Canada’s largest railroad operator said it earned $C555 million ($US541 million), down from $775 million in the previous corresponding period.

"CN faced a number of operational challenges in the first quarter, including extreme cold and heavy snow in Western Canada which hampered operations, congested the network and constrained volume growth,” CN president and chief executive officer Claude Mongeau said.

“We've turned the corner since then, improving train velocity and reducing freight car dwell times in yards across the network to restore the service level expected by our customers.”

Coal revenues for the company declined 1%, the only sector to drop during the period.

The company made an impressive 17% revenue increase for petroleum and chemicals, signalling a good possibility for growth in the crude-by-rail market.

CN said it planned to increase its capital spending by a further $100 million to $2 billion to make its railway safer and more productive.

"CN will emerge stronger from this first-quarter experience,” Mongeau said.

“To improve network resilience, particularly given our expectation of continued strong volume growth, CN is undertaking several capacity enhancement projects in its Edmonton-Winnipeg corridor.

“These and other productivity initiatives will increase CN's planned 2013 capital spending to $2 billion.”

CN said its outlook otherwise was unchanged.

The company said revenue rose 5% to $2.466 billion but operating income fell 2% to $780 million.

Operating expenses increased 9%, with the company citing higher labor and fringe benefit expenses, higher fuel costs and greater material expenses for the increase.