CP Rail prepared for ‘short-term pain’

CEO says company will not be ‘held hostage’ by striking workers

Canadian Pacific Railway Ltd. is prepared to live with the “choppiness” of a looming strike of train conductors rather than consent to a labour deal that cripples its long-term earnings power, chief executive officer Keith Creel said.

A walkout would begin at 12:01 a.m. Eastern time Saturday and affect more than 3,300 employ- ees, including conductors and electrical workers, among others. On Tuesday, the Teamsters Canada Rail Conference and the International Brotherhood of Electrical Workers each gave Canadian Pacific a 72-hour notice of their plan to strike.

If an agreement isn’t reached to avoid the strike, a work stoppage threatens to severely hamper Canadian Pacific’s ability to provide freight service, Canada’s second-largest railroad said Friday. All commodities would be impacted amid soaring demand for shipping. Passenger train commuters would also suffer in Canada’s three largest cities — Toronto, Montreal and Vancouver — because the trains they ride on use Canadian Pacific’s tracks.

“CP cannot be put in a position where we are held hostage,” Creel said Wednesday on a conference call with analysts. “We can’t take a position that’s going to destroy our long-term ability to be on solid financial footing. If it means that we have to experience short-term pain to avoid that long-term damage, then that’s my fiduciary responsibility to all stakeholders and we’re going to uphold that.”

“A strike would be highly disruptive to Canadian economic activity when the railroads are already facing some operational challenges,” said Cam Doerksen, a National Bank Financial analyst in Montreal, on Thursday in a note to clients. While the government would potentially intervene to halt a work stoppage, “the stock could be under some pressure until there is resolution on the labour front.”

Creel didn’t specify what a labour dispute would cost the company, alluding only to a “near-term headwind” and “fi- nancial noise.”

Labour Minister Patty Hajdu on Wednesday urged the company and the unions to negotiate in good faith and reach an agreement.

Creel made the comments after Canadian Pacific reported first-quarter results.

Adjusted profit climbed to $2.70 a share, Canadian Pacific said in a statement, compared with the $2.71average of analyst estimates compiled by Bloomberg. Sales rose 3.7 per cent to $1.66 billion.

Analysts had expected $1.68 billion.