17 November 2005
Efficiency the Fast Track to Profit, CPR Says
Canadian Pacific Railway Ltd. is forecasting its profit could rise 18 percent next year, based on
running its network more efficiently to take advantage of a continuing Asian trade boom.
John McBoyle, CPR's vice-president of intermodal marketing and sales, said yesterday that the company will be reducing the
amount of train downtime at terminals.
"Containers are spending too much time dwelling at the customer's dock or in our terminals and yards awaiting delivery
instructions," Mr. McBoyle said during a presentation to analysts during CPR's webcast.
Calgary-based CPR will have new terminal and track capacity in 2006 to help speed up deliveries. The company is predicting
a strong performance next year as it fends off competition from truckers.
With a shortage of truck drivers, CPR hopes to wrestle some market share away from the trucking industry.
CPR expects to thrive as it moves goods for retailers such as Canadian Tire Corp. Ltd., Loblaw Cos. Ltd. and Sears Canada Inc., and
renews partnerships with freight forwarders such as Consolidated Fastfrate Inc.
CPR is benefiting from Canada's trade bonanza with Asia, including transporting Chinese-manufactured consumer products in
intermodal containers that move from ships to railways.
"Asian trade fundamentals are solid, with Montreal and Vancouver gateways in full expansion mode," Mr. McBoyle said.
Four-fifths of the CPR's freight flow is on cross-country routes and the remaining one-fifth is
on Canada-U.S. tracks.
In yesterday's presentation, CPR chief executive officer Robert Ritchie and president Fred Green noted that the railway envisages
continuing robust demand from Asia for bulk commodities such as coal, potash, sulphur and grain.
"We feel good about most areas," Mr. Green said.
With healthy demand from export markets and with domestic customers clamouring for rail shipments, CPR likes its prospects for 2006.
The company expects to post between $3.70 and $3.85 a share in profit next year, up from an expected $3.15 to $3.25 this year. The new
outlook is based on oil prices averaging $58 (U.S.) a barrel and an exchange rate that values the U.S. dollar at $1.18 (Canadian).
Revenue is forecast to climb 6 to 8 percent next year as CPR plans to capitalize on higher volume and increased freight charges. One
area of potential growth is using more temperature-controlled containers to move food products.
On the expense side, CPR plans to reduce the pain of high diesel prices by maintaining fuel surcharges and signing energy hedging
contracts.
CPR is the country's second-largest railway, trailing Montreal-based Canadian National Railway Co.
David Newman, an analyst at National Bank Financial Inc., said CPR's earnings guidance is in line with his projection of $3.80 a share
in 2006, and just shy of the consensus estimate of $3.87 a share.
CPR shares closed down 11 cents to $49.02 yesterday on the Toronto Stock Exchange.
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