(The Canadian Press circulated the following on July 24.)
CALGARY — Canadian Pacific Railway Ltd. (TSX:CP) has reported a nine per cent rise in second-quarter operating profit on improved efficiency, but net income declined from year-ago levels that were boosted by a non-recurring tax item.
Canada’s second-largest railway company said Tuesday its April-June net income was $257 million or $1.64 per share, down from $378 million or $2.37 per share a year ago. The year-ago quarter included a $176-million reduction in future income taxes thanks to lower tax rates.
Revenue increased 7Â1⁄2 per cent to $1.22 billion from $1.13 billion, while operating expenses grew seven per cent to $907.8 million, swollen by a 21 per cent rise in fuel costs to $193.7 million.
The railway’s operating ratio – operating costs as a proportion of revenue – improved to 74.7 per cent from 75 per cent, and Canadian Pacific said its earnings adjusted for one-time factors rose to $1.12 per share from $1.00 per share.
This precisely met the average expectation among analysts surveyed by Thomson Financial, although revenue growth slightly exceeded the Bay Street forecast.
“We produced 12 per cent growth in adjusted diluted EPS and posted further improvement in our operating ratio in spite of a 26-day strike and tough weather-related operating conditions,” commented CEO Fred Green.
“We safely moved record volumes although the challenges of the quarter created inefficiencies that give us opportunities for improvement.”
Revenue reflected strong global demand for bulk commodities, with double-digit percentage growth in movements of sulphur, fertilizers and coal. Grain revenue improved nine per cent, while industrial and consumer products increased six per cent and intermodal revenue was up three per cent.
Revenue from moving automobiles fell four per cent and forest-products revenue declined two per cent.
“We still face some significant challenges through the rest of 2007 with rising fuel refining margins and the strengthening Canadian dollar,” Green stated.
“However, with continued focus on our integrated operating plan and cost containment we expect to deliver on our targets.”