(Bloomberg News circulated the following story by Hugo Miller on October 30.)
TORONTO — Canadian Pacific Railway Ltd. said third-quarter profit rose 33 percent, buoyed by foreign-exchange gains on its long-term debt. The carrier said 2007 earnings would be at the “lower end” of its forecast.
Net income increased to C$218.6 million ($229.1 million), or C$1.41 a share, from C$163.8 million, or C$1.04, a year earlier, the Calgary-based company said today in a statement. That beat analysts’ estimates. Sales climbed 3.2 percent to C$1.19 billion.
“We see ongoing challenges with the strengthening Canadian dollar and fuel-price pressures,” Chief Financial Officer Mike Lambert said in the statement. Canada’s second-largest railroad said it expects 2007 adjusted per-share earnings at the “lower end” of its forecast of $4.30 to $4.45 and for revenue growth to be “just below” its target of 4 percent to 6 percent.
The worst U.S. housing slump in 16 years damped deliveries of lumber and other forestry products, hurting Canadian Pacific and larger rival Canadian National Railway Co. Canadian Pacific said revenue from those shipments fell 21 percent.
A surging Canadian dollar that today hit a 47-year high against the U.S. currency also has cut the value of revenue from the U.S., which accounts for about a fifth of the railroad’s total. At the same time, gains by the Canadian currency helped Canadian Pacific to cover its debt obligations.
Foreign-exchange gains on long-term debt jumped to $43 million after tax compared with a loss of $6 million a year earlier, Canadian Pacific said.
Analysts’ Estimates
Profit per share exceeded the C$1.18 average of 17 analyst estimates compiled by Bloomberg. Canadian Pacific rose 65 cents to $C67.25 at 4:10 p.m. in Toronto Stock Exchange trading before the results were announced.
Canadian Pacific also said it is taking a $15 million after- tax charge to account for a readjustment of its investments in Canadian asset-backed commercial paper. The carrier, which had commercial-paper investments with an “original cost” of $144 million as of Sept. 30, 2007, didn’t say where it bought those investments.
Canada’s C$34 billion market for commercial paper sold by non-bank dealers ground to a halt after Coventree Inc. and other dealers failed to renew most of their maturing debt because investors feared possible ties to U.S. subprime mortgages.
“Uncertainties” in the credit market also could cut the value of the carrier’s investments in commercial paper, “which would impact the company’s earnings,” Canadian Pacific said.