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CN posted "solid performance" in fourth-quarter 2010, capping off a "very strong performance" for the year, President and Chief Executive Officer Claude Mongeau said during Tuesday’s earnings webcast and teleconference.

CN’s net income fell 13.6 percent to $504.3 million compared with $584 million in fourth-quarter 2009; however, net income rose 19 percent after factoring in a rail-line sale and a deferred income-tax recovery.  

Earnings per diluted share were $1.08, up 20 percent compared with 90 cents per diluted share during the same period a year earlier.

Operating income increased 18.5 percent to $777 million; revenue jumped 12 percent to $2.1 billion; and the operating ratio improved to 63.4 compared with 65.3 during fourth-quarter 2009.

CN recorded revenue growth in all commodity groups for the quarter. Coal, driven in part by strong Asian demand, was up 22 percent; intermodal, 17 percent; grain and fertilizers, 13 percent; metals and minerals, 13 percent; petroleum and chemicals, 10 percent; automotive, 10 percent; and forest products, 8 percent. Carloads and revenue ton-miles increased 10.5 percent to 1.2 million.

For 2010, CN posted net income of $1.98 billion, or $4.22 per diluted share, compared with $1.54 billion, or $3.25 per diluted share, in 2009. Revenue rose 13 percent to $8.3 billion, compared with $7.4 billion a year earlier. Carloads and revenue ton-miles soared to 4.7 million units, up 18 percent from 3.99 million units in 2009.

In addition, free cash flow increased to $1.13 billion from $793 million in 2009.

In terms of operating expenses, CN’s quarterly costs rose 12 percent to $1.35 billion. Fuel costs rose 24 percent, while labor and fringe benefit expenses increased by 2 percent.

For the full year, costs climbed 6 percent to $5.3 billion, mainly due to higher fuel costs, increased labor and fringe benefits, and higher depreciation and amortization expenses. Those factors were offset partly by a stronger Canadian dollar vs. the U.S. dollar, Elgin Joliet & Eastern Railway Co. (EJ&E) acquisition-related expenses recorded in 2009, and lower equipment rents, CN officials said in a prepared statement.

For the full year, CN's operating ratio was 63.6, compared with an adjusted operating ratio — excluding the EJ&E acquisition-related costs — of 66.7 in 2009, a 3.1 point improvement.

Looking ahead, CN believes "the North American economy will continue to recover, but at a slower pace than in 2010," Mongeau said.

CN officials believe North American industrial production will increase by 4 percent, U.S. housing starts to be 675,000 units and U.S. motor vehicle sales to be 13 million units for the year. They’re also assuming there will be a weaker grain crop. With those assumptions, CN is projecting carload growth in the mid-single digit range.

The Class I also intends to invest $1.7 billion in capital programs, including $1 billion on track infrastructure improvements, as well as other projects to support the company’s productivity and growth initiatives. Projects include a $100 million Calgary Logistics Park and intermodal terminal, and $100 million to enhance connections of the EJ&E.

— Julie Sneider