(In U.S. dollars unless noted)
OTTAWA, March 11 (Reuters) - Canadian Pacific Railway Ltd (CP.TO) may look to make additional job and cost cuts as freight volumes in March fell further than expected, the country’s second-biggest railroad said on Wednesday.
“Sadly, the month of March is even softer than February after a small recovery from January,” Chief Executive Fred Green said at a JP Morgan Chase transportation conference.
Freight volumes have tumbled nearly 19 percent in the last six to seven weeks, Green said, indicating the impact that the economic downturn has had on the rail industry.
“In times like this, when you see 15 to 20 percent reductions in volume, there are only so many things one can do. Clearly we need to be very, very focused on variable costs,” he said in a presentation monitored by webcast.
The company has already made moves to reduce expenses, laying off 1,447 people at the end of 2008 and overhauling compensation packages. Some staff were brought back to work in January and February as volumes recovered, Green said.
Canadian Pacific said commodity shipments have been buoyed by strong fertilizer and grain markets but hit by a slumping coal business.
Green said the railway is in talks with miner Teck Cominco TCKb.TO, whose five-year coal contract is set to expire in two weeks, and that final offer arbitration was a “realistic possibility”.
Under that arrangement, two parties put forward their best bids and an arbitrator decides which is most fair, he said.
Teck has been cutting costs and selling assets to pay down billions of dollars in debt which it took on to finance last year’s $13 billion takeover of Fording Canadian Coal Trust.
“We’re working on the premise, of course, that they’ll figure out a way to get through all of that and they’ll still be a viable shipper,” Green said.
“The coal assets are very good assets. So, if for any reason times change, or other parties get involved, then we’ll negotiate with whoever we have to negotiate with.”
Shipments of forestry and industrial products are “very, very soft” and retail shipments are slumping, Green added.
Canadian Pacific has been working to reduce debt and expand revenue over the past few years, the executive said. It is chasing business for short- and medium-haul runs from the trucking sector, for example.
Shares in Canadian Pacific rose 25 Canadian cents to C$36.25 on the Toronto Stock Exchange on Wednesday morning. The stock has lost about 47 percent of its value over the last 12 months.
$1=$1.28 Canadian Reporting by Susan Taylor