CP Rail boosts outlook ahead of patchy grain crop | So Good News
“We are facing a large crop”
Canadian Pacific Railway Ltd.’s revenue rose nearly 20 percent in the third quarter, and freight volumes are expected to climb even higher as shippers move a “top five all-time” grain harvest to the coast for export.
The grain crop in Western Canada is expected to reach 75.2 million tonnes this year, according to Statistics Canada. That would be about seven percent above the five-year average, CP Rail said, and well above last year’s drought-hit crop that was down 36 percent.
Grain exporters are eager to get as much of the crop as they can by train and onto world markets to take advantage of demand as food prices rise faster than they have in decades and the global food system is still reeling from the drought and war in Ukraine.
However, the shippers started the season frustrated by the number of grain cars they received from CP Rail and its main rival, the Canadian National Railway Co.
Reports released by the Ag Transport Coalition for the week of Sept. 18 showed that railroads were unable to deliver about 30 percent of the grain carloads requested. CP Rail’s fill rate was worse than average, with 39 percent of orders unfilled.
Since then, fill rates have steadily improved, with CN and CP combining to reach 81 percent fill in the latest report for the second week of October.
CP Rail CEO Keith Creel told financial analysts Oct. 26 that the railroad has hired 1,500 conductors since the beginning of the year and hit an “all-time” record for moving grain cars this fall, hitting 6,900 grain cars weekly in two separate weeks.
“We are facing a big crop. We have many expectations. We will meet expectations, he said. “When all is said and done, we’ve never been in better shape.”
Revenue at CP, Canada’s second-largest railway, rose 19 per cent to $2.31 billion in the quarter, from $1.94 billion last year, according to an Oct. 26 financial update. CP said the jump was partly due to a 31-pr. Increases in the volume of potash – a common ingredient in fertilizers – moved on the rail, amid a surge in global demand due to boycotts of Russian fertilizers in retaliation for the invasion of Ukraine.
CP moved 2 percent less grain in the quarter than last year, but marketing manager John Brooks said harvest demand only started in the final weeks of the third quarter, which ended Sept. 30.
“Volumes have now rapidly picked up as we move into Q4,” he said. CP Rail also expects to complete a four-year project in the fourth quarter to add 5,900 high-capacity grain cars to its fleet. “We will receive the last of them later this year.”
CN increases its profit forecast after record revenues in the third quarter
‘Very, very worrying’: Grain shippers fear railways will not be able to cope with large harvest
The railroad posted a 15 percent rise in profit for the quarter, with core adjusted earnings per share of $1.01 — in line with forecasts, RBC analyst Walter Spracklin said.
“Q3 was an in-line quarter for CP across all metrics; but the key from the call was the positive tone and strong guidance into Q4,” he wrote in a note to investors.
After hearings with a U.S. regulator this fall, CP still expects to receive a decision early next year on whether it can move forward with its $31 billion acquisition of Kansas City Southern — which would make CP the only railroad to run from Canada to Mexico.
“It was a fair process,” CP’s Creel said of the hearings at the Surface Transportation Board in Washington. “I’ll tell you, after listening to all the testimony, I’ve never been more convinced of the benefits this merger will create … This is an ideal merger.”
• Email: [email protected] | Twitter: Jake Edmiston
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