Calgary-based Canadian Pacific Railway reported another record year in 2018, supported by best-ever fourth quarter revenues and strong demand from shippers in every major business sector, including agriculture.
CP’s revenues for the three-month period ending Dec. 31 were $2 billion, up five percent from the fourth quarter of 2017, the company announced in a Jan. 23 earnings report.
Full-year 2018 revenues were up 12 percent to a record $7.138 billion. Adjusted earnings per share (EPS) in the fourth quarter were up 41 percent to $4.55.
The company is projecting double-digit EPS growth in 2019.
“By every financial measure, literally every financial measure , this has been a record year both on a quarterly basis and a yearly basis,” said chief executive officer Keith Creel.
“We entered 2019 with tremendous momentum. Rest assured we’re poised for another record year.”
John Brooks, the company’s chief marketing officer, said fourth quarter 2018 freight revenues were 18 percent higher than the same period in 2017.
On a full-year basis, revenues were up in every line of business, he added.
Fourth quarter freight revenues were up five percent in grain, 24 percent in potash, 18 percent in fertilizers and 46 percent in energy and chemicals.
“Canadian grain volumes were up seven percent (on the quarter), surpassing last year’s record levels,” Brooks said.
But strength in Canadian grain movement was partially offset by weakness in the company’s U.S. grain portfolio, where volumes declined 18 percent.
Fewer U.S. grain shipments to the U.S. Pacific Northwest was a key factor.
“As we enter 2019, we expect continued strength in Canadian grain through the first half of the year, given solid crop inventories and strong regulated pricing,” Brooks added.
Robust potash shipments by Canpotex and K&S resulted in a fourth consecutive quarterly record in CP’s potash segment.
“We had an all-time record year in potash, and we see opportunity as we move into 2019, as demand remains strong,” he said.
The 46 percent increase in quarterly freight revenues from energy and chemicals was largely the result of increased crude oil shipments.
CP’s crude haulings were up 25,000 carloads in the quarter. The railway has also reached a new deal with Suncor to move crude from the Edmonton area to Suncor’s expanding Vancouver refinery.
When asked about an upcoming Canadian Transportation Agency investigation into freight rail restrictions in Vancouver, Creel said CP went through “some challenges in a capacity contrained (Vancouver) corridor” in December 2018, but he defended the company’s decision to place restrictions on movements of some commodities, including Canadian lentils and peas.
“We had to take measures to protect the health of our overall franchise,” Creel said.
“That’s a key corridor for us obviously … and when we get to the point where we see certain business lanes with equipment tied up for a number of days … in a capacity-constrained location, we have the responsibility to all of our customers to take the appropriate surgical actions.”
Creel called the Vancouver bottleneck an “episodic event,” adding that the CTA “acted a bit prematurely.”
“We’re going to go through the process … but I think the facts will speak for themselves” Creel said.
“Things have recovered quite nicely for both railways.”