Two Canadian Pacific locomotives - Date/Photographer unknown.

24 April 2013

CP Rail has Record Setting First Quarter

Calgary Alberta - Canadian Pacific Railway had a record-setting first quarter and is on track to deliver the best year-end financial results in the company's history, CEO Hunter Harrison said Wednesday.
 
The Calgary-based company, which embarked on an aggressive cost-cutting strategy late last year, reported profits of $217 million, or $1.24 per diluted share, in the first quarter, a year-over-year improvement of 51 percent. Revenues were $1.5 million, an increase of nine percent and a quarterly record.
 
Harrison said during a conference call the results make him more confident than ever that CP can achieve a record-setting year-end in 2013.
 
"I think the most important thing it does is lay a solid foundation for what's to come in the future," he said.
 
Harrison, a former CEO at rival Canadian National Railway Co., replaced former CP chief executive Fred Green last June, after a bitter proxy fight led by CP's largest shareholder, New York hedge fund Pershing Square Capital Management.
 
Harrison also later lured Keith Creel away from CN to become president and chief operating officer at CP.
 
One of Harrison's goals has been to reduce the company's operating ratio, a measure of railroad efficiency and an industry benchmark. That figure improved in the first quarter to a record 75.8 percent from 80.1 percent.
 
Jeff Nelson, an analyst with Edward Jones, said CP Rail managed to achieve a solid quarter despite harsh winter weather conditions.
 
"The one thing that really stood out to us was the improvement in the operating ratio," he said.
 
While the company is only at the beginning of its improvement strategy, Nelson said Edward Jones has a "hold" recommendation for the stock.
 
"We're not betting against Hunter's turnaround plan, that's for sure," he said. "But we think the market's already priced in much of the improvement expected to take place over the next couple of years."
 
Harrison said in December that the railroad planned to reduce its workforce by 4,500 jobs by 2016. The vast majority of these reductions were to be achieved through attrition or by hiring fewer contractors.
 
On Wednesday, CP reported 3,400 jobs have already been eliminated, and Harrison said the company will likely cut deeper than its originally stated goal.
 
"The 4,500 is not the top, that's not the ceiling. That's the number that at the time... we felt comfortable with," Harrison said. "Will we exceed 4,500? I think so, yes. Will we get to 6? Could be. I don't quite have a line of sight on this yet."
 
In spite of the cuts, union leader Bill Brehl said he doesn't have any major concerns with Harrison's management so far.
 
"I can't criticize him," said Brehl, president of the Teamsters Canada Rail Conference Maintenance of Way union. "I know that he's cut a lot of jobs in other departments, he's cut a lot of supervisors, but with our people we're actually gaining in numbers. That's because he's gotten rid of quite a few contractors off the property, and he's brought a lot of work back in house."
 
CP's higher revenues were driven in part by increased global demand for fertilizer and growth in the rail shipment of crude oil. Chief Marketing Officer Jane O'Hagan said CP carried 53,000 carloads of crude oil last year, and could achieve a run-rate of 140,000 carloads by the end of 2015, a year earlier than originally forecasted.
 
O'Hagan said crude oil "remains the strongest opportunity" for revenue expansion at the railroad. On the Toronto Stock Exchange Wednesday, CP's shares closed at $124.73, down $1.50 or 1.19 percent.
 
Amanda Stephenson.

Vancouver Island
British Columbia
Canada