Canadian Pacific seeks opportunities in its land holdings

CP’s deal with Maersk is a “textbook example” of this concept coming to fruition. CP announced late Monday that it has secured a multiyear rail agreement with Maersk to move freight through the ports of Vancouver and Montreal. 

The agreement builds on CP’s announcement last month that it was developing a transload and distribution facility that would service Maersk by shuttling the containers of Maersk’s customers to and from the ocean terminals at the Port of Vancouver. The new multicommodity transload facility would be an expansion of CP’s existing intermodal facility in Vancouver.

According to the deal announced Monday, CP would move Maersk’s dry and refrigerated cargo starting on March 1, 2021. This deal would take place for Maerk’s cargo at the Ports of Vancouver and Montreal, Brooks said.

The Maersk partnership is “a textbook example of taking those land assets, creating a solution in a partnership with a customer that allows them to realize their goals and objectives running their business and allows CP to be part of something that is not only good for business, it’s good for the environment, it’s good for employees, it’s good for sustainability,” Creel said.

Meanwhile, recent acquisitions of the 1.6-mile Detroit River Tunnel linking Detroit and Windsor and the short line Central Maine and Quebec (CMQ) Railway are part of CP’s broader strategy to grow more market share, especially into the U.S. Midwest. The CMQ provides CP with direct access to the Atlantic Ocean through Port of Saint John, and CP executives were hopeful for a deal to occur in which a vessel steamship line would link directly with CP’s terminal at the port sometime in 2021. 

Creel referred to CP’s commitment to environmental, social and corporate governance (ESG) several times throughout the call, noting that the railway is developing a solar energy farm that will power CP’s headquarters in Calgary. The Vancouver project with Maersk will also help reduce carbon emissions because traffic will be diverted to rail instead of truck.

The focus on ESG follows a meeting that CP had with a key shareholder two years ago, in which the shareholder expressed concerns about the environment.

“This isn’t just a flash in the pan. This has become woven in the way we think. We’ll take these applications and we’ll operationalize them,” Creel said.

CP is also deploying several new technologies, including a train inspection portal west of Moose Jaw in Saskatchewan that will handle the remote inspection of potash trains using high-speed camera systems and a wayside detection system that measures the heat imprint that brakes apply to train wheels as a way to monitor railcars’ braking abilities.

CP’s third-quarter results

A decline in revenue dampened CP”s profits for the third quarter.

CP’s net income was C$598 million (US$453 million), or $4.41 per diluted share, for the third quarter of 2020, compared with $618 million, or $4.46 per diluted share, in the third quarter of 2019. This was a 3% decline year-over-year. All figures are in Canadian dollars. 

Revenue slipped 6% to $1.86 billion. Of that, freight revenue also fell 6% to $1.82 billion as revenue gains for grain, potash, forest products and automotive weren’t enough to offset losses for coal and the categories of metals, minerals and consumer products, and energy, plastics and chemicals. Intermodal revenue was also down year-over-year.

Meanwhile, a 2% reduction in operating expenses helped to offset the revenue decline. Operating expenses were $1.08 billion in the third quarter, compared with $1.11 billion a year ago.

CP’s operating ratio rose slightly to 58.2% compared with 56.1% in the third quarter of 2019. Operating ratio is a metric that can be used to gauge the financial health of a company, with a lower percentage implying improved health.

For more third-quarter results, go here.

Click here for more FreightWaves articles by Joanna Marsh.

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