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Researched by Industrial Info Resources (Sugar Land, Texas)--Canada's two major freight railways said they achieved second-quarter profit gains despite flat-to-falling revenues, falling shipment volumes and sluggish economic growth.
Canadian Pacific Railway Limited (CP) (NYSE:CP) (Calgary, Alberta) reported Tuesday that second-quarter net income rose to C$390 million ($301 million), up 12% over C$371 million ($209 million) for the same quarter in 2014. The profit gain was achieved despite a 2% drop in quarterly revenues to C$1.61 billion ($1.24 billion), according to the railway, which operates in both Canada and the U.S.
Industrial Info is tracking 22 active Canadian Pacific projects worth $1.11 billion. The Detroit/Windsor Replacement Rail Tunnel project has a total investment value of $400 million. The Continental Rail Gateway Coalition, with construction services firm MMM Group Limited (Toronto, Canada), are seeking permits for a 1.6-mile tunnel to replace the existing 100-year-old tunnel between Detroit, Michigan, and Windsor, Ontario. The high-clearance tunnel would accommodate double-stacked containers and multilevel rail cars. The Continental Rail Gateway Coalition consists of the Windsor Port Authority, Borealis Infrastructure (a division of the Ontario Municipal Employees Retirement System) and Canadian Pacific Railway. The project is scheduled to kick off in fourth-quarter 2015, with completion by the end of 2017.
CP reported C$255 million ($197 million) in revenue from shipments of Canadian grain, up 1%, but revenue from U.S. grain shipments were down 8% at C$106 million ($82 million). Revenue from chemicals and plastics shipments rose 10% to C$171 million ($132 million), but crude oil revenue fell 29% to C$81 million ($63 million). Revenue from shipments of metals, minerals and consumer products dropped 6% to C$160 million ($124 million). Domestic intermodal revenue fell 4% to C$192 million ($148 million), while international intermodal revenue rose 2% to C$153 million ($118 million).
Speaking during the company's earnings conference call, Chief Operating Officer Keith Creel said CP had to make more adjustments to cost and efficiencies due to weaker-than-expected demand in the second quarter. Second-quarter shipment volume was down 6% from the same quarter last year. The railway was operating with 700 less workers than it had at this time last year, he said, adding the railway will reduce the worker level by an additional 200 to 300 positions by the end of the year.
CP said it benefited from foreign exchange rates to the tune of C$9 million ($7 million) in the second quarter. Fuel prices were down 35% from second-quarter 2014, but Creel said CP "did not have any tail wind from fuel." Also, a change in Alberta's provincial income tax rate took a C$23 million ($18 million) bite out of CP's profits.
Looking forward, CP expects revenue growth to be 2% to 3% for the year, despite less volume. Senior Vice President of Marketing and Sales Tim Marsh said grain shipments are expected to increase in the third quarter. However, "we are looking at 50% reduction in our energy commodities for the year," he said, adding he was "cautiously optimistic" that crude margins will improve.
Creel said the implementation of remote control of locomotives at the railway's switchyards through the third quarter will result in savings of C$12 ($9 million) million per year.
CP's planned capital expenditures (capex) for 2015 are set at C$1.5 billion ($1.2 billion).
On Monday, Canadian National Railway (NYSE:CNI) (CN) (Montreal, Quebec) reported C$886 million ($682 million) in second-quarter net income, up nearly 5% from the same quarter last year, while revenues were flat at C$3.13 billion ($2.41 billion). The railway benefited from the weaker Canadian dollar against the U.S. dollar, and by cutting costs and improving efficiencies, company executives said. Chief Financial Officer Luc Jobin said operating costs were cut by C$100 million ($77 million), about 5% from last year. Also, about 600 employee layoffs have been made this year so far, according to the company.
Industrial Info is tracking 28 active CN projects worth $1.01 billion, nearly all of which involve system rehabilitations and upgrades. With a total investment value of $30 million, the Duluth Steelton Hill double-track addition at the railway's intermodal terminal in Minneapolis, Minnesota, involves construction of a second, 4.5-mile mainline track next to the existing mainline track, as well as removal of a railway bridge and realignment of existing track. Construction kicked off in August 2014, with completion set for fourth-quarter 2016. Consulting engineering firm Alfred Benesch and Company (Chicago, Illinois) and Golder Associates (Toronto, Ontario) are participating in the project.
Capital expenditures by CN are expected to run about C$2.7 billion ($2.1 billion).
CN serves mid-western and southern states in the U.S., as well as Canada. CN executives said the railway saw a 26% drop in coal revenue, and a 5% drop in metals and minerals revenues. Petroleum and chemicals revenues were up 4%, automotive revenues rose 17% and intermodal revenues rose 2%, while revenues from grain and fertilizer shipments fell 7%.
The railway saw a large decrease in frac sand, drilling pipe and crude oil shipments. Looking forward, "we are no longer counting on growth in energy-related shipments," said Jean-Jacques Ruest, chief marketing officer for CN. Overall, the railway is expected to experience flat revenues for the remainder of the year, company executives said.
Other North American railways have reported mixed second-quarter results.
On July 17, Kansas City Southern (NYSE:KSU) (KCS) (Kansas City, Missouri) said its second-quarter net income fell nearly 14% to $112 million from the same period last year, as revenues dropped by 10% to $586 million. Second-quarter revenue fell in all commodity groups except the Chemicals & Petroleum segment, which rose 1%, KCS reported.
KCS is a railway holding company with railroad investments in the central and south U.S., Mexico and Panama. Industrial Info is tracking seven KCS projects worth $474.5 million, including the grassroot Monterrey-Nuevo Laredo railway in Mexico. Currently in the preliminary design phase, the 200-kilometer project would connect Monterrey and Nuevo Laredo, to move products from a new KIA Motors (Seoul, South Korea) plant in Monterrey. Construction kick-off would occur in first-quarter 2016, with completion in the fourth-quarter of that year.
Eastern U.S. CSX Corporation (NYSE:CSX) (Jacksonville, Florida) on July 15 reported $553 million in second-quarter net earnings, a 5% increase over $529 million in the same quarter a year earlier.
For related information, see a 5% increase in second-quarter earnings, see July 16, 2015, article - CSX Railway: Third-Quarter Domestic Coal Shipments to Continue to Fall.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Canadian Pacific Railway Limited (CP) (NYSE:CP) (Calgary, Alberta) reported Tuesday that second-quarter net income rose to C$390 million ($301 million), up 12% over C$371 million ($209 million) for the same quarter in 2014. The profit gain was achieved despite a 2% drop in quarterly revenues to C$1.61 billion ($1.24 billion), according to the railway, which operates in both Canada and the U.S.
Industrial Info is tracking 22 active Canadian Pacific projects worth $1.11 billion. The Detroit/Windsor Replacement Rail Tunnel project has a total investment value of $400 million. The Continental Rail Gateway Coalition, with construction services firm MMM Group Limited (Toronto, Canada), are seeking permits for a 1.6-mile tunnel to replace the existing 100-year-old tunnel between Detroit, Michigan, and Windsor, Ontario. The high-clearance tunnel would accommodate double-stacked containers and multilevel rail cars. The Continental Rail Gateway Coalition consists of the Windsor Port Authority, Borealis Infrastructure (a division of the Ontario Municipal Employees Retirement System) and Canadian Pacific Railway. The project is scheduled to kick off in fourth-quarter 2015, with completion by the end of 2017.
CP reported C$255 million ($197 million) in revenue from shipments of Canadian grain, up 1%, but revenue from U.S. grain shipments were down 8% at C$106 million ($82 million). Revenue from chemicals and plastics shipments rose 10% to C$171 million ($132 million), but crude oil revenue fell 29% to C$81 million ($63 million). Revenue from shipments of metals, minerals and consumer products dropped 6% to C$160 million ($124 million). Domestic intermodal revenue fell 4% to C$192 million ($148 million), while international intermodal revenue rose 2% to C$153 million ($118 million).
Speaking during the company's earnings conference call, Chief Operating Officer Keith Creel said CP had to make more adjustments to cost and efficiencies due to weaker-than-expected demand in the second quarter. Second-quarter shipment volume was down 6% from the same quarter last year. The railway was operating with 700 less workers than it had at this time last year, he said, adding the railway will reduce the worker level by an additional 200 to 300 positions by the end of the year.
CP said it benefited from foreign exchange rates to the tune of C$9 million ($7 million) in the second quarter. Fuel prices were down 35% from second-quarter 2014, but Creel said CP "did not have any tail wind from fuel." Also, a change in Alberta's provincial income tax rate took a C$23 million ($18 million) bite out of CP's profits.
Looking forward, CP expects revenue growth to be 2% to 3% for the year, despite less volume. Senior Vice President of Marketing and Sales Tim Marsh said grain shipments are expected to increase in the third quarter. However, "we are looking at 50% reduction in our energy commodities for the year," he said, adding he was "cautiously optimistic" that crude margins will improve.
Creel said the implementation of remote control of locomotives at the railway's switchyards through the third quarter will result in savings of C$12 ($9 million) million per year.
CP's planned capital expenditures (capex) for 2015 are set at C$1.5 billion ($1.2 billion).
On Monday, Canadian National Railway (NYSE:CNI) (CN) (Montreal, Quebec) reported C$886 million ($682 million) in second-quarter net income, up nearly 5% from the same quarter last year, while revenues were flat at C$3.13 billion ($2.41 billion). The railway benefited from the weaker Canadian dollar against the U.S. dollar, and by cutting costs and improving efficiencies, company executives said. Chief Financial Officer Luc Jobin said operating costs were cut by C$100 million ($77 million), about 5% from last year. Also, about 600 employee layoffs have been made this year so far, according to the company.
Industrial Info is tracking 28 active CN projects worth $1.01 billion, nearly all of which involve system rehabilitations and upgrades. With a total investment value of $30 million, the Duluth Steelton Hill double-track addition at the railway's intermodal terminal in Minneapolis, Minnesota, involves construction of a second, 4.5-mile mainline track next to the existing mainline track, as well as removal of a railway bridge and realignment of existing track. Construction kicked off in August 2014, with completion set for fourth-quarter 2016. Consulting engineering firm Alfred Benesch and Company (Chicago, Illinois) and Golder Associates (Toronto, Ontario) are participating in the project.
Capital expenditures by CN are expected to run about C$2.7 billion ($2.1 billion).
CN serves mid-western and southern states in the U.S., as well as Canada. CN executives said the railway saw a 26% drop in coal revenue, and a 5% drop in metals and minerals revenues. Petroleum and chemicals revenues were up 4%, automotive revenues rose 17% and intermodal revenues rose 2%, while revenues from grain and fertilizer shipments fell 7%.
The railway saw a large decrease in frac sand, drilling pipe and crude oil shipments. Looking forward, "we are no longer counting on growth in energy-related shipments," said Jean-Jacques Ruest, chief marketing officer for CN. Overall, the railway is expected to experience flat revenues for the remainder of the year, company executives said.
Other North American railways have reported mixed second-quarter results.
On July 17, Kansas City Southern (NYSE:KSU) (KCS) (Kansas City, Missouri) said its second-quarter net income fell nearly 14% to $112 million from the same period last year, as revenues dropped by 10% to $586 million. Second-quarter revenue fell in all commodity groups except the Chemicals & Petroleum segment, which rose 1%, KCS reported.
KCS is a railway holding company with railroad investments in the central and south U.S., Mexico and Panama. Industrial Info is tracking seven KCS projects worth $474.5 million, including the grassroot Monterrey-Nuevo Laredo railway in Mexico. Currently in the preliminary design phase, the 200-kilometer project would connect Monterrey and Nuevo Laredo, to move products from a new KIA Motors (Seoul, South Korea) plant in Monterrey. Construction kick-off would occur in first-quarter 2016, with completion in the fourth-quarter of that year.
Eastern U.S. CSX Corporation (NYSE:CSX) (Jacksonville, Florida) on July 15 reported $553 million in second-quarter net earnings, a 5% increase over $529 million in the same quarter a year earlier.
For related information, see a 5% increase in second-quarter earnings, see July 16, 2015, article - CSX Railway: Third-Quarter Domestic Coal Shipments to Continue to Fall.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
