CANADIAN NATIONAL RAILWAY COMPANY

Canadian National Railway Company



Canadian National Railway Company

About the company

Canadian National Railway is engaged in the rail and related transportation business. Co.'s network of approx. 21,100 route miles spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, British Columbia, Montreal, Halifax, New Orleans, and Mobile, AL and the areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minnesota/Superior and Green Bay, WI, Minneapolis/St. Paul, Memphis and Jackson, MS, in North America. Co.'s extensive network, and its co-production agreements, routing protocols, marketing alliances and interline agreements, provide Co. customers access to all three North American Free Trade nations. 

SWOT analysis overview

Canadian National Railway (or the company or CN) is engaged in the rail and related transportation business. The company has a diversified product portfolio and well balanced revenue streams. Diversified product portfolio and balanced revenue streams enables CN to provide end-to-end solutions and also insulate the company from market threats. However, intense competition pressurizes the operating margins of the company, and also reduces the market share.

Strengths

Weaknesses

Diversified product portfolio and well balanced revenue streams

Strong inorganic growth

Robust growth in sales and profits

Overdependence on the Canadian market

Opportunities

Threats

Canadian automotive manufacturing industry gaining momentum

Growing North American coal market

Infrastructure enhancement

Intense competition

Increasing fuel prices

Environmental regulations

Financial Analysis

Profitability Analysis

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

Change`

ROA % (Net)

9.59

8.35

7.15

7.53

9.09

9.04

7.51

7.1

4.07

3.03

217%

ROE % (Net)

22.37

18.69

17.02

18.23

21.58

21.88

18.75

18.71

11.2

8.79

154%

ROI % (Operating)

19.05

17.26

13.31

16.85

18.42

20.36

19.55

18.81

11.72

9.11

109%

Profitability relates to a firm's ability to produce a reasonable profit so that the shareholders and investors will keep providing capital to it for its operations. A firm's profitability is connected to its liquidity, for the reason that earnings eventually produce cash flow. For these rationales, profitability ratios are imperative to both potential investors and shareholders. The

profitability analysis of the company shows a gradual growth in all its key indicators including ROE, ROA and ROI. The graph shows the ten year actual movement of the figures of these profitability ratios. ROA was merely 3.03 which during the ten years period have increased to 9.59 witnessing the phenomenal growth of 217%. It should be noted that there has been upward trend till 2008 when the entire world financial market and industries struck financial distress which also affected the railway in industry of Canada in general and Canada national railway company in particular which is evident by the fall of prices in 2008 to the level of 7.53 from the previous and higher level of 9.09 of 2007. ROE has also shown similar trend. Return on equity has increased from 8.79 to 22.37% and observing the massive growth of 154% during the ten years period. Like ROA, we can also observe the affect of financial distress in ROE during 2008 when it fell to 18.23 from 21.58 and did not recover the lost value until 2011.

Growth in Return on investment has also been very impressive but the cut in capital expenditure which in turn affect the investment amount can be seen in the subsequent period of 2008. In 2002, the value of ROI was 9.11 which continue to increase till 2006 and marked ...