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Despite strong headwinds that included severe winter weather, a strong Canadian dollar vs. the U.S. dollar and high diesel prices, CN had “a lot to be proud of” in its first-quarter financial results, senior executives said yesterday during an earnings conference.

“It was a difficult environment to contend with in winter,” said President and Chief Executive Officer Claude Mongeau. “But we had good performance from an efficiency standpoint. We’re pleased with the growth across all commodity groups.”

CN’s first-quarter net income climbed 31 percent to $668 million and diluted earnings per share jumped 34 percent to $1.45 compared with first-quarter 2010 results (the Class I reported figures in Canadian dollars). The income and earnings included an after-tax gain of $254 million from a line sale to Metrolinx. Excluding the sale, adjusted earnings per share rose 12.5 percent to 90 cents.

In addition, CN’s revenue rose 6 percent to $2 billion, carloads increased 6 percent to 1.15 million units, operating income climbed 7 percent to $645 million and operating ratio improved 0.3 points to 69 on a year-over-year basis. The Class I also set a wintertime revenue ton-mile record at 46.1 million, up 5 percent vs. first-quarter 2010, said Executive Vice President and Chief Marketing Officer Jean-Jacques Ruest.

On an unadjusted basis, petroleum and chemicals revenue rose 7 percent to $342 million; metals and minerals revenue was flat at $209 million; forest products revenue increased 4 percent to $299 million; automotive revenue inched up 1 percent to $115 million; grain and fertilizers revenue climbed 9 percent to $406 million; and intermodal revenue jumped 12 percent to $392 million.

Intermodal business benefitted from supply-chain collaboration agreements, and continued strength in both import and export traffic, while bulk business primarily was driven by CN’s scheduled grain plan and high demand for thermal and metallurgical coal, said Ruest.

However, total operating expenses rose 6 percent to $1.4 billion primarily because fuel costs soared 29 percent to $327 million, said EVP and Chief Financial Officer Luc Jobin. Purchased services and materials costs rose 11 percent to $286 million and labor/fringe benefits costs inched up only 1 percent to $473 million, he said.

For the remainder of 2011, CN expects “solid mid-single-digit” traffic growth and pricing above inflation levels, said Jobin.

“CN anticipates strong demand from most business segments for the balance of the year,” said Mongeau.

— Jeff Stagl