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Train profits derailed (November 06, 2001)

MONTREAL, Que. -- Canada's leading rail freight movers are showing signs the economic slowdown as lower traffic lev...

MONTREAL, Que. — Canada’s leading rail freight movers are showing signs the economic slowdown as lower traffic levels begin to eat into their revenues.

Canadian Pacific Railway (CPR) warned investors yesterday they could expect sharply lower profits for this quarter, at the same time the chief executive of Montreal-based Canadian National Railway (CN) announced his company will maintain profit levels, but not without more cost-cutting.

CPR, recently spun off from Canadian Pacific Ltd., is calling for basic earnings of 66 cents a share for the fourth quarter, compared with $1.62 a year earlier. Chief executive Robert Ritchie tells local media the company’s higher debt load since it was spun off from parent CP is what will drive earnings to the cellar.

On the operating side, he said shipments of coal, forest products and intermodal containers will be strong in the coming months, but more than offset by declines in grain, fertilizer and industrial products like steel, plastic pellets and cement.

CN chief executive Paul Tellier told the same group of investors in New York that revenues at the larger railway will definitely drop during the next few quarters, but he believes CN will be able to maintain earnings by cutting expenses.

Analysts expect CN to earn $1.28 a share in the current quarter, and CN spokesman Mark Hallman says, “We’re comfortable with that. We have no plan to revise downwards.” This would actually be an improvement from the $1.20 earned this time last year.

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