31 January 2007
CPR Hopes Retooling Will Ward Off Slump
Spurred by its record annual profit, Canadian Pacific Railway
Ltd. is forecasting an excellent 2007 as it looks to strength in coal, grain, and potash shipments.
Fred Green, CPR's president and chief executive officer, said yesterday that despite an expected economic slowdown, the railway is on
track to post share earnings this year that will be 9 to 13 percent higher than in 2006. The outlook for 2007 is based on oil prices
averaging $58 (U.S.) a barrel.
The railway has fuel-hedging contracts this year that account for 8 percent of its requirements at $32 a barrel, partly
shielding it from high oil prices.
Mr. Green said CPR overcame the effects of harsh winter weather in the fourth quarter, noting that "2006 was a good year and 2007
promises to be even better."
He said a corporate strategy dubbed "Execution Excellence" will boost productivity in categories such as locomotive speed,
and reduce time spent getting trains ready in rail yards, also known as "terminal dwell time."
CPR executives expect to maintain the momentum by keeping pace with brisk demand for rail services from Canadian retailers importing
Asian consumer goods and Canadian resource firms exporting commodities.
Profit at Canada's second-largest railway surged 47 percent last year to a record $796-million. That
eclipsed its previous annual high of $543-million in 2005. The Calgary-based company's share profit climbed
to $5.02 from $3.39 while revenue rose to $4.58-billion from $4.39-billion.
In the fourth quarter, CPR's profit increased 6 percent to $145.6-million or 92 cents a share. Excluding unusual items,
the railway made $1.15 a share, or one penny shy of analysts' estimates, according to Thomson First Call.
Last week, Montreal-based Canadian National Railway Co. set its own record with a $2.1-billion profit for
2006, up 34 percent from 2005.
CPR's 2006 operating ratio, a key gauge of productivity that measures operating costs as a percentage of revenue, improved to 75.4
percent from 77.2 percent. A lower operating ratio is better.
Fadi Chamoun, an analyst at UBS Securities Canada Inc., said he's impressed by CPR's "continued cost containment" and
"robust" freight rates.
At the end of 2006, CPR had 15,327 employees, or 968 fewer than a year earlier. Last year, the company cut almost 400 management and
office support jobs, or 15 percent of its white-collar positions.
Mr. Green said that if business is bustling in 2007, he envisages hiring up to 150 people to handle the increased
workload.
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