CP's profit soared on higher crude revenues despite 'toughest' of quarters: CEO
Heavy snow and freezing temperatures cooled Canadian Pacific Railway's first-quarter results
The head of Canadian Pacific Railway Ltd. says heavy snowfall and frigid temperatures cooled the company's quarterly results, resulting in lower tonnage numbers despite a boost in profits thanks in part to crude-by-rail revenues.
"What happened to us in February, especially in the first two weeks of March, was extraordinary," chief executive Keith Creel said of the weather.
"Momentum was interrupted. As a result, revenue growth was muted and … expenses increased," he told investors on a conference call Tuesday.
Creel stressed "one of the toughest … quarters in my experience as well as the company's," highlighting its lowest gross ton mileage — an industry metric measuring weight moved per mile — in eight years.
Chief financial officer Nadeem Velani cited "fuel inefficiency due to weather," and marketing head John Brooks said the ensuing network problems "hindered" grain volumes, though strong pricing allowed revenues to ramp up.
Crude-by-rail helps fuel rising profits
Despite the weather trouble, Canadian Pacific saw profits shoot up last quarter as crude-by-rail revenues increased and fuel costs declined.
Net income rose 25 per cent to $434 million in the quarter ended March 31, compared to $348 million in the same period in 2018, the Calgary-based company said.
Quarterly revenues jumped to $1.77 billion, up six per cent from $1.66 billion last year.
On an adjusted basis, year-over-year diluted earnings per share rose three per cent to $2.79 from $2.70, far short of analyst expectations of $3.01, according to Thomson Reuters Eikon.
Revenues for energy, chemicals and plastics jumped 18 per cent to $315 million amid surging demand from Asian markets in the first quarter.
Grain revenues, which have broken company records recently, rose six per cent to $380 million, and container traffic and coal nudged up three per cent and four per cent to $380 million and $158 million, respectively.
CP Rail's operating ratio, a key industry metric, hit 69.3 per cent, an increase of 180 basis points compared to last year.