CPR announces plans for growth

by Canadian Shipper

Canadian Pacific Railway aims to grow revenue by four per cent a year, expand earnings by ten per cent a year, contain operating expense increases to two per cent annually, and improve its operating ratio to a solid 73% by 2004, said the railway’s management team at a recent conference organized for investors.

CPR expects to be spun off from Canadian Pacific Limited on Oct. 1, with the company’s shares trading two days later on the New York and Toronto stock exchanges.

The conference launched a series of road shows at which CPR’s management team will inform investors about the railway’s plans and prospects as a publicly traded company following its spin-off from Canadian Pacific Limited. Over the next two weeks, nine presentations will be made in six cities, including New York, Boston, Montreal, Toronto, Winnipeg and Vancouver. A second wave of road shows will follow in September.

Anticipating some three per cent a year in volume growth, CPR is targeting general expense savings of approximately $150 million by 2004 through scheduled railway operations, tighter car fleet management and keeping administrative expenses flat.

The railway says it has already shaved $300 million a year off its operating costs as a result of an extensive infrastructure renewal and its scheduled railway program.

Driving the carload market growth, which CPR expects to be the fastest growing area of its business, are a modernized freight car fleet, scheduled railway operations, and a network of transload facilities that divert traffic from truck to rail. A new transload brand, Connetix, has been introduced for 23 facilities that support sophisticated supply chain management solutions.

CPR also plans to introduce pricing concepts including seasonal and equipment premiums, spot pricing, and trainload rates, as well as contract escalation. This will see CPR push towards more open or published price lists, rather than confidential contracts, enabling the railway to adjust quickly to competitive pressures.

Pricing policies that reward customers for shipping in off-peak periods will be a key component of a new yield management strategy. By reducing the seasonality prevalent in the rail business, CPR expects to utilize equipment and human resources more effectively.

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