A reduced Prairie grain handle has taken a bite out of the year-end gross for Canadian Pacific Railway in what’s turned out to be CEO Hunter Harrison’s last year on the job.
Calgary-based CP on Wednesday announced full-year net income of $1.599 billion on $6.232 billion in gross revenues, up from $1.352 billion on $6.552 billion in 2015. Fourth-quarter net income came in at $384 million on $1.637 billion in revenues, up from $319 million on $1.687 billion in the year-earlier period.
Harrison, who announced Wednesday he will retire from CP effective Jan. 31, said the fourth quarter was “weighed down by challenging operating conditions, including unexpected and extreme weather on the West Coast that compounded the impact of an already delayed grain harvest.”
For 2016 overall, he said, the railway’s revenues were weighed down by “a precipitous decline in crude oil shipments and weakness in grain movements, particularly in the first half.”
CP in 2016 moved about 270,000 carloads of Canadian grain — down five per cent from 2015 — including 75,000 carloads in the fourth quarter, down six per cent. Canadian grain revenue for 2016 was down 10 per cent at $962 million, for revenue per carload of $3,559, down five per cent. Fourth-quarter Canadian grain revenue per carload came in at $3,758, up one per cent from the 2015 Q4.
In its U.S. grain segment, CP’s carloads for 2016 came in at about 162,000, up three per cent, for revenue per carload of $3,202, down four per cent. Fourth-quarter U.S. grain carloads came in at 44,000, up 10 per cent from the 2015 Q4, for revenue per carload of $3,488, up seven per cent.
In its fertilizers and sulphur segment, CP’s carloads for 2016 slipped three per cent, to 60,000, while revenue per carload rose eight per cent to $4,769. In potash, meanwhile, revenue per carload rose one per cent to $2,904 on about 116,000 carloads, down six per cent.
CP on Wednesday announced its chief operating officer, Keith Creel, will replace Harrison as CEO effective Jan. 31. However, Harrison is taking vacation leave “immediately” until then, during which time Creel will act as CEO.
Citing an unnamed source, the Reuters news service reported Wednesday that Harrison and U.S. investment fund manager Paul Hilal were finalizing a partnership expected to spur a financial turnaround for a U.S. railroad — specifically, Jacksonville, Fla.-based CSX.
Hilal previously worked for activist investment firm Pershing Square, whose investments in CP led to Harrison’s installation as CEO back in 2012.
CP on Wednesday said Harrison approached its board to discuss his retirement and “potential related modifications to his employment arrangements that would allow him to pursue opportunities involving other Class 1 railroads.”
Harrison’s retirement, CP said, will include a “separation agreement” with a “limited” waiver of his non-competition obligations to CP. In return, Harrison is to “forfeit substantially all benefits and perquisites he is entitled to receive from CP going forward, including his pension.”
A previously-agreed-upon consulting agreement between CP and Harrison “will not take effect” following his retirement, and Harrison has agreed to sell all shares he owns in CP by May 31.
“I have had a wonderful experience and depart with many friends and with full confidence in Keith’s ability to build on the great success we have enjoyed,” said Harrison, who came to CP following a stint as CEO for CP’s Montreal rival Canadian National Railway (CN).
CN also underwent a change of command in July, when chief financial officer Luc Jobin took over the CEO post from Claude Mongeau, who stepped down for health reasons. –– AGCanada.com Network