27 May 2005
Canadian Pacific's
Ritchie Sees Rate Rises This Year and Next
Canadian Pacific Railway Ltd.
Chief Executive Robert Ritchie said he expects to boost freight rates this year and next because of
rising shipments of commodities including coal and potash, and surging demand in North America for
consumer goods made in China.
The Calgary-based railway, Canada's second biggest after Canadian National Railway Co.,
will raise rates about 6 percent on average in 2005, while next year's increase will be less as coal
rates climb at a slower pace, Ritchie said in an interview. A 2006 rise would mark the fourth straight
annual increase.
China used about 8.4 million metric tons of potash in 2004 and this year may surpass the U.S. as the
top consumer of the fertilizer, according to Potash Corp. of Saskatchewan, the world's largest potash
producer. Potash Corp., a Canadian Pacific customer, plans to boost production 58 percent to 12.5
million tons a year to fill orders from abroad.
"If commodity prices stay strong, all of the commodity people will be looking for room and be
willing to pay for it," Ritchie said in a May 19 interview. "We still see the pricing power
there."
Shares of Canadian Pacific have risen 55 percent in the past year and yesterday touched a
52-week high of C$46.88. Today the stock fell 1 cent to C$46.44 by 9:53 a.m. on the
Toronto Stock Exchange.
Canadian Pacific's first-quarter revenue from shipping coal rose 43 percent as rates
surged on settlement of a contract dispute with Elk Valley Coal Corp. Fertilizer and sulfur shipments
had the biggest increase in carloads in the first quarter, rising 9.7 percent to 55,500. Shipments
of fertilizer and sulfur, a by-product of petroleum refining, accounted for about 9
percent of carloads and coal 13 percent.
Feels Like 70's
"This feels like the 1970s, when we built those coal mines (in British Columbia), and the potash
mines expanded," said Ritchie, 60, who has been with the railroad for 35 years and its chief
executive since March 1995.
Canadian Pacific last month increased its 2005 profit forecast as much as 25 percent to C$3.15 a share
after raising rates in the coal-shipping dispute with Elk Valley. Elk Valley ships coal
used in making steel to Vancouver for export from five mines in British Columbia.
"In 2006, the rate of increase will be probably drop a little because we had a pretty good
up-tick in coal prices in 2005," Ritchie said.
First-quarter profit tripled to C$80.7 million ($63.9 million), or 50 cents a share,
because of record traffic and rising freight rates, the company said on April 28.
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