Ottawa Citizen

CPR profits down 21% as sales increase 4.2%, share price goes up

- BY REG CURREN AND JEFF GREEN

CALGARY • Canadian Pacific Railway Ltd., the country’s second- largest railroad, said third- quarter profit fell 21 per cent from a year earlier, when the company had gains from foreign exchange and an environmen­tal settlement.

Net income declined to $ 161.7 million Cdn, or $ 1.02 a share, from $ 203.6 million, or $ 1.27, a year earlier, the Calgary- based company said yesterday. Sales rose 4.2 per cent to $ 1.15 billion. The profit exceeded analysts’ estimates, and the shares climbed 2.8 per cent.

Canadian Pacific boosted freight revenue four per cent on demand to ship grain and industrial and consumer products, and its profit margin jumped 13 per cent. The company was able to keep its expenses little changed even as fuel costs rose.

“ They were a little bit better on their costs than what we expected,” said Avi Dalfen, an analyst at Blackmont Capital Inc. in Toronto who rates the shares a “ buy” and owns them. “ The company is clearly going in the right direction.”

Canadian Pacific’s operating ratio, also called profit margin, rose to 26 cents per dollar of sales before taxes and interest, from 23 cents a year earlier. Canadian National Railway Co., the nation’s biggest railroad, said Oct. 19 its operating ratio rose to 43 cents from 37 cents, as third- quarter profit increased 21 per cent.

“ We are very busy out there and we are not seeing any deteriorat­ion” in the productivi­ty of the railroad, Canadian Pacific chief executive officer Fred Green said in a conference call with analysts. “ The fourth quarter is unfolding as we would hope it would. We’re getting the benefit of more business and moving it more efficientl­y.”

Canadian Pacific shares rose $ 1.72 to $ 62.74 in Toronto Stock Exchange trading. They have gained 29 per cent this year, more than three times the rise of the S& P/ TSX Composite, Canada’s benchmark index.

Canadian Pacific said its third- quarter 2005 profit included $ 69 million in gains from foreign exchange and the environmen­tal settlement.

This quarter, it had a $ 6 million loss from the effect of foreign- exchange rates on long- term debt. Excluding that, profit would have been $ 168 million, or $ 1.06 a share.

Mr. Dalfen expected the company to earn $ 1 a share, excluding the effect of foreign exchange. The average estimate was 99 cents in a survey of eight analysts by Thomson Financial, which doesn’t say if costs or other items are excluded from its figures.

The operating ratio was “ well above our expectatio­n” of 24 cents, Edward Wolfe, a Bear, Stearns & Co. analyst in New York, said in a note to clients. “ This was a significan­t beat by Canadian Pacific despite continued depressed export coal volumes,” he said in his note.

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