Skip to main content

After a frustrating first half, Fred Green is determined to have Canadian Pacific Railway Ltd. stick as closely as possible to delivery schedules, come rain or shine.

Calgary-based CP suffered through brutal winter weather in the Rockies in the first quarter, notably avalanches that disrupted freight shipments in Western Canada. Then flooding in Saskatchewan, Manitoba and North Dakota ruined what should have been a recovery phase in the second quarter.

"This is a service-sensitive business and we caused some apprehension amongst a subset of our clients, based on our difficult first quarter in particular, and then inconsistency in the second quarter, when the floods came and went," Mr. Green said Wednesday during a conference call with industry analysts.

CP, gearing up for whatever Mother Nature throws at the railway in future, intends to strengthen backup plans to ensure trains stay on track and increase staffing levels as required.

"We're positioned and ready to deliver second-half earnings growth and productivity improvements," Mr. Green said, adding that CP will have "locomotives and new hires coming on stream."

CP will be gradually improving and extending its sidings – sections of track located to the side of main rail lines. "With the amount of locomotives we have today and the crew capabilities and the agreements we have, we can go forward. We just have to systematically march our way through the critical corridors with these siding extensions," Mr. Green said.

Operating longer trains will also help make the railway more efficient, he added.

"We're trying to ensure we have enough resources in almost any circumstances," said Mr. Green, who offered assurances of timely service after CP announced that its second-quarter profit fell 23 per cent to $128-million. Quarterly revenue rose 2.5 per cent to $1.26-billion, but operating expenses climbed 8 per cent to $1.03-billion.

"We were under the black cloud and we paid the price for it," he said.

CP's adjusted earnings per share of 75 cents exceeded second-quarter expectations, though analysts had to chop their original forecasts as spring flooding worsened. The freight carrier restored full service across its network on July 12.

RBC Dominion Securities Inc. analyst Walter Spracklin said CP had some part of its network down for two-thirds of the April-to-June period, with 90 separate outages in total. "That's quite phenomenal," he said.

Canada's second-largest railway posted a second-quarter operating ratio of 81.8 per cent, a key indicator of productivity that measures operating costs as a percentage of revenue. A lower operating ratio is better, and CP's ratio worsened from 77.8 per cent in the second quarter of 2010.

By contrast, Montreal-based Canadian National Railway Co. boasted an industry-leading operating ratio of 61.3 per cent for the three months ended June 30. Overcoming weather-related delays, CN's second-quarter profit rose 1 per cent to $538-million.

On the plus side for CP, first-half freight revenue from coal, sulphur and fertilizer improved.

"The coal volumes have been a little soft lately as they go through a little bit of summer shutdown stuff. But I think you're going to start to see those ramp back up probably around Aug. 1," Mr. Green said. "In potash, we're actually running ahead of the forecast."

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe