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Canadian Pacific Railway Ltd. delivered stronger-than-expected quarterly results Wednesday, but warned its recovery out the recession will remain choppy throughout the remainder of the year.
The country's No. 2 railway said its volumes continued to grow in the second quarter, up 20 per cent compared to the same period last year.
But Fred Green, CP chief executive officer, said there is still a lot of volatility in the railway's shipments on a week-to-week basis. He said uncertainty in the broader economy, and tougher year-over-year comparisons, should see volume growth moderate in the second half.
"We continue to see significant volatility in weekly demand," he said. "This makes for a challenging operating environment."
Adding to the uncertainty is that the railway's metallurgical coal and potash shipments are increasingly being based on quarterly, or even monthly contracts, Green said.
"When people have gone from a year-long, or multi-year pricing agreement, back to 30 or 90 days, they can't give us the visibility of what sale will occur to what country at what point," he said. As a result, CP has been forced to be more nimble in its operations, he added.
"We are preparing to move it, albeit not perfectly smooth every day of the week, or every week of the month, or every month of the quarter," Green said. "We'll figure out how to work it and we've shown our ability to work it."
The news comes as CP reported a 23-per-cent increase in its second-quarter earnings Wednesday. The company said it earned $166.6 million during the quarter, or 98 cents a share, compared to a year ago. Excluding one-time items, CP earned 92 cents a share, well ahead of the 85 cents a share that analysts had expected. Revenue was up 20 per cent to $1.23 billion on the improved traffic.
The results included a $9-million hit, or 12 cents a share, incurred during the quarter due to flooding in Alberta and Saskatchewan that forced CP to reroute some of its trains and crews over an 11-day period in June.
David Tyerman, Canaccord Genuity analyst, said the better-than-expected results stem from CPR's improved costs and operating margin.
"This is a theme that has been going on across all industries, whether it be rails, autos, airlines, or whatever," he said. "They were all cutting their costs during the downturn, and when the volumes return, you get some upside surprises."
Last week, Canadian National Railway Co. delivered a stronger-than-expected result that took the company shares to an all-time high.
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