Canadian Pacific Kansas City Ltd. has faced a financial setback of $200 million due to the ongoing trade conflict initiated by the United States, as stated by CEO Keith Creel. Despite this challenge, Creel expressed optimism amidst uncertainties surrounding the North American free trade agreement.
During a conference call with analysts, Creel mentioned that the company has already experienced a significant revenue impact, estimated to be around $200 million or possibly higher. He highlighted the importance of the upcoming renegotiation of the United States-Mexico-Canada Agreement (USMCA) in potentially benefiting all involved parties and addressing trade imbalances emphasized by President Donald Trump.
Creel emphasized the crucial role of trilateral trade between the three nations, stressing the interdependence for their collective success. He expressed hope for the timely renewal of the USMCA, projecting a potential agreement before the midterms. Despite acknowledging the challenges ahead, Creel remained confident that they would navigate through turbulent times.
In its recent financial quarter, CPKC managed to increase revenue by one percent to $3.92 billion, attributed partly to enhanced operational efficiency and a slight rise in freight volumes. Strong grain revenues were driven by a bountiful crop, although disruptions at the Port of Vancouver limited the overall increase.
Although CPKC reported a revenue uptick and consistent earnings growth throughout the year, profits declined by 10% in the latest quarter, dropping to $1.08 billion from $1.20 billion year-over-year. Apart from trade uncertainties, the rail industry has been stirred by Union Pacific Corp.’s proposal to acquire Norfolk Southern Corp., potentially leading to significant rail mergers across North America.
Creel voiced concerns about the potential acquisition impacting competition and market dynamics negatively. He warned about the risks of consolidation within the rail industry, highlighting the importance of maintaining a balanced and competitive market environment. The rejection of the UP-NS merger application by the Surface Transportation Board underscored regulatory scrutiny over such consolidation efforts.
Looking ahead, CPKC projected mid-single-digit volume growth and low double-digit core adjusted diluted earnings per share growth for the upcoming year. Additionally, the company planned to reduce capital expenditures by 15% to $2.65 billion. A quarterly dividend of nearly 23 cents per share on outstanding common shares was announced by the board, payable on April 27.