(The Globe and Mail posted the following story by Darren Yourk on its website on July 23.)
TORONTO — Canadian Pacific Railway Ltd. saw its second-quarter earnings drop on a restructuring charge of $150-million, high fuel prices and a stronger Canadian dollar, the company said Wednesday.
Net income declined to $29-million in the quarter, from $169-million in the second quarter of 2002. Earnings a share came in at 18 cents in the three-month period ending June 30, 2003, compared with $1.06 in the same period of 2002.
Calgary-based CPR pointed to a special charge of $150-million, announced in June, was largely responsible for the drop on profit. The charge is for a program to eliminate 820 job positions by the end of 2005 and for a restructuring of CPR’s Northeastern U.S. network to improve its economic performance.
Income, excluding foreign exchange gains on long-term debt and non- recurring items, which are comprised of the special charge in 2003, was $87-million in second-quarter 2003, compared with $111-million in the same period a year earlier. EPS on this basis was 55 cents, compared with 70 cents last year. Analysts were expecting earnings of 51 cents.
“We’re pleased with the progress CPR is making on its growth strategy with freight revenues up 5 per cent prior to the effects of foreign exchange,” Rob Ritchie, president and chief executive officer, said in a statement. “Volumes were up in five of CPR’s seven commodity groups, including a big surge in our intermodal business, however, our earnings were affected by higher fuel prices, a stronger Canadian dollar and increasing pension costs.”
Second-quarter 2003 operating income, excluding the special charge, was $191-million, compared with $219-million in the same period last year. The decline was due to the effect of persistently high fuel prices, a reduction in other revenues, and the net result of the stronger Canadian dollar.
CPR said the change in the foreign exchange rate had a $31-million favourable impact on expenses incurred in U.S. dollars but reduced U.S. dollar-denominated revenues by $40-million.
Looking forward, the company said anticipated gains in productivity combined with the Canadian grain industry forecast on the crop to be harvested this fall, are expected to mitigate the majority of the effects of fuel prices and the higher Canadian dollar.
“Assuming these factors remain relatively stable for the balance of the year, the company’s results should be in line with those in the second half of 2002,” CPR said.