Fred Green, president and CEO of Canadian Pacific, gestures during a shareholder's meeting - 12 May 2011 Jeff McIntosh.

31 January 2012

Canadian Pacific Defends Strategy as Investor Road Show Kicks Off This Week

Calgary Alberta - Canadian Pacific Railway Ltd.'s top brass is meeting with shareholders this week to defend the company's strategy, while the hedge fund aiming to oust the railway's CEO prepares to make its case to Bay Street.
 
"Starting this week, members of our board and management team are going on the road to meet with investors and discuss the significant progress we made against our multi-year plan," CEO Fred Green wrote in a memo to employees.
 
Meanwhile, New York hedge fund Pershing Square Capital Management, which has a 14.2 percent stake in Canadian Pacific, is set to hold a town hall meeting in Toronto next Monday.
 
There, the investment community will have a chance to meet the man Pershing wants to install as CP's new CEO, former Canadian National Railway boss Hunter Harrison, as well as the five nominees Pershing wants to see join CP's board of directors.
 
In his note, Green said the CP meetings will go over the railway's plan to bring its operating ratio, costs as a percentage of revenues, from its 2011 level of 81.3 percent to between 70 and 72 percent by the end of 2014.
 
"And we won't stop there," Canadian Pacific said in its slide show presentation to investors.
 
An operating ratio is a key measure of a railway's productivity. The lower it is the better it is seen to be performing. On that metric, Canadian Pacific lags its peers.
 
In its presentation, Canadian Pacific outlined the steps it has been taking to improve the operating ratio.
 
It plans to grow revenue by maintaining "strong personal relationships" with its customers, which include coal miner Teck Resources Ltd. and potash exporter Canpotex, among others.
 
It also has a multibillion-dollar capital investment program underway to improve its network and it says it's undertaking measures to improve efficiency and reliability.
 
Pershing wants an operating ratio of 65 percent in three years and says a major shakeup at the top is necessary to accomplish that goal.
 
Canadian Pacific says no railway has been able to achieve such a steep drop in its operating ratio in that little time. As such, it says Pershing Square's demands are unrealistic.
 
Canadian Pacific shares rose 38 cents to $71.90 Tuesday afternoon on the Toronto Stock Exchange.
 
Lauren Krugel.