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10/28/2008



Rail News: Financials

CPR: Earnings and income tumble, operating ratio rises


Foreign exchange gains and losses on long-term debt and high fuel costs served as severe drags on Canadian Pacific Railway’s earnings and income in the third quarter.

Diluted earnings per share decreased 21 percent to 86 cents and net income declined 21 percent to $134 million compared with third-quarter 2007 totals. Excluding foreign exchange gains and losses on long-term debt and other specified items, diluted earnings per share fell only 2 percent to 93 cents, but income dropped $144 million from $148 million.

Operating expenses rose 11 percent to $746.5 million primarily because fuel costs jumped 49 percent to $214 million.

"Fuel expenses were a serious headwind, but we saw strong recovery in our operations with progressive improvement as we moved through the quarter,” said CPR President and Chief Executive Officer Fred Green in a prepared statement. "Our pricing gains and focused cost containment helped offset declines in bulk volumes.”

In the good news department, total revenue increased 7 percent to $978 million compared with third-quarter 2007’s total. Freight revenue rose 8 percent as industrial and consumer products revenue jumped 24 percent, automotive revenue increased 16 percent, intermodal revenue went up 11 percent, sulphur and fertilizer revenue rose 8 percent and coal revenue increased 5 percent. Grain revenue declined 4 percent.

In addition, despite a “declining market,” CPR’s operating ratio improved 3.4 points to 76 vs. its second-quarter ratio, said Green. However, the ratio increased 3.1 points compared with third-quarter 2007’s 72.9 ratio.

For the rest of 2008, the Class I has confirmed its earnings outlook that adjusted diluted earnings per share will range between $3.10 and $3.26. The outlook excludes the Dakota, Minnesota & Eastern Railroad Corp.’s (DM&E) projected revenues and expenses, which will be consolidated with CPR’s for November and December. The Class I obtained Surface Transportation approval in September to acquire the DM&E and will begin to integrate the regional into its operations on Oct. 30.


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