west shipments on the network.
In response, CN cancelled 400 trains over the past week and is progressively shutting down its Eastern Canadian operations. On Tuesday, it issued layoff notices to operational employees in Eastern Passage, Moncton, Charny and Montreal.
“This has nothing to do by the way with CN, we’re a bit taken hostage, we’re a bit victim out of this,” Houle told analysts, adding CN is co-operating with the government as the feds negotiate with First Nations to resolve the issue. “We’re very hopeful that this blockage on our eastern network will be lifted anytime soon, in the next day or two.”
The blockade on CN’S mainline to the port in Prince Rupert, B.C., has already been lifted, allowing CN to recover its western franchise and route to Chicago, the two segments where it moves most of
its volume, Houle said.
“Our eastern franchise is actually underutilized,” he said. “I don’t want to undermine the impact of the blockades that are on our eastern network, and we’re hoping it’s going to be resolved, but at this point we’re not panicking.”
Even with the blockade out west, Prince Rupert’s revenue per volume of freight shipped has increased 29 per cent year-to-date, Houle said.
Helping the recovery in Western Canada was a federal government reversal of its Feb. 6 order forcing all trains carrying dangerous goods to cut their speeds in half following a derailment.
On Sunday, Transport Minister Marc Garneau amended the order to allow trains to speed up to 40 miles per hour across the network and 35 mph in metropolitan areas. This is still shy of full speed of 50 mph and 40 mph respectively, but up from 25 mph and 20 mph in the first order.
“That will allow us to get our network back to fluid in Western Canada,” Houle said. “That’s going to be very helpful.”
CN shares have fallen less than two per cent since the blockade began. CP Rail shares are up less than one per cent during that time.
While CN struck an optimistic tone, businesses across the country remained concerned about halted movement of goods and commodities.
The Canadian Federation of Independent Business, which represents 110,000 small and medium businesses, is urging the federal government to work with the provinces and law enforcement agencies to immediately restore rail service.
Small businesses are facing steep costs if the rail stoppage continues, CFIB said in an open letter to Prime Minister Justin Trudeau. As examples, the CFIB cited a flag maker in Quebec that receives raw materials from Taiwan and stands to lose $100,000 if its shipment doesn’t arrive, thus preventing it from fulfilling a contract. In Alberta, the CFIB pointed to one member that can only last 30 days without steel shipments before it has to layoff 400 employees.
“Canada’s reputation as a dependable place to do business is at stake if a speedy resolution is not reached,” the CFIB stated.