Canadian Pacific Kansas City Ltd. CP-N reported its first financial results as a combined railway on Thursday, with revenues of $3.2-billion and profit of $1.3-billion, but signalled that its increased heft is no bulwark against economic uncertainty.
Keith Creel, CPKC’s chief executive officer, said he is sticking with an earlier forecast for mid-single-digit growth in profit, despite a “challenging quarter” amid softer demand and wider economic uncertainty.
“This is about the long game, it’s not about the first quarter of a new company,” Mr. Creel said on a conference call with analysts on Thursday.
Declining shipments of grain, potash and crude oil helped reduce CPKC’s carloads in the second quarter by 2 per cent, measured on a combined basis, from the year-ago quarter. The adjusted per-share profit of 83 cents fell short of analyst expectations.
A 13-day strike by 7,500 workers at B.C.’s ports – including Vancouver and Prince Rupert – halted shipments of consumer goods and other imports. The strike has ended but its impact is still rippling through the economy.
John Brooks, chief marketing officer, said the port strike cost CPKC $80-million in revenue, much of which he hopes to claw back in the coming quarters.
CP completed its US$27-billion takeover of Kansas City Southern on April 14, two weeks into the second quarter. The deal, which CP won after a bidding war with Canadian National Railway Co., created the first single-line rail network that connects Canada, the United States and Mexico. The 32,000-kilometre railway links a cross-Canada railway with a north-south line that reaches agricultural and industrial regions of the U.S. and Mexico, as well as ocean ports.
“We’re just 105 days old but I’m extremely proud of the combination so far,” Mr. Creel said.
The U.S. economy grew at a 2.4-per-cent clip in the first half of 2023, exceeding expectations and calming fears of a recession. The Canadian economy is expected to underperform that of the U.S., although concerns of a major slowdown here have also dimmed.
Still, the dip in demand for rail freight is being felt across the industry.
The number of rail cars hauled by major North American carriers fell by 4.2 per cent in the first 29 weeks of the year, compared with the same period a year ago, according to the Association of American Railroads. Rail traffic has been weighed down by declines in containerized shipments, which fell in number by 6.3 per cent in the week ending on June 22, from the same week in 2022.
On Tuesday, Montreal-based CN CNR-T posted a profit of $1.16-billion, a 12-per-cent drop it blamed on reduced demand for freight because of Canadian wildfires and economic conditions.
CPKC’s stock price has risen by 7 per cent on the Toronto Stock exchange this year. CN’s share price has fallen by 3 per cent.