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Grain revenue helps CPR in down year

Higher grain revenue from a slightly lower grain handle helped offset lower operating income in fiscal 2008 for Canadian Pacific Railway (CPR).

The Calgary-based railway on Tuesday posted a full-year profit of $619 million on $4.93 billion in revenues, down from $946.2 million on $4.71 billion in 2007.

CPR’s 2008 ledger included fourth-quarter profit of $200.6 million on $1.3 billion in revenue, also down from the year-earlier Q4’s net of $342.3 million on $1.19 billion.

The company reported Q4 operating income of $305 million, which it said was “essentially flat” despite a charge of $23 million due to a Federal Court decision upholding a retroactive adjustment to CPR’s maximum Prairie grain revenue entitlement related to the 2007-08 crop year.

CPR had previously booked $15.9 million in Q4 to cover what it expected to forfeit in Prairie grain revenue overage, but its penalty, pending any appeal the company might mount, is $38.9 million: $33.8 million in revenue overage plus a 15 per cent penalty worth $5.1 million.

The forfeited grain revenue and lower volumes offset the company’s Q4 freight revenues, which are up 10 per cent from the year-earlier period on foreign exchange, “continued pricing strength inclusive of fuel recoveries,” and revenues from the company’s acquisition of the Dakota, Minnesota and Eastern Railroad (DMandE) for the last two months of its latest Q4.

CPR said its lower full-year profit for 2008, relative to 2007, was due to lower operating income in 2008, but also due to a foreign exchange gain on long-term debt, plus a “large future income tax benefit,” both of which were recorded in 2007.

Revenue per carload

CPR in 2008 hauled 382,400 carloads of grain, down 0.7 per cent from 2007, but earning total grain revenues of $970 million, up 3.3 per cent from 2007. Its 2008 fourth-quarter grain handle was 114,700 cars, up 10.7 per cent, for grain revenues of $307.1 million, up 19.3 per cent from the year-earlier Q4.

That works out to grain revenue per carload of $2,537 for 2008, up four per cent from 2007 and well above CPR’s overall freight revenue per carload of $1,821 for 2008.

CPR’s sulphur and fertilizer handle for all of 2008 was 191,300 cars, down 8.8 per cent from 2007. Its revenue for the sulphur and fertilizer sector was up 1.3 per cent, however, at $508.6 million. Its Q4 sulphur and fertilizer traffic was 40,200 cars, down 20.7 per cent from the year-earlier period. Q4 revenue for that sector was down 3.1 per cent at $117.5 million.

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