24 April 2007
Canadian Pacific's First-Quarter Results Solid Despite Tough Winter Conditions
Canadian Pacific Railway Limited reported net income growth of
18 percent to $129 million in the first-quarter of 2007 when compared with the same quarter 2006. Diluted earnings per
share improved 21 percent to $0.82.
Summary of First-Quarter 2007 Compared with First-Quarter 2006
Excluding foreign exchange gains and losses on long-term debt, diluted earnings per share increased 8 percent to $0.78
from $0.72.
- Operating ratio improved to 79.5 percent from 79.6 percent;
- Freight revenue of $1.09 billion increased 2.2 percent from $1.07 billion;
- Operating expenses at $887 million, up just 0.3 percent from $884 million.
"CP's team delivered adjusted diluted EPS growth of 8 percent in the face of extremely difficult, weather-related
operating conditions that challenged the entire transportation chain," said Fred Green, CP's President and CEO. "Our
disciplined execution of the integrated operating plan, in addition to the investments in network capacity we've made in our Western
corridor, paid major dividends for us this quarter. We were able to recover from each event as it occurred and keep our customers'
shipments moving."
Mr. Green added, "Our operational focus on network fluidity has increased our resilience and allowed our operations to rebound
effectively. With the recent return to more normal operating conditions, we expect to move freight volumes with increasing efficiency
and improved service levels through the balance of the year."
Revenues in sulphur and fertilizers increased 31 percent over first-quarter 2006 and intermodal and automotive were also
up, with growth of 6 percent and 5 percent respectively. Softness in forest products offset some of the revenue growth, decreasing $11
million from the same period in 2006. Winter disruptions and the CN strike increased network congestion which resulted in reduced
shipments in coal and other commodities. Other revenue declined $18 million in 2007 reflecting a significant land sale that took place
in first-quarter 2006.
Operating expenses were essentially flat at $887 million, up 0.3 percent from 2006, despite the challenging winter operating
conditions. Fuel, inflation, and winter related expense increases were partially offset by a drop in compensation and benefits expense.
2007 Outlook
"CP is on track to deliver solid performance in 2007," said Mike Lambert, Chief Financial Officer. "A reduction in our
cash pension funding requirement to approximately $100 million, down from our original $150 million estimate given in the Fall of 2006,
has improved our free cash outlook to more than $300 million in 2007, up from $250 million estimated previously. Our diverse commodity
portfolio, a strong yield program and continued vigilance around cost containment will drive our projected EPS growth of 9 to 13
percent."
CP's outlook for diluted earnings per share excluding foreign exchange gains and losses on long-term debt and other
specified items remains in the range of $4.30 to $4.45 for 2007, compared with 2006 diluted EPS which was $3.95.
CP expects to grow revenue in the range of 4 percent to 6 percent in 2007. Capital investment is anticipated to be between $885 million
and $895 million and free cash, after dividends, is now expected to exceed $300 million in 2007. This outlook assumes oil prices
averaging US$58 per barrel and an average currency exchange rate of $1.15 per U.S. dollar (US$0.87).
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