25 October 2006
CP Rail on Track
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CPR third-quarter profit fell, but CEO Fred Green
is boosting its outlook.
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Global demand for a bumper crop of high-quality
Canadian wheat is expected to power Canadian Pacific Railway Ltd. through the next year, the company said yesterday.
Strong grain and potash shipments drove up third-quarter revenue for the Calgary-based railway and offset a
28% drop in metallurgical coal volumes caused by increased use of lower-grade coal on world markets.
CPR's three-month revenue rose to $1.15 billion from $1.1 billion.
Pre-tax operating profit increased to $296.9 million from $249.4 million, but after foreign exchange and other one-time items net income was $162 million, $1.02 per share, down from $204 million, $1.27 per share.
For the full year, "in spite of soft coal and the slow start in potash we should deliver revenue growth in the five percent
range," CEO Fred Green told analysts.
Green also said annual earnings may exceed the top end of the company's guidance of $3.60 to $3.85 per share by up to 10 cents.
UBS Securities analyst Fadi Chamoun commented this implies 19% year-over-year profit growth in the current quarter, but is
"achievable, provided costs remain intact."
The railway's outlook is based on an average oil price of US$67 per barrel, down from its earlier working assumption of US$70 per barrel
and above its $59 level.
CPR said fourth-quarter grain volumes are expected to be up 10 to 15%, based on a harvest of high-quality
crops and a higher than normal carry-over from last year.
Wheat prices have hit record levels on fears a drought in Australia will hurt world supply, and demand for Canadian grain is forecast to
be maintained in 2007.
"The strengths we see now we would expect to continue, given the crop quality," said Marcella Szel, CP Rail's senior
vice-president of marketing and sales.
Third-quarter revenues from grain shipments grew to $225.3 million, a jump of 18% from a year earlier, thanks to a 20% rise
in Canadian carloads while U.S. grain volumes were flat.
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