(The Canadian Press circulated the following story by Lauren Krugel on March 25, 2010.)
CALGARY — The volume of goods being transported across North America by rail is expanding, an investment bank says, but Canada’s second-biggest railway is still cautious about the overall economic outlook for 2010.
Canadian carloads are 15 per cent higher so far in 2010 compared with the year-earlier period, when the recession ate away at demand for many of the products that move across the continent by rail, UBS Investment Research wrote in a note to clients Thursday.
UBS cited “notable strength” in automotive, metals, building materials, chemicals, coal and intermodal goods at Canada’s two main railways, industry leader CN Rail of Montreal and No. 2 CP Rail.
Railways are often considered a bellwether for the state of the wider economy. For instance, if consumers are buying fewer vehicles or fewer homes are being built, railways will be the first to observe it through how many automobiles or how much lumber their customers want shipped.
Calgary-based Canadian Pacific Railways Ltd. (TSX:CP) has seen its total carloads rise 10.6 per cent to date, the UBS note said.
Canadian Pacific chief financial officer Kathryn McQuade said while the improvements are heartening, there is still a lot of economic uncertainty as the Canadian and U.S. economies recover from the painful 2008-2009 recession.
“There’s a lot of industries that still need healing and that’s what makes me cautious,” she told an investor conference this week.
“It does appear the consumer is beginning to open their purse a little bit and beginning to spend. But will that be the same case in October, November, December? That’s where I don’t have clarity.”
In January, Canadian Pacific began reporting its financial results according to U.S. accounting rules. It had previously reported according to Canadian standards.
In 2011, Canadian companies will be required to switch to international reporting standards if they aren’t already reporting according to U.S. Generally Accepted Accounting Principles.
McQuade said Canadian Pacific decided to move to U.S. GAAP because it makes it easier for investors to compare its performance with its U.S. peers such as Union Pacific and CSX Corp.
Late Wednesday, Canadian Pacific re-stated its earnings to reflect the changes.
Net income for 2009 was US$555.4 million, or $3.33 per diluted share, compared to $635.6 million, or $4.09 per diluted share.
The railway said previously in January, when it calculated its results under Canadian standards, its 2009 profits were $612 million, compared to $607.2 million in 2008.
The revenues Canadian Pacific reported in January were $4.3 billion, compared to $5.2 billion.
On Wednesday, the company said its revenues were $4.4 billion, compared to $5 billion a year ago, under the U.S. GAAP rules.
Canadian Pacific’s shares rose 2.4 per cent to C$55.96 in afternoon trading Thursday on the Toronto Stock Exchange.