25 April 2006
CPR's First-Quarter Earnings Ip Thirty-Eight Percent
Retiring CEO Rob Ritchie leaves on a high note
Canadian Pacific Railway reported a strong start to the year as net income grew to $111 million, a
38 percent improvement over first-quarter 2005.
Q1 2006 Earnings Release and Financial Reports
Summary of First-Quarter 2006 compared with First-Quarter 2005
- Excluding foreign exchange losses on long-term debt, diluted earnings per share increased 40 percent to $0.74 from
$0.53;
- Operating ratio improved 3 percentage points to 79.4 percent;
- Revenue increased 10 percent to $1,111 million;
- Operating expenses up 1 percent, excluding the impact of higher fuel prices.
"Our Execution Excellence strategy has delivered an outstanding first quarter," said Rob Ritchie, CPR's Chief Executive
Officer. "Revenue growth is strong, despite the decrease in coal and potash volumes. We have managed our cost structure
effectively, responding quickly to changes in traffic. Our Operations team has done an excellent job delivering improved fluidity, with
average train speed increasing 17 percent, yard processing time decreasing a full 32 percent, and car velocity up 15 percent over the
same period last year. With increased fluidity, we are driving more value from our assets, delivering a better product to our customers
which, in turn, is producing better results for our shareholders."
Freight revenue in the quarter grew by double-digits in four of CPR's seven business lines, with grain leading the way at
28 percent, industrial and consumer products up 13 percent, and intermodal and automotive each growing 12 percent. This more than offset
the declines in coal and sulphur and fertilizer volumes. Other revenue was up $22 million over the same period last year due mainly to
earlier than planned land sales that closed at the end of the quarter.
Operating expenses were $881 million in first-quarter, up six percent. The increase was due primarily to fuel costs which
were 17 percent higher and compensation and benefits costs which increased by 6 percent. CPR recovered almost all of the increase in
fuel price through its fuel surcharge program and fuel efficiency measures. Higher compensation and benefits costs were a result of the
impact of rising share prices on stock-based compensation programs as well as inflation. Increased expenses were largely
offset by lower operating costs resulting from the benefits of initiatives focused on reducing costs and favourable operating
conditions due to milder weather.
"This is my last full fiscal quarter before I retire in May as CEO of CPR," said Mr. Ritchie. "It is with some
satisfaction that I am able to do so with the company producing solid results. What is even more satisfying is to see a new team in
place that is strong, capable and motivated to take the company forward to even greater success."
Outlook
CPR's outlook for diluted earnings per share in 2006 remains unchanged at a range of $3.60 to $3.85, excluding foreign exchange gains
and losses on long-term debt and other specified items. The outlook assumes oil prices averaging US$66 per barrel and an
average exchange rate of $1.14 per U.S. dollar (US$0.88). This is a revision to our previous assumptions which were oil prices
averaging US$58 per barrel and an average exchange rate of $1.18 per U.S. dollar (US$0.85). CPR expects to grow revenue in the range
of 5 percent to 8 percent and expenses are expected to increase by 3 percent to 6 percent in 2006. Capital investment is anticipated
to be between $810 million and $825 million in 2006 and free cash is expected to exceed $200 million for the year.
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