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COMPETITION WATCH: CP reports strong first quarter, despite harsh winter weather

CALGARY, Alta. -- Canadian Pacific (CP) Railway reported net income growth of 18% to $129 million during the first ...

CALGARY, Alta. — Canadian Pacific (CP) Railway reported net income growth of 18% to $129 million during the first quarter of 2007 despite having to cope with a harsh winter.

The railways operating ration improved to 79.5% and freight revenue was up 2.2% to $1.09 billion during the first quarter.

“CP’s team delivered adjusted diluted EPS growth of 8% in the face of extremely difficult, weather-related operating conditions that challenged the entire transportation chain,” said Fred Green, CP’s president and CEO. “Our disciplined execution of the integrated operating plan, in addition to the investments in network capacity we’ve made in our Western corridor, paid major dividends for us this quarter. We were able to recover from each event as it occurred and keep our customers’ shipments moving.”

Green credited the railways focus on network fluidity for keeping freight moving in the face of severe winter weather.

With the recent return to more normal operating conditions, we expect to move freight volumes with increasing efficiency and improved service levels through the balance of the year,” he said.

CP moved higher volumes of sulfur and fertilizer, and also experienced an increase in intermodal and automotive shipments. Softness in the forestry sector offset some of those gains, however. Operating expenses remained flat during the first quarter of 2007, despite the cold winter. The railway is optimistic as it looks ahead to the rest of 2007.

“CP is on track to deliver solid performance in 2007,” said Mike Lambert, chief financial officer. “A reduction in our cash pension funding requirement to approximately $100 million, down from our original $150 million estimate given in the Fall of 2006, has improved our free cash outlook to more than $300 million in 2007, up from $250 million estimated previously. Our diverse commodity portfolio, a strong yield program and continued vigilance around cost containment will drive our projected EPS growth of 9 to 13 per cent.”

The railway says it plans to increase revenue by 4-6% in 2007.

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