CN announces Ruest's retirement, Q3 financial results

CN yesterday announced Jean-Jacques "JJ" Ruest will retire as president and CEO and as a board member at the end of January 2022 or a later time when a successor is appointed.

Ruest has been with CN for over 25 years and served as CEO since 2018.

"JJ deferred discussions on his retirement plans in order to see the company through the potential merger with [Kansas City Southern] and closing of the transaction, and the introduction of the strategic plan announced on Sept. 17, 2021, which is beginning to demonstrate results," said Chairman Robert Pace in a press release. "We are grateful for his leadership and his exemplary commitment of service to the Company and wish him the all the best in his upcoming retirement."

The board has appointed a committee to conduct a global search for the next CEO.

"I have been honored to lead CN during my time as chief executive officer, and I am confident that the company is well positioned to continue to thrive following my retirement," Ruest said. "The strength of the company’s management team and Board allow me to announce my planned retirement knowing that the Company we have built will continue to prosper."

Ruest's retirement announcement follows a dispute with TCI Fund Management Ltd., one of CN's largest shareholders, which last month launched a proxy fight to replace Ruest and some board members over the failed attempt to acquire KCS. On Monday, TCI issued its own strategic plan for CN. The plan includes more information about its proposed board nominees Gilbert Lamphere, Allison Landry, Rob Knight and Paul Miller, as well as CEO candidate Jim Vena.

Yesterday, TCI Founder and Portfolio Manager Chris Hohn said in a prepared that Ruest's announcement is a "good start, but it does not address the fundamental problem of a lack of leadership, failed strategic oversight and the vacuum of operational expertise at the board level."

Hohn also called on CN's board to meet with Vena "immediately to secure his leadership."

Meanwhile, CN yesterday released its third-quarter results, which included revenue of CA$3.6 billion, up 5% from the same period a year ago; operating income of CA$1.34 billion, up 2%; adjusted operating income of CA$1.5 billion, up 8%; diluted earnings per share of CA$2.37, up 72%; and adjusted diluted earnings per share of CA$152, up 10%.

The Class I posted an operating ratio of 62.7%, an increase of 2.8 points, and adjusted operating raito of 59%, an improvement of 0.9 points.

Operating income and operating ratio were impacted by transaction-related costs for the terminated CN merger agreement with KCS, a workforce reduction provision, and advisory fees related to shareholder matters, company officials said in a press release.

"CN's dedicated railroaders produced strong financial and operating results this quarter, despite headwinds from severe wildfires in Western Canada that caused a prolonged disruption to CN’s main line to Vancouver in July," said Ruest.

"Our entire organization is highly confident that the investments we have made in safety, technology and capacity over the past three years will support the company in delivering enhanced financial results in the last quarter of this year, as well as in 2022 and beyond," Ruest added. "Similarly, we believe that we are well positioned to achieve our targets of CA$700 million of additional operating income and a 57% operating ratio for 2022."