CN today announced the details of its strategic and financial value creation plan, which the Class I said is designed to allow the company to continue delivering high-quality service to customers while generating profitable growth and enhanced returns to shareholders.
The plan builds on CN’s January 2021 strategic plan to lead on safety, customer value, operational excellence, sustainability and social inclusion, while also delivering industry-leading shareholder returns, CN officials said in a press release.
The plan's details are being announced days after the termination of CN's proposed merger with Kansas City Southern.
CN has conducted an extensive review of all revenue and cost levers and has targeted CA$700 million of operating income improvements to drive future growth. To achieve these improvements in 2022, CN intends to use a balanced approach that includes a strategic review of non-rail businesses and an optimization of labor productivity, company officials said.
For 2022, CN expects to grow operating income and earnings per share (EPS) by approximately 20% and improve its operating ratio to 57%. Additionally, CN is reviewing its capital structure and financial leverage with a view to increasing total shareholder distributions.
"Just as CN pioneered the industry’s focus on efficiency to increase reliability, we are now well-positioned to lead the industry through its next transformation by investing in the success of our customers, workforce and communities while delivering enhanced financial results," said CN President and Chief Executive Officer JJ Ruest.
CN officials said their plan calls for:
• Resuming share repurchases. CN will restart share repurchases under the plan previously approved by CN’s Board of Directors in January 2021 and expects to complete the remaining CA$1.1 billion of share repurchases by the end of January 2022.
• Increasing shareholder returns. CN is reviewing capital structure and financial leverage with a view to increase total shareholder distributions, including share repurchases in the range of CA$5 billion for 2022.
• Reducing capital expenditures. CN expects to reduce capex to 17% of revenue in 2022 as a result of the current good condition of its network and the company’s commitment to safety and customer service. CN expects to maintain capex at 17% of revenue for 2023-24 unless there are significant market shifts.
• Producing compelling financial returns. CN is committed to driving top-quartile total shareholder return, leading the industry in organic revenue growth driven by CN’s intermodal business and showing continuous improvement on its operating margin.
• Lowering its operating ratio. CN is targeting an operating ratio of 57% for 2022.
Source: Progressive Railroading Daily News
