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8/3/2001



Rail News: Rail Industry Trends

CPR lays out go-it-alone strategy for potential investors


Canadian Pacific Railway might be spinning off, but it won't be spiraling out of control. Post-Canadian Pacific Ltd., the railroad's management team plans to grow annual revenue 4 percent, increase yearly earnings 10 percent, control operating expenses to 2 percent annual bumps and boost CPR's operating ratio to 73 by 2004.
That was the message rail execs hammered home to potential investors Aug. 2 at an equity research conference in Toronto. CPR plans to spin off from CP Oct. 1, then make its shares available for trading on New York's and Toronto's stock exchanges two days later.
Once it’s a separate, publicly traded company, the railroad expects to save about $150 million in general expenses by 2004 — anticipating 3 percent annual volume growth — through scheduled operations, tighter fleet management and flat administrative spending.
CPR also plans to introduce pricing concepts, including seasonal and equipment premiums, spot pricing, trainload rates and contract-escalation clauses. Structured pricing would enable the railroad to move more toward open or published price lists and away from confidential contracts — a way to quickly address competitive pressures.
CPR officials expect the carload market to be the railroad's fastest growing business segment during the next few years, requiring a modernized rail-car fleet, scheduled operations and a transload facility network. The Class I also will rely on coal, some grain markets, international and domestic intermodal, and Expressway — CPR's rapid roll-on/roll-off intermodal system for highway trailer moves.
As part of CPR's stand-alone strategy, the railroad plans to implement an executive incentive program, under which senior executives would be required to own a significant number of CPR shares, and the railroad would base the vesting of performance-based stock options on CPR's ability to reach its financial targets.
For two more weeks, CPR plans to make similar investor presentations in New York, Boston, Montreal, Winnipeg, Manitoba, and Vancouver, British Columbia; a second wave of presentations would follow in September.


Contact Progressive Railroading editorial staff.

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