(The Calgary Herald posted the following article by Lisa Schmidt on its website on March 19.)
CALGARY — Canadian Pacific Railway Ltd. said it will trim another 300 jobs from its workforce by the end of the year to cope with slumping profits brought on by high fuel prices and bad winter weather.
The country’s second-largest railway warned Tuesday that first-quarter profits would fall short of expectations, but said company is taking action to get back on track.
Earnings will likely be in the range of 21 to 25 cents a share, below the analysts’ consensus of 37 cents per share, the Calgary-based company said.
“The entire transportation industry has been feeling the pain of high fuel prices,” chief executive Rob Ritchie said during a conference call. “In addition, winter weather conditions across North America have disrupted not only our schedules, but the schedules of our connecting carriers.”
“These circumstances are extraordinary and CP has managed them reasonably well.”
Despite the revisions, Ritchie said the company has not changed its outlook for the year, attributing the problems to one-time events beyond the railway’s control, rather than systemic problems.
“You’ve got to keep in mind that the first quarter for this railway is always a difficult quarter,” he said.
“So we should be back to where we were in operating efficiencies last year.”
The railway expects half of the positions to be eliminated through attrition and has also instituted a hiring freeze for all but entry-level positions.
No particular division is targeted for cuts, a company official said. “It’s too early to say. We’re looking at all options,” said Len Cocolicchio, a CP spokesman. “But we will net out, by the end of the year, at 300 fewer positions.”
The layoffs, the latest in a series over the past few years, represent about two per cent of the company’s workforce, which stands at 15,500 employees. That’s down about 400 employees from last year.
“These are not easy times for the transportation industry,” said Peter Wallis, head of the Van Horne Transportation Institute at the University of Calgary.
“They are very sensitive to the price inputs and in order to continue to try and obtain a level of profitability, they have to go after their costs.”
“As a last resort, most transportation companies would modify the size of their workforce — it’s not their first choice.”
While CPR has a plan in place to protect against rising oil prices, the railway said it was not enough to offset the increase in the price of diesel fuel, used to power its locomotives.
Crude oil prices have eased in recent days, but still remain about $10 US a barrel higher than a year ago.
The company said every $1 US increase in the price of crude takes a $10-million bite out of pre-tax operating income.
The railway locked in prices for more than half of its fuel for the first quarter, but still expects to pay as much as $20 million in additional costs, a 20 per cent increase from last year.
An extended cold snap — during which temperatures were 10 to 15 degrees below the 30-year average — forced the company to run shorter and slower trains on the brittle rails.
Cold temperatures in central Canada contributed to nine derailments during the quarter, compared with four during the corresponding period in 2002.
Last week, the company was forced to temporarily reroute trains to its rival Canadian National Railway Co. after avalanches blocked the company’s main line through Alberta and B.C.
Canadian Pacific reported profits of $496 million in 2002, a 33 per cent increase over the previous year.
In the fourth quarter, the railway earned $126 million, or 79 cents a share, a 29 per cent increase over the same quarter in 2001.
The company will release first-quarter results April 25.
Shares of CPR rose 40 cents to $29.40 Tuesday on the Toronto stock exchange.