CP Rail CEO urges PM-elect Trudeau to ‘just leave us alone’
The Calgary-based company and its larger rival, Canadian National Railway, were highly critical of Harper's meddling
CALGARY—The head of Canada’s second-largest railway urged the country’s incoming Liberal government to stop what is says is Ottawa’s history of meddling in its operations.
Canadian Pacific Railway CEO Hunter Harrison said the Conservatives and prior Liberal governments haven’t done much in the past to help the railway.
“Just leave us alone, give us a level playing field and let us run our business,” Harrison said Tuesday during a conference call about its third-quarter results a day after Justin Trudeau led the Liberals to a majority government.
The Calgary-based company and its larger rival, Canadian National Railway (TSX:CNR), were highly critical of the Tories for imposing fines and setting minimum grain volume requirements last year following backlogs in moving a bumper grain crop.
Harrison said he hopes the new government won’t again regulate Western grains.
“I think they’ve got larger issues than to worry about than rails in Canada,” he said, adding that the country has been best rail system in the world.
Canadian Pacific beat analyst expectations as it posted stronger adjusted profits by continuing to control costs while facing weaker volumes.
CP’s adjusted profits were $427 million or $2.69 per share, which was up 16 per cent from the same time last year and two cents above an estimate compiled by Thomson Reuters.
Revenues rose to $1.709 billion in the three months ended Sept. 30, up two per cent from the third quarter of 2014.
Analysts had estimated $2.67 per share of adjusted earnings and $1.686 billion of revenue.
Net income decreased 19 per cent to $323 million or $2.04 per diluted share _mainly because of the impact of foreign exchange fluctuations on the value of the debt it owes.
The company said it plans to cut up to $400 million in capital spending next year and will extend its holiday from buying locomotives a few more years until at least 2018.
Cutting costs will further improve operating efficiencies to ensure double-digit EPS growth next year despite the weak economy, the company told analysts.
Measures being taken include running trains faster, running fewer locomotives and further reducing staff levels. The workforce is already down nine per cent from last year and 5,900 positions have been cut since Harrison joined the railway more than three years ago.
“There is no silver bullet there,” said chief operating officer Keith Creel. “It is rightsizing our assets relative to the business levels with a much more productive physical plant _ doing more with less effectively.”
CP’s adjusted operating ratio reached a low of 59.9 per cent in the quarter. But Harrison said he sees that dipping at least two or three more percentage points. Operating ratio measures a company’s expenses as a percentage of revenue where a lower number is better.
Meanwhile, CP announced it ratified a multi-year collective agreement with its 450 U.S.-based engineers represented by the Brotherhood of Locomotive Engineers and Trainmen.
The new hourly-rate agreement ends a mileage-based wage system from the steam engine era and provides CP with increased flexibility and transparency, while giving workers two consecutive days off and the best wages in the industry.
CP hopes the changes will also be adopted in Canada.
Creel said it will completely change the railway working environment by providing predictability about days offs.
“They got better quality of life, they’ve got more money in their chequing account. That is a powerful combination,” he said.