CP Rail rises despite lower 4Q profits
Source: By Jamie Sturgeon, Financial Post
Published: January 27th 2009

Canadian Pacific Railway Ltd. said Tuesday profit slipped 41% in the fourth quarter due to certain one-time items the railway benefited from in the year-earlier quarter, primarily a tax credit.

Full-year profit was also down, the railway said, adding it has cut capital investment for 2009.

The Calgary-based railway (CP/TSX) said net income for the three months ended Dec. 31 was $201-million ($1.29 a share) compared with $342-million ($2.21) in the fourth quarter of 2007.

Excluding one-time items like a "large" future income tax credit as well as a foreign exchange gain that were recorded in fiscal 2007, diluted profit from continuing operations came in at $1.15 a share last quarter compared to $1.19, down 3.3%.

Still, the earnings of Canadaís No. 2 railroad managed to beat the Streetís expectations of $1.09 a share, driven by a weak loonie increasing the value of its U.S.-based revenue, a larger-than-expected contribution from its recently acquired Dakota, Minnesota, & Eastern, and robust pricing.

Revenues for the period increased 9% to $1.3-billion despite operating expenses rising 13% to $833-million, CP said.

"The impact of a stronger U.S. dollar in the fourth quarter increased both freight revenues and operating expenses," the company said in a news release.

Full-year profit was down 35% to $619-million from $946-million due to the one-time benefits recorded through the four quarters of 2007.

Revenue for fiscal 2008 increased 5% to $4.9-billion while total operating expenses climbed 9% to $3.9-billion.

CP said spending for the this year would total between $800-million and $820-million, down 20% from fiscal 2008.

The railway also said it anticipates defined benefit contributions over the next two years to climb significantly.