CP Rail sees profit drop
Source: Jamie Sturgeon, Financial Post with Reuters
Published: October 28th 2008

Canadian Pacific Railway Ltd. said Tuesday currency fluctuations, high fuel costs and bad asset-backed securities investments drove down earnings in the third quarter.

CP said net income was $173-million ($1.11 a share), down from $219-million ($1.41) in the year-earlier quarter, "primarily due to foreign exchange impacts on long-term debt" and "charges associated with the revaluation of an investment in asset-backed commercial paper [ABCP]."

Excluding those two one-time items, diluted earnings still declined 2%, the company said. The results are a penny shy per share of analysts' expectations.

Costs also weighed on the bottom line, climbing 11% to $962-million, with the price of fuel "the single largest driver," increasing fuel expenses by 49% in the quarter ended Sept. 30, CP said in a news release.

Canadian Pacific, which has operations in both Canada and the northern United States, said it had revenues of $1.26-billion in the quarter, up from $1.19-billion a year ago.

CP said it had a foreign exchange loss on long-term debt of $3-million (a gain of $6-million after tax) in the quarter, compared with a foreign exchange gain on long-term debt of $64-million ($43-million after tax) in the third quarter of 2007.

CP also said it adjusted the estimated fair value of an ABCP investment and took a charge of $22-million ($15-million after tax) and classified the investments as long-term.

The railway said its operating ratio, a transportation industry measure of efficiency, was 76%, compared to 72.9% a year ago.