TORONTO (Reuters) - Canadian Pacific Railway Ltd said on Tuesday its quarterly profit slumped nearly 40 percent amid spiraling fuel costs and a sluggish U.S. economy which curbed shipments, compelling the company to cut its full-year earnings forecast.
The carrier earned C$154.9 million, or C$1.00 a share, during the second quarter through June 30. That compares with a profit of C$256.7 million, or C$1.64 a share, a year earlier.
Analysts, on average, had expected earnings of 99 Canadian cents a share, on revenue of C$1.25 billion, according to Reuters Estimates.
Canada’s No. 2 railway, which also operates in the northern United States, said quarterly revenue nudged higher to C$1.22 billion, from C$1.215 billion a year earlier.
“This was a tough quarter with the unprecedented rise in fuel prices, the North American economic downturn, and prolonged flooding on our U.S. mainline,” said Fred Green, president and chief executive. “Combined, these had a significant impact on CP’s earnings.”
Indeed, the Calgary-based Canadian Pacific cut its forecast for 2008, saying it now expects diluted earnings per share of between C$4.00 and C$4.20, down from between C$4.40 and
However, total revenue is expected to grow by six to eight percent this year, up from a previously forecast four to six percent, due to increased fuel recovery, offset somewhat by volume declines, the company said.
Total operating expenses are expected to rise by 11 to 13 percent, up from six to eight percent, on higher fuel costs.
Canadian Pacific said it expects free cash this year of about C$150 million, down from a previously expected C$200 million, due to lower projected earnings.
Operating ratio, or its operating expenses as a percentage of revenue, was 79.4 percent compared with 74.7 percent.
In the six months through June 30, the company said it had a foreign exchange loss on long-term debt of C$10 million before tax, compared to a foreign exchange gain of C$97 million a year earlier.
Reporting by Jennifer Kwan; Editing by Bernadette Baum