A thermite weld in progress.

23 September 2011

CPR Expanding Secondary Routes

Montreal Quebec - Strong demand from Asia will continue to drive commodity sales, Canadian Pacific CEO Fred Green says, as the railway undertakes an expansion of its secondary routes to capitalize on that growing export market, while improving customer service.
 
Green says given changing trade patterns and the impact flooding and snowstorms have on delivery, the carrier has to be flexible and provide continuity.
 
"There are several major investments to position us to be able to be more nimble," he said in an interview Wednesday, after addressing the Canada Maritime Conference in Montreal. "Between the severe and unpredictable weather patterns we've all experienced, and we've had some collateral damage, and these uncertain but clearly changing traffic patterns, it's apparent to us that we need to build in a level of redundancy or capability."
 
That includes its southern route and spending $300 million on the line between Winnipeg and Edmonton.
 
David Tyerman, an analyst with Canaccord Genuity, said the move is both an offensive and defensive play for CP, as the railway has been hammered by severe weather over the past two years.
 
In July, CPR reported a 23 percent drop in its second quarter profits, year over year, with net income of $128 million on revenues that rose by just over $30 million to $1.3 billion. Its operating expenses hit $1 billion, a $73.9 million jump.
 
At the time, Green expected a solid second half of the year.
 
Green believes exports from the west coast will continue to be strong, driven by demand from China and the rest of Asia.
 
"Anything going west off the coast is actually quite robust," he said, pointing to agriculture products, potash, coal, and oil. "Anything oriented to the retail sector, because of consumer confidence... would leave us a little bit uncomfortable with the ability for that business to grow in any substantive way for the foreseeable future."
 
Tyerman said that certainly seems to be the case in the short term.
 
Green says changing export patterns have the railway, and its customers, thinking about routes and demand.
 
He cites an increase in the amount of thermal coal shipping from western ports, on top of traditional metallurgical coal, the unknowns around what the promised demise of the Canadian Wheat Board will mean to grain patterns, and the impact should BHP Billiton proceed with its Jansen potash project in Saskatchewan.
 
Kim Guttormson.