CALGARY
(CP) - Canadian Pacific Railway (CP.TO) plans to spend between
$885 million and $895 million in 2007, mainly on improvements
to its rack infrastructure, adding locomotive power and building
its information technology.
The
major rail carrier said Thursday it plans to spend $40 million
to maintain and increase capacity in automotive and intermodal
terminals, $150 million on locomotive acquisitions, overhauls
and fuel-saving modifications, $60 million on railway operations
and customer shipments information technology.
It
will also spend $625 million to maintain and upgrade rail, ballast,
crossties and automated signal systems, buildings and equipment
and other physical assets as well as for land acquisitions for
future development.
The
rest will be used for modifications and upgrades to the freight
car fleet "to more closely align with customer requirements."
"CPR's
planned capital investments are targeted at further improving
the fluidity of our network, while maintaining the reliability
and safety of our infrastructure," president and CEO Fred
Green said in a release.
"These
investments support our strategic initiatives, our focus on
execution excellence and drive to improve CPR's operating ratio.
This capital plan, implemented with the ingenuity of our employees,
will keep us on track to become the safest, most fluid railway
in North America."
CPR
spent about $845 million in 2006.
Canadian
Pacific Railway sees 2007 earnings growth of 9 to 13 per cent
CALGARY (CP) - Canadian Pacific Railway (CP.TO) expects improved
efficiencies and more international demand to bolster earnings
in 2007, the railway said Thursday.
"Growth
in emerging economies like China and India will fuel demand
for natural resources," chief executive officer Fred Green
told an annual analyst presentation.
"This
bodes well for railways with a strong bulk franchise like CPR."
Green
noted that despite a tough start to 2006 in potash exports and
very poor coal volumes, the company is on track to deliver its
projected growth of five to eight per cent for the year.
Calgary-based
CP Rail is expecting potash and coal to make strong comebacks
in the coming months, while global demand for grain is also
expected to increase. About 45 per cent of the railway's fortunes
are tied to global trade.
The
railway is forecasting earnings per share will rise by nine
to 13 per cent in 2007, with revenue up by four to six per cent.
Next year's earnings per share excluding currency effects and
one-time items are expected to be in the range of $4.30 to $4.45.
This
would be up from $3.95, the top end of recently revised 2006
earnings guidance.
Over
the last 18 months, the railway has moved to becoming more streamlined.
Those efforts are to continue in 2007, with CP Rail intending
to cut between $30 and $35 million in operating costs, said
Brock Winter, vice-president of operations.
That
comes after the railway reduced costs by $20 million in 2005
and makes progress toward trimming a further $35 million by
the end of this year.
"We
believe by operating a more consistent and faster railroad,
we'll generate capacity for growth," said Winter.
The
company has expanded to more seven-day operations and is examining
if 24-hour operations result in better utilized railcars.
"We're
balanced, we're cycling mobile assets, we're flushing out our
yards: it's effectively a conveyor belt," said Winter.
CP
Rail plans to expand corridor capacity in Lanigan, Sask., north
of Regina, to handle potash volumes that will be bound largely
for export through the port of Vancouver.
The
company will also review more than 600 interline operating agreements
worth $400 million a year to see if there are places cut costs.
"This will be a major focus for us in 2007," said
Winter.
Capital
investment for 2007 is forecast at about $890 million, up from
$840 million to $845 million this year.
That
was a modest surprise, said Fadi Chamoun of UBS Research.
"We
were expecting spending to slow following last year's expansion
of the Western corridor and given the modest volume growth outlook,"
Chamoun said in a research note. "Higher spending could
be a positive factor where it is targeting improved efficiency,
but payback doesn't appear to be quick, based on projected margins."
The
company's 2007 outlook assumes crude oil prices averaging US$65
per barrel, a Canadian dollar worth 90 cents US, and North American
economic growth of 2.7 per cent.
