BOSTON -- CN Rail (CNR.TO) says that its operations are performing better than it expected so far in the second quarter after a rough winter that led to the replacement of its chief executive.

Chief financial officer Ghislain Houle told a transportation conference on Tuesday that volumes are up 14 per cent in the first two weeks of May after falling four per cent in the first quarter.

Demand is strong for frac sand, lumber, Canadian grain and coal, he said.

The Montreal-based railway says its port facility at Prince Rupert, B.C., is expanding faster than expected and should hit capacity two years ahead of schedule.

Houle says the operating performance will see a particular improvement in the fourth quarter after significant investments in the railway network, especially in Western Canada.

CN Rail increased its capital expenditures by $200 million to reach $3.4 billion, is qualifying hundreds of new conductors and buying 200 locomotives over the next three years.

Two days after CN Rail dumped its CEO in March, his interim replacement, Jean-Jacques Ruest, apologized for the railway's poor performance last winter and promised immediate action to clear the backlog of grain shipments.