Canadian Manufacturing

CP Rail cuts outlook while two board members, including chair, resign

Company reassesses 2015 projections, sharply cutting financial expectations

CP wants Transport Canada to mandate inward-facing cameras in locomotives. PHOTO CP

Canadian Pacific railway locomotive. PHOTO CP

CALGARY—Canadian Pacific Railway chairman Gary Colter and board member Krystyna Hoeg have left their positions on the board as a result of a governance dispute. The company announced the departures July 21 as it reported its earnings for the second quarter of 2015.

In response to the resignations, the board elected Andrew Reardon chairman of the board, and appointed Anthony Melman and Rebecca MacDonald to CP’s board.

It has been a tumultuous few months for CP, as the high-profile legal battle over the Lac-Megantic disaster settlement fund has continued.

The company reported a record quarterly high of $390 million in net income, or $2.36 per diluted share, an improvement of 12 percent, while revenues were little changed at $1.65 billion.

“CP remains disciplined during this period of economic uncertainty in identifying opportunities to control costs and improve efficiency to offset near-term headwinds,” CEO, Hunter Harrison, said in a statement. “CP’s achievement on the bottom line came even as a sluggish North American recovery and stubborn global economic softness weighed on commodity prices, forcing producers to reduce output and cut shipments.”

Nevertheless, the company reassessed its revenue outlook for 2015. CP now expects revenue growth to be 2-3 per cent, compared with 7-8 per cent announced in April. The news sent CP shares down sharply.

The company also addressed concerns that had arisen about Harrison’s health.

“Mr. Harrison recently had stents implanted in order to improve circulation and reduce cramping in his legs. In addition, Mr. Harrison is recovering from a mild bout of pneumonia which has restricted his travel. His full recovery is expected in the coming weeks,” the company said.

“He remains actively engaged in the company’s business, but elected not to travel to Calgary to participate in this morning’s earnings call,” it added.

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