The CEO of Canadian Pacific Kansas City Corp. says he is unfazed by Mexico’s president’s executive order forcing freight railroads to allow passenger transport on their tracks.
Keith Creel told analysts that Mexico’s ambitions and intentions to integrate and launch passenger rail services alongside freight rail services reflect our synergies and ability to achieve the goals of our multi-year guidance. “We have no expectation or confidence that it will have any impact on the future,” he told analysts. on a conference call Tuesday.
Creel said he has met twice with President Andrés Manuel López Obrador and reached an agreement with the Mexican government to conduct a study on passenger trains in the roughly 200-kilometre (200-kilometre) corridor stretching northwest from Mexico City. . Since the first meeting, the scope of the study has expanded and is expected to be completed in May, he added.
“He has delivered exactly what I expected,” Creel said, citing the government’s efforts to strengthen both passenger service and economic growth, particularly through manufacturing jobs that rely in part on rail transportation. He promised me that he would be there.” “He’s not going to risk it.”
Creel said “with the right infrastructure and the right investments,” the company could open its doors to passenger trains while maintaining solid freight service on its only network from Canada through the U.S. to Mexico. said.
Few passenger train systems in the world are profitable, and most rely heavily on government subsidies. The decree does not mention whether financial support will be provided to private companies.
The company is proposing passenger rail service on a long section of CPKC-operated track between Laredo, Texas, and San Luis Potosi in central Mexico, among other routes.
Mexico has few scheduled passenger flights after a 1995 reform that made concessions to two private rail companies: Mexico’s Feromex and a subsidiary of U.S.-based Kansas City Southern, which Canadian Pacific acquired in April for $31 billion. There aren’t any left.
In a Nov. 20 executive order, the presidential office wrote that “public passenger rail services will be given priority and freight rail transportation will be respected, subject to the terms of the corresponding concession.”
Specifying priorities can cause delays. In his 1990s, when the government last provided passenger service through state-owned companies, trains were rarely on time.
Creel said Tuesday that he expects CPKC’s adjusted earnings per share to increase by double digits this year, following last quarter’s revenue increase, despite lower container volumes and lower grain harvests. stated.
“As we move into 2024, we are confident that our unique synergy opportunities, combined with improving macroeconomic conditions, will allow us to overcome Canada’s grain failure and deliver another strong performance this year.” Stated.
The decline in imports of wheat and other grains is expected to continue into the second half of 2024, the company noted.
Containers also remain a source of uncertainty as consumers continue to direct their spending toward services rather than goods as pandemic trends reverse. Pressures from inflation and rising interest rates could further constrain product purchases.
CPKC said domestic container volumes fell last quarter due to lower retail volumes, despite increased activity at the Port of Vancouver and a recovery in international container shipments following a 13-day strike in July by longshoremen in B.C. He said it had decreased.
This decline was partially offset by increased refined fuel products and vehicle shipments as manufacturing supply chain kinks ironed out due to COVID-19.
CPKC said its revenue increased 4 per cent to $3.78 billion last quarter, from $3.64 billion in the same period last year, which includes Canadian Pacific and Kansas City Southern. Last quarter’s core adjusted total earnings increased 3% to $1.1 billion from $1.07 billion in the year-ago period.
“This is not going to be easy,” Chief Operating Officer Mark Redd told analysts on a conference call, referring to the merging of two disparate rail networks – the continent’s first major rail merger in more than 20 years. ” he said. But he also emphasized potential efficiencies. This is possible through “synergy”.
CPKC said its core adjusted total diluted earnings for the fourth quarter were $1.18 per share, up from $1.14 a year earlier.
Net income fell 20% year over year to $1.02 billion from $1.27 billion in the previous quarter. That figure doesn’t take into account last year’s gains south of Kansas City.
CPKC expects core adjusted total diluted earnings per share to increase by double digits this year from $3.84 per share in 2023.
The rail operator plans to spend $2.75 billion on infrastructure upgrades and purchases through 2024.
— With files from The Associated Press
This report by The Canadian Press was first published Jan. 30, 2024.
Companies featured in this article: (TSX:CP)
Christopher Reynolds, Canadian Press