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A Canadian Pacific Railway employee walks along the side of a locomotive in a marshalling yard in Calgary, on May 16, 2012.Jeff McIntosh/The Canadian Press

Canadian Pacific Railway Ltd. hauled a record amount of oil in the fourth quarter as the Calgary-based carrier posted a 26-per-cent rise in profit that defied an industry-wide slump in demand for rail freight.

CP said it hauled 36,000 rail cars of oil in the final three months of 2019, posting a 33-per-cent rise in revenue in its energy, chemicals and plastics segment.

John Brooks, CP’s chief marketing officer, said CP expects to match and exceed that pace this year, as the government of Alberta allows private shippers to take over crude-by-rail contracts signed by the previous government. A lack of pipeline capacity in Canada’s oil patch has caused an oil bottleneck that has caused a discount or spread in the value of Alberta oil compared with U.S. crude, driving the appeal of shipping by rail.

Demand for “crude by rail can be pretty volatile, but if things hold in the [price] spread range that we see today we could see some acceleration,” Mr. Brooks said on a Wednesday conference call with analysts to discuss the financial results.

CP made a profit of $664-million, or $4.82 a share, in the three months ending on Dec. 31, compared with $545-million ($3.83), in the third quarter of 2018.

Revenue increased by 3 per cent to $2-billion, CP said. Cargo volumes measured by revenue ton miles declined by 3 per cent, while carloads fell by 1 per cent.

“Global economic uncertainty caused by geopolitical and macroeconomic challenges slowed rail volumes across North America," CP said in a statement accompanying the financial results, which were released before markets opened on Wednesday.

For the full year, revenue at Canada’s second-biggest rail carrier rose by 7 per cent to $7.8-billion, and profit increased by 29 per cent to $2.4-billion ($17.52) from 2018.

For 2020, CP is forecasting earnings per share growth of high single digits to low double digits. CP said part of this optimism stems from expectations for continued growth in demand for oil by rail. This business is expected to see a boost in volumes beginning in 2021, when Gibson Energy Inc. said in December it will build a US$200-million terminal in Hardisty, Alta., that will receive oil sands bitumen by pipeline, remove the dilutive chemicals and pump it into rail cars for shipment to a refinery in Port Arthur, Tex.

CP’s Mr. Brooks said the project, served exclusively by CP, will have the capacity to fill two trains a day, providing a long-term revenue stream at a cost that is competitive with pipeline transportation.

CP’s quarterly results beat analyst expectations, and its 2020 guidance is in line with the consensus outlook. “CP has led the industry in volume growth for the last two years – and based on guidance provided, is lining up to do so again in 2020,” said Walter Spracklin, a stock analyst at Royal Bank of Canada.

Investors reacted to CP’s financial results by driving up the share price by almost 2 per cent on the Toronto Stock Exchange.

The share price is up by about 26 per cent in the past 12 months, outpacing the gain on the broader TSX composite index.

Trade uncertainty and weak industrial demand has dampened railway freight volumes in recent months. CP’s coal-hauling volumes fell by 10 per cent in the fourth quarter, compared with a year ago, and potash sales are down by 26 per cent. Metals, minerals and consumer products revenue fell by 14 per cent.

CP rival Canadian National Railway Co. on Tuesday said profit fell by 22 per cent in the fourth quarter, amid weak freight demand and an eight-day strike by 3,200 conductors.

The number of combined carloads pulled by CN and CP in the first three weeks of 2020 is down by 7 per cent, compared with a year ago. The volumes compiled by the American Association of Railroads, which include the companies’ U.S. operations, show all freight categories declined, except for petroleum and farm products. Motor vehicles and coal posted the steepest drop, of more than 21 per cent.

In the U.S., rail freight volumes fell by 8 per cent in the first three weeks of 2020, compared with a year ago, excluding the U.S. operations of CN and CP.

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