MONTREAL/TORONTO (Reuters) - Canadian Pacific Railway (CP.TO), the unsolicited suitor of U.S. railroad Norfolk Southern (NSC.N), reported lower-than-expected quarterly results on Thursday as falling prices for commodities such as oil and coal hurt freight volumes.
The No. 2 Canadian railroad, whose shares slid more than 3 percent, said it was pushing forward with plans to streamline its operations further in the face of lower revenue and would trim its workforce in 2016 by nearly 1,000 people, or about 7 percent.
“This is a story of recognizing up front the things that you cannot control, which is the economy, and then doing something about those that you can, like your operating performance,” Chief Operating Officer Keith Creel said on a conference call.
The Calgary-based company is ahead of schedule in meeting previously outlined operating ratio targets, Creel said.
Despite lower freight volumes, the company said it aimed to push its operating costs as a percentage of revenue below 59 percent in 2016 from 60 percent in 2015. Years ago, it said it planned to bring the ratio down to 65 percent by mid-2016.
CP announced a $28 billion offer for Norfolk Southern in mid-November, saying a merger would enhance competition and create new markets and options for customers across North America.
However, Norfolk Southern has repeatedly rejected CP’s advances, saying the proposed terms were “grossly inadequate” and that a deal would face substantial regulatory risks.
CP’s net income fell 29 percent to C$319 million, or C$2.08 per share, in the fourth quarter.
Excluding a hit from foreign exchange translation on its U.S. dollar-denominated debt, the profit was C$2.72 per share, below the analysts’ average estimate of C$2.77, according to Thomson Reuters I/B/E/S.
Revenue fell 4 percent to C$1.68 billion.
The company expects double-digit earnings growth in 2016 from last year’s C$10.10 a share, excluding items.
In a note to clients on Thursday, RBC analyst Walter Spracklin wrote that the company’s results reflected the “challenging volume environment” for railroads and that its earnings outlook was consistent with expectations.
Shares of CP were down 3.5 percent at C$145 in afternoon Toronto trading and down 2 percent at $102.04 on the New York Stock Exchange.
($1 = 1.4441 Canadian dollars)
Additional reporting by Swetha Gopinath; Editing by Ted Kerr and Lisa Von Ahn