(The Canadian Press circulated the following on July 22.)
CALGARY — Canadian Pacific Railway Ltd. (TSX:CP) has reported a 40 percent decline in second-quarter profit as surging fuel costs swelled operating expenses while the slackening economy kept revenue flat.
Canadian Pacific said Tuesday it earned $155 million or $1.00 per share in the April-June period, down from $257 million or $1.64 per share in the year-ago quarter.
Revenue was essentially unchanged at $1.22 billion, while the railway’s operating ratio – operating costs as a proportion of revenue – deteriorated to 79.4 per cent, from 74.7 per cent a year earlier.
“This was a tough quarter with the unprecedented rise in fuel prices, the North American economic downturn, and prolonged flooding on our U.S. mainline,” commented CEO Fred Green.
“We see the current economic conditions continuing, and CP is taking aggressive steps which should position us well for 2009,” Green added.
In releasing the quarterly results, Canadian Pacific cut its 2008 profit outlook “to reflect our substantially higher fuel assumptions and the deteriorating economic conditions.”
The company now expects full-year adjusted diluted earnings per share of $4.00 to $4.20, down from its previous guidance of $4.40 to $4.60 despite an upgrade of forecast revenue. Management predicts revenue will grow by six to eight per cent over last year, up from previous guidance of four to six per cent, “due mostly to increased fuel recovery, offset somewhat by volume declines.”
Operating expenses are expected to increase by 11 to 13 per cent over 2007, revised from the earlier outlook of six to eight per cent, due principally to higher fuel costs.