Canadian Pacific second-quarter profits rise to $371 million, revenues increase

Photo: The Canadian Press. All rights reserved.

A Canadian Pacific Rail maintenance worker climbs onto a locomotive in Port Coquitlam on May 23, 2012. THE CANADIAN PRESS/Darryl Dyck

CALGARY - Canadian Pacific Railway Ltd. (TSX:CP) posted "record after record after record" in the second quarter despite the lingering effects of a harsh winter, CEO Hunter Harrison said Thursday in touting earnings results that surpassed expectations.

Profits grew 48 per cent in the April-June period compared with a year earlier, even as the nasty weather's impact dragged into April, particularly in its U.S. Midwest operations where congestion around Chicago has been an ongoing issue.

Net income rose to $371 million from $252 million for the same period ended June 30 a year ago.

On a per share basis, profits were $2.11, a penny higher than analyst expectations as compiled by Thomson Reuters.

Revenues increased to $1.68 billion from $1.5 billion.

Operating expenses were two per cent higher at $1.09 billion.

Canadian Pacific's operating ratio — a closely watched industry measure of operating expenses as a share of revenues — was an "outstanding" 65.1 per cent, Harrison said.

A year earlier, the company's operating ratio was 71.9. The lower the operating ratio, the better.

While a sub-60 operating ratio isn't out of the question for the third quarter, Canadian Pacific isn't changing its 2014 target of 65 or lower, Harrison said.

"If there's no unforeseen issues in the third and fourth quarter, you're going to see some pretty good numbers there."

The railway's shares were up 3.4 per cent at $204.58 in afternoon trading on the Toronto Stock Exchange. CP's results also gave a lift to rival Canadian National Railways (TSX:CNR). Its shares gained 53 cents to $71.98 ahead of the release of its earnings on Monday

Canada's two biggest railways — Canadian Pacific and Montreal-based Canadian National — have been under pressure to deal with a backlog of Western Canadian grain shipments they've blamed on poor winter conditions combined with a record crop. Farmers and government officials have questioned that explanation.

Earlier this year, the federal government stepped in with measures to get the grain carloads moving, slapping fines on railways that don't ship a certain amount of grain every week.

Harrison has been blunt in his criticism of Ottawa's moves.

"Anyone that thinks that some of this legislation...can have an impact on moving grain, they're nuts," he said, adding recent flooding in the Prairies doesn't appear to have affected this year's crop as much as expected.

"They don't know anything about the infrastructure or the movement or grain."

Meanwhile, Canadian Pacific said late Wednesday it would go to court to try and block an arbitrator's ruling that a cocaine-using locomotive engineer be reinstated. The case stems from an incident in late 2012.

The railway said the worker took the drug "at a time and of a quantity which could impact his duties."

"The arbitrator's decision is an outrage and, as a railroader, I am appalled we would be forced to place this employee back in the cab of a locomotive," said Harrison.

Also, on Wednesday afternoon, 24 rail cars went off the tracks west of Moose Jaw, Sask., but there were no leaks, injuries or threats to public safety.

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