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Canadian Pacific Railway Ltd. said its profit rose by 28 per cent even as freight volumes dipped in the first quarter – a period marked by a fatal derailment and bad weather.

For the three months ended March 31, CP posted earnings of $434-million or $3.09 a share, compared with $348-million or $2.41 in the same period a year earlier. Revenue was $1.77-billion, a 6-per-cent rise.

Adjusted for foreign exchange on debt and lease liabilities, profit was $2.79 a share. Analysts expected adjusted per-share profit of $2.98 and revenue of $1.77-billion.

CP’s operating ratio declined to 69.3 per cent from 67.5 per cent a year ago. The ratio is a closely watched comparison of sales versus expenses; lower is better. Revenue per tonne mile, another industry measurement, declined by 1 per cent.

The first quarter featured extremely cold temperatures in parts of Canada. For safety, railways run shorter trains at slower speeds in harsh weather, hampering network fluidity.

Calgary-based CP hauled 635,000 carloads of grain, potash and other freight in the first quarter, a decline of 2 per cent from the same period in 2018. A rise in automotive and potash shipments was outweighed by a drop in grain, fertilizer, metals and minerals and consumer products in a quarter marred by derailments, including a crash in the Rocky Mountains on Feb. 4 that killed a three-man crew.

The grain train rolled away on its own from an emergency stop on a steep grade near the B.C.-Alberta border and crashed off the tracks, killing engineer Andrew Dockrell, conductor Dylan Paradis and trainee Daniel Waldenberger-Bulmer. The accident, under investigation by the Transportation Safety Board, is believed to be linked to the failure of the train’s air brakes and a lack of hand brakes.

“This past winter was one of the most challenging in my railroading career,” Keith Creel, CP’s president and chief executive officer, said in a statement accompanying the results released after markets closed on Tuesday. "I applaud our employees for their resiliency in overcoming loss and pushing through extraordinary conditions and challenges throughout February and March.”

CP waved off concerns Alberta’s newly elected government plans to cancel contracts to lease tank cars and ship Alberta’s oil will have any effect on the railway’s expected growth in crude by rail.

CP vice-president John Brooks said the company is still planning to begin shipping the crude in July, according to the contract it reached with the provincial government.

“Crude by rail fundamentals are strong. Even with [Enbridge’s new pipeline] coming on, it still looks like a good two to three year crude by rail opportunity,” Mr. Brooks said on a call with analysts Tuesday. “That being said, with regards to the [Alberta Petroleum Marketing Commission] contract, just like we would do with any customer, it was negotiated in good faith and we feel good about it.”

CP said its agreement with the province protects its investment and costs of capital required to move the oil, although the railway intends to see the contract fulfilled.

Each contract we have is structured a little differently … but the fundamentals of those contracts are designed to backstop our investments, our costs of capital related to those contracts. We feel good about them,” Mr. Brooks said. “We spent a fair bit of time working with the Alberta government putting this contract together. I didn’t do it to have it ripped up.”

On the call with analysts, Mr. Creel said the fatal crash had a deep impact on the company and its 13,000 employees.

“As you can imagine, as a leader, there can never be a worse call to receive than the one I received that morning to notify me of that tragic accident,” he said. “It’s heartbreaking for immediate family members as well as the CP family members. Rest assured our CP family members will forever be remembered and honoured.

"Beyond the loss of life, it happened in a very busy part of our network in very challenging conditions. This incident led to what became one of our toughest months and quarters in my railroading experience as well as the company’s,” he said referring to extreme cold weather that hurt the railway’s performance by slowing traffic.

For the rest of 2019, CP expects costs to decline as the weather improves. CP reiterated its guidance for freight volumes, measured by revenue per tonne miles, to increase by about 5 per cent, and adjusted per-share profit growth to exceed 10 per cent.

Mr. Creel said the company has hired a specialist to use data analytics to target network areas for investment, as well as rail-car performance and safety.

CP’s share price is up by 20 per cent this year, lagging the 25-per-cent gain of rival Canadian National Railway Co. and beating the S&P/TSX Composite Index’s rise of 16 per cent.

Editor’s note: (April 24, 2019) An earlier version of this article incorrectly said Canadian Pacific Railway Ltd.’s operating ratio was 69.5 per cent in the first quarter, when it was in fact 69.3 per cent. This version has been corrected.

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