Canadian Pacific Railway (CP) Q2 2016 Earnings

Canadian Pacific Railway (CP) CEO Hunter Harrison said railroad market is improving

“The market has turned much more positive.  Grain looks much better than we expected earlier in the year.  In fact, if you listen to the experts in Canada, this will probably be a record year of all time of production of grain in Canada. The bulk that has pretty well squared itself away. I think we see improvements second half, everywhere but probably crude and we know the question marks are there.”

Canadian Pacific Railway (CP) COO Keith Creel said they aren’t focused on being best in class in safety but are rather focused on “just being the best we can be” 

“So on the safety front, which is all very topical in this industry, topical with our responsibility to communities we operate in and through, although that scenario that you never get there, it’s a journey, it’s not a destination. We continue to drive dramatic improvement in that area as well, which is good for business from a societal cost to people cost, it’s the right thing to do. And it’s not about being the best in class or the best in the industry, it’s all about day-in and day-out being the best that we can be ourselves. We hold our own self to a high standard, and that’s something we’ll never forget about. And because of that, we’re driving culture, process change into the people. We’re producing some significant progress there that makes all of this possible.”

Canadian Pacific Railway (CP) CFO Mark Erceg called the demand environment weak

“We did face a very challenging demand environment during the second quarter, which was further exacerbated by the Northern Alberta wildfires, which we believe negatively impacted shipments by about CAD 20 million during the quarter.”

Canadian Pacific Railway (CP) COO Keith Creel said they’re using longer trains to improve efficiency

“nother margin issue that I think is critically important for people to understand, the day of the 112-car grain train of CP is done. We’re moving to 134 cars. Why are we doing that? Takes the same amount of locomotive. There’s a 17% or 18% pick-up in cars per train which means at the end of the day, same amount of grain is lower cost, lower locomotives, lower train starts. It’s an immediate margin opportunity for us, as well as an additional opportunity for the farmer and for us to work in concert with the grain companies to move more grain. That’s a powerful, powerful thing especially when you’re facing what might be a huge opportunity for us both in 2016 to make up some of what we’ve lost the first half, but the true power is going to be in 2017 in those lull months which we’ve experienced this year. But this is all a very positive story for us.”

Canadian Pacific Railway (CP) COO Keith Creel said coal prices have stabilized which is encouraging

“Actually, that’s something that is pretty encouraging. To your point, the prices have stabilized, the price for the third quarter is higher than the price for the second quarter, so I would suggest that that’s inflected as well.  The service is great, we’re controlling our cost, and I see line of sight to a little upside there.”

Canadian Pacific Railway (CP) COO Keith Creel stressed the important of grain

“Grain is king. Grain is king right now.  Everything is turning for grain. If you look, first of all, we get the rate action, which the increase was I think 4.6%.  That’s number one. Number two, I think I read that it’s the more acres planted in the pack.  The yield is better with new technology and so forth. So, if you believe what you read, the only thing that’s holding grain back is the supply chain coordination. And we want to be a player and a leader to help Canada, and we have the same issues in the U.S., just on a smaller scale, become a world leader in the movement of grain.”