Merged CPKC Releases Strong Q1 Earnings
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The merged Canadian Pacific Kansas City says in its first quarter together the new Class I railroad saw its income surge by 35% to C$800 million, or 86 cents a share, compared with C$590 million, 63 cents, in the same period a year ago.
Revenue increased by more than 23% to C$2.27 billion compared with C$1.84 billion a year ago.
The financial release is the first earnings report since Canadian Pacific Railway officially combined with Kansas City Southern Railway on April 14 after the U.S. rail regulator approved the US$31 billion deal in March.
It is the first single-line railway connecting the United States, Mexico and Canada.
“Since we first announced our intention to combine CP and KCS more than two years ago, we never lost our conviction that a CP-KCS combination is right for our railroaders, our customers, our stakeholders and the North American economy,” CPKC President and CEO Keith Creel said. “We are excited to have united the talented railroaders at CP and KCS to form our new CPKC family and are working to deliver on the synergies and countless benefits the combined company will produce.”
The railroad’s operating ratio improved to 63.4 from 70.9 in the same period in 2022. Operating ratio measures a company’s expenses as a percentage of revenue and determines efficiency. The lower the ratio, the greater the company’s ability to make a profit.
The railroad said its volume, as measured in revenue ton-miles, is up 11% compared with a year earlier.
Creel
“In our final quarter before our historic combination, the CP team delivered solid results driven by our investment in capacity, service and continued focus on safety,” Creel said. “Our strong bulk franchise, fueled by a robust Canadian grain harvest, plus competitive service offerings in intermodal helped produce these results providing momentum as we begin our journey as CPKC.”
In the aftermath of the Canadian Pacific-Kansas City Southern merger, interest in providing freight rail and intermodal service across the three nations has intensified.
Earlier this week CPKC and Knight-Swift Transportation Holdings announced a new, multiyear deal where beginning in May, Knight-Swift would provide truckload intermodal transportation service on the new CPKC, single-line north-south corridor.
“This agreement creates compelling new transportation solutions for Knight-Swift’s current and future customers looking for optionality and increased capacity in their supply chains,” CPKC Chief Marketing Officer John Brooks said in a statement. “As Knight-Swift transitions their Mexico-U.S. traffic to CPKC starting in mid-May, we will focus on growth between Chicago, Texas and Mexico markets.”
The Knight-Swift-CPKC agreement comes days after Schneider announced it also would be moving its intermodal U.S.-Mexico business from Union Pacific to CPKC later this spring.
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However, while Union Pacific lost its Mexican business with Knight-Swift and Schneider to CPKC, it will gain new volume from a new joint cross-border service it plans to begin next month with Canadian National and Mexico’s Grupo Mexico Transportes (GMTX) to move automotive parts, food, freight of all kinds, home appliances, and temperature-controlled products to and from Canada, into the U.S. and to terminals in Monterrey, Nuevo Leon, and Silao, Guanajuato.
CPKC says when compared to the trucking industry, its International Railroad Bridge that spans the Rio Grande River at Laredo is a viable alternative to sometimes congested highway ports of entry on both sides of the border. CPKC also is constructing a second span and it is to be completed by the end of 2024.
“The Knight-Swift team is looking forward to engaging with the CPKC railroad on service offerings, customer solution design and demand planning to help facilitate growth on the first single-line railroad connecting Mexico, the United States and Canada,” Knight-Swift Transportation Chief Financial Officer Adam Miller said.
About 16,000 trucks cross the border at Laredo every day compared to just a few hundred intermodal containers, which CPKC executives have said represents a major growth opportunity.
CPKC saw revenue growth across all of the business lines where it moves freight.
Grain shipments surged 43% to C$515 million from C$360 million in 2022.
Coal shipments increased 11.5% to C$155 million from C$139 million a year ago.
Potash moved upward by nearly 27% to C$132 million from C$104 million in the same period in 2022.
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Fertilizers and sulphur also jumped by 23% to C$96 million from C$78 million a year ago.
Forest products shipments moved upward by 19.7% to C$103 million from C$86 million in 2022.
Energy, chemicals and plastics increased by nearly 20% to C$366 million from C$310 million a year ago.
Metals, minerals and consumer products grew 24% to C$233 million from C$181 million in the same period in 2022.
Automotive shipments skyrocketed by 37% to C$125 million from C$91 million in 2022.
Intermodal traffic also jumped by more than 10% to C$492 million from C$447 million.
