CP’s 2012 grain handle down, grain revenue up

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Canadian Pacific Railway has booked a solid increase in its 2012 year-end gross from hauling Prairie grain — despite a marked drop in its grain handle.

The railway’s year-end and fourth-quarter (Q4) financials, released Tuesday, show the costs involved in what the Calgary company describes as a "transformational journey to become the most efficient railroad in North America."

The railway booked a full-year 2012 profit of $484 million on overall revenues of $5.695 billion, down from $570 million on $5.177 billion in 2011.

Meanwhile, CP’s Q4 net for 2012 came in at $15 million on $1.502 billion in revenue — well down from $221 million on $1.408 billion in its year-earlier Q4.

In its grain business, CP’s full-year carloads were down four per cent in 2012 at 433,000 — but the company logged total grain revenue of $1.172 billion, up seven per cent from 2011, for grain revenue per carload of $2,707, up 11 per cent.

CP’s Q4 grain handle came in at 122,000 cars, up one per cent from the year-earlier period — but its quarterly grain revenue rose 10 per cent to $355 million, for revenue per carload of $2,910, up nine per cent from the year-earlier Q4.

The company’s sulphur and fertilizer handle also dropped in 2012, with full-year carloads down 11 per cent at 177,000 and Q4 carloads down 10 per cent at 43,000.

CP’s sulphur and fertilizer revenue per carload, however, rose six per cent in 2012 to $2,938, and 12 per cent in its Q4 alone to $3,093.

By comparison, CP’s revenue per carload across all its business segments was up seven per cent in 2012 at $2,079, and up six per cent in Q4 at $2,153.

"Now behind us"

"Management made a number of hard decisions this quarter, including booking several significant items," CP CEO Hunter Harrison said in Tuesday’s release. "With these decisions now behind us, we anticipate record-setting financial and operational results starting in 2013."

"Significant items" included a $180 million impairment from CP’s decision, in Q4, to "indefinitely" defer plans for a 420-kilometre extension of its Dakota, Minnesota and Eastern Railroad (DM+E) into the Powder River Basin, a coal mining area of Montana and Wyoming.

In shelving that option, which was included in its purchase of DM+E in 2007, CP cited "continued deterioration in the market for domestic thermal coal," particularly during 2012.

CP in Q4 also ate an $80 million asset impairment on its decision to "dispose of a certain series of locomotives to improve operating efficiencies."

The company’s Q4 ledger also includes a $53 million charge for "labour restructuring."

Harrison, who retired at the end of 2009 from CP’s Montreal rival CN, stepped into CP’s CEO chair last summer, as the first choice in a campaign by an activist shareholder, New York investment firm Pershing Square Capital Management.

Pershing, for months prior, had ripped CP’s then-CEO Fred Green — who resigned under pressure in May — and CP’s board of directors for overseeing "the worst managed and poorest performing Class I railway."

Related stories:
CN, CP slightly over limits on Prairie grain revenue, Dec. 20, 2012
Grain revenue per carload up for CN, CPR in Q3, Oct. 25, 2012