26 July 2005
CPR Boosts Earnings Per Share 45 Percent in 2nd Quarter 2005
Railway handles record workload while expanding western corridor
for future demand
Canadian Pacific Railway (TSX/NYSE: CP) increased net income to $123 million in the second quarter of
2005, compared with net income of $84 million in second-quarter 2004. Diluted earnings
per share increased 45 percent to $0.77 in the three-month period ended
30 Jun 2005, compared with $0.53 in the same period of 2004.
Summary of 2nd quarter 2005 compared with 2nd quarter 2004
- Operating ratio of 75.5 percent, an improvement of 2.5 percentage points;
- Excluding foreign exchange losses on long-term debt, diluted earnings per share
up 34% to $0.87;
- Revenue up 10 percent to $1,106 million;
- Operating expenses up less than 2 percent, excluding significantly higher fuel costs.
Rob Ritchie, President and Chief Executive Officer of CPR, said: "CPR employees know what
our company has committed to deliver and they are bringing it home. They grew our business with a
focus on quality revenue. They demonstrated the power of our integrated operating plan, maintaining
fluidity from coast to coast while handling more workload in the second quarter than in any other
quarter ever. They worked more safely, making substantial improvements in both train operations and
personal safety.
"Even more remarkable is that these achievements were accomplished with major track capacity
expansion work in full force between the Canadian Prairies and the Vancouver gateway, our busiest
corridor.
"The fluidity across our network is generating greater operating efficiency, which is driving
more of our growth to the bottom line," Mr. Ritchie said.
CPR's quality revenue strategy continued to deliver results as resources were focused on growing
higher-yield traffic. Revenue per carload increased 14 percent, driven by success in
upgrading CPR's book of business, strong pricing and contract renewal programs supported by an
environment of improving service.
Revenue in the second quarter of 2005 grew in five of CPR's seven business lines, led by increases of
48 percent in coal, 10 percent in intermodal freight and 7 percent in grain.
Most of the expense increase was due to high fuel prices. CPR's fuel expense increased by 35 percent
in the second quarter of 2005, compared with the same period of 2004. More than
three-quarters of the increase in fuel prices was recovered through CPR's revenue fuel
surcharge mechanism, as well as hedging and fuel efficiency measures.
Summary of 1st half 2005 compared with 1st half 2004
- Net income up $97 million to $204 million and diluted earnings per share up 90 percent to
$1.27;
- Operating ratio improved by 3.4 percentage points to 78.8 percent;
- Excluding foreign exchange losses on long-term debt, income up $83 million to $225 million and
diluted earnings per share up 57 percent to $1.40;
- Revenue up 12 percent, with double-digit increases in coal, grain and industrial
products;
- Operating expenses up 7 percent, with most of the increase due to higher fuel costs.
2005 Outlook
CPR expects to grow revenue in the range of 12 percent to 14 percent in 2005. Diluted earnings per
share, excluding foreign exchange gains and losses on long-term debt and other specified
items, are expected to be in the range of $3.15 to $3.25, assuming oil prices averaging US$55 per
barrel and an average exchange rate of $1.23 per U.S. dollar (US$0.81) for the full year.
A $160-million program to expand capacity by four trains a day, or more than 400 freight
cars daily, between the Canadian Prairies and the Vancouver gateway is on schedule to be completed in
the fourth quarter of 2005.
Foreign exchange losses on long-term debt
CPR had a foreign exchange loss on long-term debt of $17 million ($17 million after tax)
in the second quarter of 2005, compared with a loss of $20 million ($20 million after tax) in the same
period of 2004.
In the first half of 2005, CPR had a foreign exchange loss on long-term debt of $20
million ($21 million after tax), compared with a loss of $33 million ($34 million after tax) in the
same period of 2004.
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