CALGARY, Alberta — A wire service reports that Canadian Pacific Railway is not in danger of becoming the second
former Canadian Pacific Ltd. unit to disappear as long as it keeps boosting earnings and its stock price, its chief executive said on Friday.
Canada’s second-largest railroad aims to increase revenues by 4 percent annually, an aggressive target that CEO Rob Ritchie said would lead to improvements in operating income and a warmer reception from investors.
“That should make us a very strong railroad, and not one subject to people who would wish to buy shares at bargain-basement levels,” Ritchie told reporters following CP Rail’s first annual meeting as an independent firm since 1971.
It is one of five companies spun off in the breakup of transport, energy and hotels conglomerate CP Ltd. last October. Already, the largest spinoff, PanCanadian Energy, has disappeared in the C$10.6 billion ($6.7 billion) merger with Alberta Energy Co. to create EnCana Corp. (Toronto:ECA.TO – news), the world’s biggest independent oil explorer and producer.
Ritchie has long favored alliances with bigger U.S. railways, such as Union Pacific Corp. (NYSE:UNP – news), over mergers as a way to extend shipping services for customers and improve efficiency, a position he repeated on Friday.
Still, stockholders at the meeting approved a shareholder rights plan aimed at giving the board more time to scout for alternative offers should CP Rail become the target of a hostile bid.
The railroad, which traces its roots back to 1881, has been working to cut costs for the past several years to improve its operating ratio, a key measure of efficiency defined by expenses as a percentage of revenues. Increasing revenues has proved more difficult.
Last year its operating ratio was 77.3 percent, a figure that continued to lag that of its major competitor, Canadian National Railway (Toronto:CNR.TO – news). Ritchie said he wanted to improve that record to 73 percent by 2004.
Over the past year it cut 800 jobs, a process that started during the first quarter of 2001 when the railway’s executives began to see the North American economy slowing. It currently has 16,500 employees.
Now CP Rail aims to lift revenues by aggressive marketing and attracting shippers to new services, Ritchie said.
He said he believed the economy in 2002 would be a “mirror image” of last year, with recovery expected in the second half.
“To date there is nothing that would cause us to vary that forecast,” he said. “I am cautious, though — we haven’t seen it. It is only April and we need to see the improvement come October, November, December.”
Meanwhile, Ritchie said he was comfortable with analysts’ estimates of CP Rail’s first-quarter earnings per share, despite a jump in fuel prices in March as crude oil markets jumped and a major derailment in North Dakota in January.
Four analysts surveyed by Thomson Financial/First Call expect, on average, a profit of 39 Canadian cents per share for the first quarter. The estimates range from 37 Canadian cents a share to 41 Canadian cents.
The railway is scheduled to release its quarterly results on April 25. For the year-earlier period, it was still part of the former Canadian Pacific Ltd. empire.
CP Rail shares were up 86 Canadian cents to C$33.95 in Toronto on Friday, an improvement of 6 percent since the start of 2002. That compares with a rise of less than 1 percent in the broad Toronto Stock Exchange 300 composite index.