OTTAWA -- Even though segments of its business are booming, Canadian National Railway Co. remains guarded about its prospects for the year, according to the National Post.

Paul Tellier, the president and chief executive, said yesterday that despite impressive increases in some traffic -- such as 33% growth in revenue from forestry shipments -- the overall economy remains uncertain.

"We tend to be cautious and under-commit ... we are reasonably confident but we remain cautious because this is a difficult economy to read," he said during a media conference call following the release of first quarter results.

CN has told shareholders it would deliver 5% to 10% earnings per share growth in 2002.

In the first quarter ended Mar. 31, CN had net income of $230-million or $1.15 per share. That compares with $202-million ($1.03) in the previous year after excluding a $73-million (36¢) gain on the sale of the Detroit River Tunnel. Net income in the most recent quarter was improved 7% by the purchase in October of Wisconsin Central Transportation Corp.

The results were in line with analyst expectations. They were released after the markets closed yesterday, with CN up 27¢ at $80.12. Revenue in the quarter grew 8% to $1.5-billion but it was outstripped by a 9% rise in operating expenses.

As a result, CN's all-important operating ratio, a measure of efficiency, deteriorated slightly to 73.1% from 72.5% a year ago.

That fell short of the expectations of some observers such as Horst Hueniken, an analyst at TD Newcrest, who predicted the ratio would improve to 71%, and led Mr. Tellier to declare costs are under control.

"Is this a temporary situation? Yes it is. And therefore is there going to be another increase of the same magnitude in the next quarter or the quarter after? The answer is no," he said.

He said the rise in the ratio -- one of only two such increases in seven years -- was due to higher labour costs and casualty expenses.

In the quarter, four of CN's seven main business segments increased, these included forest products up 33%, metal and minerals up 26%, automotive up 19% and petroleum and chemicals up 18%. Grain and fertilizers were down 16%, coal off 9% and intermodal down 1%.

Mr. Tellier said it is unknown whether the trends will hold for the year. For example, with tariffs looming on shipments of some lumber products to the U.S. from Canada, producers may be shipping as much as possible before the deadline.

Mr. Tellier also said the railway intends to vigorously fight a small railway's application to use its lines in Western Canada that is now before the Canadian Transportation Agency. It has asked the Federal Court to stop a hearing by the transport regulator set to start April 29.

"A very polite but accurate way to describe this is that this is a sham," he said, noting two similar applications have already failed.