Canadian Pacific Railway Ltd. reported a 20-percent drop in quarterly profit and cut its freight volume forecast amid supply chain snoring and costs due to the discovery of Kansas City Southern.
Calgary-based CP said third-quarter profit fell to $472 million, or 70 cents per share, from $598 million (88 cents) in the same period a year ago. Revenue rose 4 percent to $1.9 billion for the three months ended Sept. 20.
CP said on Wednesday morning that the operating ratio, a measure of cost versus sales, declined from 58.2 per cent to 60.2 per cent.
Canadian national CEO to leave railways in January amid activist shareholder pressure
CP Rail confirms Kansas City Southern offer, gives US rail carriers until Sept. 12 to accept
CP revised its freight volume forecast for 2021 to low single-digit growth from the nearly 10 percent outlook issued by the rail company in April.
CP is sticking to its forecast of double-digit growth in profit per share for 2021, CP Chief Executive Officer Keith Creel said on a conference call with analysts Wednesday morning.
Railways, like others in the freight business, are facing closed ports and delayed shipments due to lack of raw materials and manufacturing. Additionally, dry weather in western Canada has reduced the expected harvest by 40 percent.
“We can’t make it rain but we can stay in the shape of the game,” said Mr Crell.
CP’s largest line of business, cereals, fell up to 27 percent in volume in the quarter. Fertilizer potash has declined by 22 per cent.
CP’s marketing chief John Brooks called the odds “disappointing” but “temporary”.
“As much as we are disappointed, we have had a good ride in Canadian grain over the years,” said Mr. Brooks, adding that CP sees new opportunities pushing more US crops.
“Despite global supply chain issues and a challenging Canadian grain harvest, we remain confident in our ability to deliver full-year double-digit adjusted diluted EPS growth,” CP said in a statement accompanying the earnings results.
“The underlying demand environment remains strong, and our commitment to generating sustainable, profitable growth will not be deterred by elements beyond our control.”
CP recently emerged as the winner in a high-stakes competition to buy Kansas City Southern, a railway that spans the U.S. Upper Midwest to Mexico. CP says the larger network will allow customers to offer new markets with access to sea ports on Mexico’s Pacific and Gulf coasts.
KCS’s board agreed to CP’s US$27.2 billion offer in September, ending a takeover agreement with the National Railway Company of Canada and ending a seven-month battle for the Missouri-based railway.
The combined companies will be called CPKC, will employ approximately 20,000 people and operate a 32,000-km network that runs across Canada, the United States and Mexico.
Mr Krell said he expects the deal to get shareholders’ approval in the fourth quarter.
The combined companies will provide faster, more efficient service across borders, “at a time when there was no greater need,” said Mr. Krell.
The US Surface Transportation Board review of the acquisition is expected to run through the end of 2022, and the Mexican antitrust review could last up to four months.
CP announced its financial results on Wednesday morning, the day Canadian National Railway Company chief executive Jean-Jacques Ruest stunned the markets with the announcement of his retirement in January.
CN is under pressure to improve its operations and performance from British investor Christopher Hawn, who has lagged behind in the industry. Mr Hohn, whose TCI Fund Management Ltd holds 5.2 per cent of CN, has resigned, accusing Mr Ruest and chairman Robert Pace of “weak” leadership and mishandling the attempt to buy out KCS. asked for. Mr. Hone has compiled a list of independent directors and a chairman whom he would like to vote on the board.
Bank of Nova Scotia stock analyst Konark Gupta said CN’s new plans to improve operations and Mr Ruest’s departure “could bridge some of the gap” between Mr Hawn and CN. This could help the company avoid a costly proxy battle, the vote for which was held on March 22.
Your time is valuable. Get the Top Business Headlines newsletter conveniently delivered to your inbox early morning or evening. .