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CPR’s Q2 grain revenue drops

Despite raising its freight rates against rising fuel costs, Canadian Pacific Railway posted a sharp drop in profits plus a four per cent smaller grain handle in its second quarter ending June 30.

“This was a tough quarter with the unprecedented rise in fuel prices, the
North American economic downturn, and prolonged flooding on our U.S. mainline,”
said CPR CEO Fred Green in a release Tuesday. “Combined, these had a significant impact on (CPR’s) earnings.”

Overall, the railway posted Q2 net income of $154.9 million on $1.22 billion in revenue, down from $256.7 million on $1.215 billion in the year-earlier period.

Freight revenues rose almost two per cent despite reduced traffic, mainly due to pricing to recoup higher fuel costs, the company said. Operating expenses rose seven per cent, mostly on a 34 per cent increase in fuel costs.

Revenue in CPR’s industrial and consumer products sector was up 17 per cent, intermodal nine per cent and coal six per cent. Offsetting those increased revenues were decreases in the grain sector (9.4 per cent), sulphur and fertilizers (4.6 per cent), forest products (21 per cent) and automotive (two per cent).

CPR hauled about 87,700 carloads of grain in its Q2, down from 91,200 in the year-earlier period. Grain freight revenues dropped from $224 million to $203 million, for revenue per carload of $2,315, down from $2,456. Freight revenue per revenue ton-mile (RTM) — that is, revenue earned on the movement of a ton of freight over one mile — sat at three cents, down from 3.06.

Sulphur and fertilizer traffic was also down 12.9 per cent in Q2 at about 53,400 carloads, with revenue down $6.6 million at $137.9 million. However, CPR’s revenue per carload of sulphur and fertilizer was up 9.5 per cent at $2,582 and revenue per RTM was up from 2.37 to 2.48 cents.

CPR’s chief financial officer Mike Lambert said the company will update its guidance to reflect “substantially higher fuel assumptions and the deteriorating economic conditions.” Full-year adjusted diluted earnings per share are now expected to be in the $4 to $4.20 range, down from $4.40 to $4.60.

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