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A Canadian Pacific Rail maintenance worker climbs onto a locomotive at the company's Port Coquitlam yard east of Vancouver on May 23, 2012.DARRYL DYCK/The Canadian Press

Canadian Pacific Railway Ltd. has slashed its earnings outlook for the rest of the year as the COVID-19 pandemic has caused the North American economy to slow and rail shipments to plummet.

The Calgary-based railway reported its first-quarter results on Tuesday and said it expects revenue ton miles will fall by about 5 per cent this year, while adjusted profit will be flat compared with 2019.

Keith Creel, CP’s chief executive officer, told analysts on a conference call the company’s strong balance sheet and ample liquidity will ensure the company survives the crisis and emerges in good shape. “We’re not panicked, we’re not distracted, we’re prepared,” Mr. Creel said.

CP, Canada’s second-largest railway, said its profit for the first quarter ended March 31 fell by 4 per cent to $409-million, or $2.98 a share, from $434-million ($3.09 a share) in the first quarter of 2019. Revenue rose by 16 per cent to $2.04-billion, the railway said in financial results released after markets closed on Tuesday.

The first quarter included several weeks of sporadic protests that blocked railways across Canada in support of the Wet’suwet’en hereditary chiefs, who oppose the $6.6-billion Coastal GasLink natural gas pipeline through their territory in British Columbia to the Pacific coast.

The COVID-19 outbreak has devastated economies and capital markets. The deadly virus has caused a steep plunge global economic activity, as millions of people stay home amid travel restrictions and business shutdowns.

Benoît Poirier, a Desjardins Securities analyst, said Canada’s railways have been hit by steep declines in shipments of autos and parts, oil and sand used in natural gas extraction. But he said bulk commodities – Canadian grain, coal, potash and sulphur – have held up “so far.”

Canadian rail freight volumes have outperformed the broader North American market this year. Canadian carloads were down by 14 per cent in the week ended April 11, and by 4 per cent year-to-date compared with the same period in 2019 from, the Association of American Railroads said. But U.S. rail traffic for the week ending April 11 fell by 22 per cent, and by 7 per cent in the first 15 weeks of 2020, compared with a year ago.

“The pandemic is affecting firms in every industry, and railroads are no exception,” said John Gray, senior vice-president of the rail lobby group. “When rail customers suffer a drop in demand for their products, their need for transportation services declines as well, and that negatively impacts rail volumes.”

Christian Wetherbee, a stock analyst with Citigroup Inc., said it is far too early to say when the plunge in freight demand will stop, “but it’s worth watching closely, as signs of stabilization and the respective depth of declines will be critical for near-term stock performance.”

CP’s share price crashed along with the broader market in March but has recovered some of the losses in recent days for a decline of about 8 per cent for the year to date. The S&P/TSX Composite Index has fallen by close to 16 per cent.

An end to the plunge in rail freight volumes is not far off, but it is tough to predict when the recovery will begin, said Fadi Chamoun, a BMO Capital Markets analyst. “We sense that the level of demand activities of pre-COVID-19 may not return until sometime later in 2021," he said.

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