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Rail News Home Financials

7/22/2008



Rail News: Financials

Revenue the lone bright spot on CPR's financial ledger


A strong dollar in Canada and flooding in the United States were two of the primary reasons Canadian Pacific Railway posted less-than-stellar financial results in the second quarter.

Net income plunged 40 percent to $155 million, adjusted diluted earnings per share decreased 13 percent to 97 cents, total operating expenses increased 7 percent to $969 million and CPR's operating ratio jumped 4.7 points to 79.4 compared with second-quarter 2007 figures. Fuel costs ballooned 34 percent to $260 million.

"This was a tough quarter with the unprecedented rise in fuel prices, the North American economic downturn and prolonged flooding on our U.S. mainline," said CPR President and Chief Executive Officer Fred Green in a prepared statement.

The only positive result: freight revenue, which rose about 2 percent year over year to $1.2 billion despite a traffic decrease, primarily because of rate increases and fuel surcharges.

Industrial and consumer products revenue jumped 17 percent, intermodal revenue rose 9 percent and coal revenue increased 6 percent. However, forest products revenue plunged 21 percent, grain revenue fell 9 percent, sulphur and fertilizers revenue tumbled 5 percent, and automotive revenue declined 2 percent compared with second-quarter 2007 totals.

During the first half, CPR's freight revenue totaled $2.3 billion, up 2 percent year over year. But net income dropped 36 percent to $246 million, diluted earnings per share declined 35 percent to $1.59, operating expenses increased 7 percent to $1.9 billion and the railroad's operating ratio (excluding foreign exchange gains and losses on long-term debt) rose 4 points to 81.

For the rest of 2008, CPR expects adjusted diluted earnings per share to range between  $4.00 and $4.20 — down from previous guidance of between $4.40 and $4.60 — total revenue to increase from 6 percent to 8 percent and total operating expenses to increase by 11 percent to 13 percent.

"We see the current economic conditions continuing, and CPR is taking aggressive steps, which should position us well for 2009," said Green. "I have accelerated a rigorous process to improve our productivity, efficiency and yield."


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