CALGARY, Alberta — Canadian Pacific’s fourth-quarter earnings declined due to a combination of harsh weather, a smaller Canadian grain crop, and costs related to the Kansas City Southern merger.
CEO Keith Creel said on the company’s earnings call Thursday afternoon that while railroading is an outdoor sport, the extreme conditions in November and December tested the CP’s team’s “commitment, grit, and determination.”
Catastrophic November flooding significantly damaged the CP and Canadian National main lines in the directional running zone across British Columbia. It was a “miraculous effort,” Creel said, to get the railroad open in just eight days. Then the weather in December turned cold, affecting train length.
CP’s quarterly results were “an exceptional outcome” given the challenges the railway faced, Creel says.
For the fourth quarter, operating income fell 10%, to $832 million, as revenue increased 1%, to $2 billion. Earnings per share, adjusted for one-time items including costs related to the merger with Kansas City Southern, fell 6%, to 95 cents. The operating ratio increased 5.3 points to 59.2%. Quarterly volume declined 10% on a carload basis, while revenue ton miles fell 11%.
Grain carloads fell 25% due to the poor crop in Canada, while intermodal traffic slumped 9%, and automotive business was down 32%. Potash, fertilizer, and metals, minerals, and consumer products traffic all posted gains for the quarter.
For the year, CP’s operating income slipped 3%, to $3.2 billion, as revenue grew 4%, to $7.9 billion. Earnings per share, adjusted for the impact of one-time items, increased 7%, to $3.76. The railway’s operating ratio, also adjusted for one-time items, was 57.6%, a half-point increase from 2020. Volume for the year was up 1% on the basis of total carloads and containers, or down 1% when measured by revenue ton-miles, the favored metric of the Canadian railways.
CP did not provide a financial outlook for the year due to uncertainties that include the pandemic, ongoing disruptions to the global supply chain, and the regulatory review of the KCS merger.
But Creel did say CP expects traffic volume to improve in the second half of the year, which will produce growth in revenue ton miles, profit margin improvement, and earnings growth for the full year.
