Calgary Alberta - The chief executive of Canadian Pacific Railways Ltd. (CP) said he is keeping a close eye on contentious NAFTA discussions that could affect the company's cross-border business.
 
Keith Creel, who has been leading Canada's second-largest railway for the last year, said that despite the fact that the U.S. represents about 30 percent of the company's business, the figure "overstates" the company's exposure in the event that NAFTA is no longer intact.
 
"Our cross-border is primarily agricultural products, stuff like grain, potash, fertilizers, chemicals, and some autos, which is not a huge piece of our business," he said in a conference call with analysts on Thursday.
 
"The reality is the U.S. relies heavily on these raw materials that we're shipping south to support the overall economy. I'm starting to see signs that Mr. Trump is probably feeling the same thing we feel, that it makes a whole lot of sense to have healthy trade and commerce between these two countries."
 
Creel made the comments following the release of CP's fourth quarter results.
 
The Calgary-based railway more than doubled its net income from $384 million to $984 million in the three month period ending 31 Dec 2017.
 
The results were partially bolstered by U.S. corporate tax reforms that saw the railway post a $527 million income tax recovery.
 
Revenues in the fourth quarter increased by five percent to $1.71 billion, while diluted earnings per share increased 159 percent to $6.77, in part due to the income tax recovery.
 
The railway's operating ratio, a key industry metric that measures expenses as a percentage of revenues, came in at 56.1 per cent for the quarter.
 
Freight revenues in the fourth quarter from metals, minerals, and consumer products grew 30 percent to $187 million, while energy, chemicals, and plastics increased by 20 percent to $247 million.
 
In 2017, the company saw freight revenues for metals, minerals, and consumer products increase by 33 percent, while potash shipments jumped by 23 percent.
 
For 2017, overall revenues jumped 5 percent to $6.55 billion.
 
Creel said that despite some challenges, including two derailments in the western corridor in November, the company made excellent progress and expects growth to continue through this year.
 
"With a 2018 plan that balances strategic growth with continued productivity and improvement, CP expects revenue growth in the mid-single digits and adjusted diluted (earnings per share) growth to be in the low double-digits," he said in a statement.
 
But while he expects the railway to make progress, Creel said he is "staying close" to Canada's Minister of Transport Marc Garneau and Minister of Foreign Affairs Chrystia Freeland as NAFTA negotiations continue.
 
In a note sent to clients earlier this month, RBC Capital Markets analyst Walter Spracklin said that CP was best positioned to outperform other railways, given "available capacity to achieve organic and freight shift growth, exposure to the U.S. corporate tax rate cut, strong performance momentum, and the most attractive valuation across the group of railways."
 
Alicja Siekierska.