Calgary Alberta - Blaming a weakening economy, Canadian Pacific Railway Ltd. is slashing jobs and its growth forecast for the rest of the year, as overall demand for shipments of commodities slumps.
 
Even though the company reported its best second-quarter profit results of $390 million, or $2.36 per diluted share on Tuesday, CP said it will trim its workforce by as many as 300 jobs.
 
That comes on top of 700 positions eliminated in the past year.
 
The railroad is also using about 20 percent fewer cars and locomotives, said chief operating officer Keith Creel.
 
"We are going to continue to pace demand," Creel said on a conference call with analysts.
 
"If business goes down and demand reduces, then obviously headcount is going to go down in lockstep with it, and labour expense is going to reduce."
 
Revenue growth for the year will be 2 percent to 3 percent, down from initial forecast of 7 to 8 percent.
 
It is projecting annual adjusted diluted earnings per share of $10 to $10.40.
 
Revenues for the second quarter, ending 30 Jun 2015, were $1.65 billion, down from $1.68 billion over the same period last year.
 
Shares fell $11.38 to close at $194.97 in Toronto.
 
Creel credited the second-quarter results to focused cost-cutting efforts and an emphasis on efficiency, from equipment use to staffing.
 
"So while we may have hit some unexpected business demand, and macro economic headwinds in the short term of a multi-year plan," Creel said, "we are much further along from an operating point of view, which creates powerful leverage when the business demand comes back."
 
CEO Hunter Harrison did not participate in the call because he is recovering from surgery.
 
North American railroads including rival Canadian National Railway have been hit with falling demand to ship everything from crude oil to grain and coal.
 
CN, which reported earnings on Monday, did not change its growth forecast for the year, sticking to an adjusted EPS growth at 10 percent in 2015, compared with last year's EPS of $3.76, implying earnings of at least $4.14.
 
However, CN laid off 600 workers in the second quarter and has implemented a hiring freeze.
 
CP's Tim Marsh, senior vice-president of marketing and sales, expects U.S. grain volumes to increase in the second half of the year, noting that farmers were electing to sit on their crops in hope of getting a better price.
 
He added that demand to move energy-related commodities including heavy crude and frac sand were down in part because of more pipelines coming online.
 
"We are cautiously optimistic that things may improve," he said, adding CP is modeling at 10 to 15 percent reduction in commodities for the year.
 
Creel added that the company continues to take on cost-cutting measures, including the introduction this quarter of remote-control locomotives in switching operations, which are used by other companies.
 
"That allows a conductor from the ground to operate the locomotive, and switch the cars, rather than the traditional method of relying on a locomotive engineer," Creel said, which will reduce staffing needs.
 
The initiative will be completed by the end of the third quarter, which will bring in $12 million in annualized savings.

Vanessa Lu.

Falling revenues in Q2
 
Canadian Pacific Railway reported strong second-quarter profits, though freight revenues were down 2 percent compared to the second quarter of 2014.
 
When adjusted for currency changes, here are the revenue variances for these commodities over the same period from 2015 to 2014:

• Crude minus 36 percent;
   
  
• Automotive minus 18 percent;
   
  
• U.S. grain minus 18 percent;
   
  
• Metals, minerals, and consumer minus 14 percent;
   
  
• Domestic intermodal minus 6 percent;
   
  
• International intermodal minus 3 percent;
   
  
• Canadian grain minus 2 percent;
   
  
• Coal minus 1 percent;
   
  
• Potash minus 1 percent;
   
  
• Fertilizers and sulphurs minus 1 percent;
   
  
• Chemicals and plastics plus 1 percent;
   
  
• Forest products plus 7 percent.

Source:  Canadian Pacific Railway.

       

http://www·okthepk·ca/