25 October 2005
Shipping Rolls CP Rail Profits Up 15 Percent
Canadian Pacific Railway Ltd. posted a 15 percent jump in third-quarter profit on
Tuesday, as higher shipping revenues offset climbing fuel prices and labor costs.
The railway said an expansion of its mainline in Western Canada had a slightly larger impact on operations than had been expected and
it reaffirmed its full-year financial guidance.
The Calgary, Alberta-headquartered railroad, which operates in Canada and United States, said net profit was $203.6
million, or $1.27 per share, in the quarter ended 30 Sep 2005.
That's up from $176.5 million, or $1.11 per share, in the same period a year earlier. Analysts polled by Reuters Estimates had looked
for earnings of between 91 and 84 cents a share, with an average estimate of 88 cents.
CP recorded a $65 million foreign exchange gain on its U.S. dollar denominated debt in the quarter, although that was down from a $71
million gain in the year-ago quarter.
Operating income was $283.3 million, up from $218.9 million.
Total revenue was $1.1 billion, up from $990 million, led by a 35 percent increase from coal shipments. Revenue from intermodal
operations was up 13 percent.
"We were a busy railroad," chief executive Rob Ritchie told analysts.
CP Rail officials said they are confident demand will remain strong enough next year to support additional rate increases.
"I don't see anything on the horizon to believe that we can't get that price increase in the 3 to 4 percent range minimum,"
chief operating officer Fred Green told analysts.
CP said operating expenses were $855 million, up from $771 million, but its operating ratio - a measure of efficiency used by North
American railways - improved to 77.4 percent from 77.9 percent.
Higher diesel costs were responsible for nearly half the jump in expenses, although CP said it was able to recoup most of that through
special surcharges.
Canadian Pacific has hedged about 33 percent of its fuel purchases in 2005, but that is expected to drop to 13 percent next year as it
relies more on surcharge programs.
CP said its $160 million "western corridor" expansion program was 85 percent done, and the project, which is designed to
tap into increased Asian trade via Vancouver, was expected to be completed as scheduled by the end of the year.
The railroad is eyeing another expansion of its track network next year, but Ritchie said details on capital expansion would not be
ready until November.
CP Rail shares were down $1.14 at $48.36 in Toronto on Tuesday, although they have climbed by nearly 45 percent over the past
year.
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