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9/5/2002



Rail News: Rail Industry Trends

CN, CSX issue investor caveats on yearly, quarterly earnings


Lower bulk-commodity revenue — especially from drought-plagued western Canadian grain — will hold down Canadian National Railway Co.'s year-over-year earnings at the low end of a previously announced 5 percent to 10 percent growth range come Dec. 31, the railroad announced Sept. 4.


"Although CN's merchandise and intermodal businesses remain strong, the outlook for the 2002/2003 Canadian grain crop is much worse than anticipated," said Paul Tellier, CN president and chief executive officer, in a prepared statement. "Recent reports suggest this year's crop could be less than 50 percent of the five-year average — we're faced with two bad crop years in a row, which has significantly reduced the amount of product we can move."


CN plans to identify other revenue-growth opportunities and productivity initiatives to mitigate grain's impact on the railroad's 2002 and 2003 financial results.


Meanwhile, CSX Corp. Sept. 4 announced that weak utility coal demand will adversely affect its third-quarter earnings.


The railroad expects quarterly declines in coal carloads (about 5 percent) and coal revenues (about $35 million) compared with third-quarter 2001.


However, CSX officials believe quarterly combined merchandise, automotive and intermodal carloads — and respective revenue — will rise. The revenue gains would more than offset a coal decline, but quarterly intermodal operating income is expected to decrease slightly compared with last year's $237 million, according to a prepared statement.


"Coal stockpiles at our electric-utility customers have been dropping at a much slower rate than we anticipated despite the relatively warm summer weather," said CSX Chairman and CEO John Snow. "We believe inventories are approaching normal levels, and unit-train coal shipments should pick up in the fourth quarter."


CSX plans to report third-quarter earnings Oct. 24.


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