Canadian Pacific Kansas City Ltd. CEO Keith Creel disclosed a significant financial setback of approximately $200 million resulting from the ongoing tariff dispute initiated by the United States. Despite this challenge, Creel maintained an optimistic outlook amidst uncertainties surrounding the North American free trade agreement.
Addressing analysts in a conference call, Creel emphasized the adverse impact of the trade tensions, estimating the revenue loss at $200 million or potentially higher. As the head of the sole railway extending across the three North American countries, he highlighted the upcoming renegotiation of the United States-Mexico-Canada Agreement as an opportunity to enhance mutual benefits and streamline cargo movements to address the trade imbalances highlighted by U.S. President Donald Trump.
Expressing confidence in the potential renewal of the USMCA, which has notably boosted trilateral trade to over US$1.6 trillion since the inception of NAFTA in 1994, Creel anticipated the agreement’s extension by summer. Despite acknowledging potential challenges ahead, he reassured stakeholders of navigating through uncertainties successfully.
In the latest fiscal quarter, CPKC managed to achieve a modest revenue increase of one percent, reaching $3.92 billion. This growth was attributed to enhanced operational efficiency and a slight uptick in freight volumes, with a particularly strong performance in grain revenues, albeit hindered by adverse weather conditions at the Port of Vancouver.
While CPKC’s revenue showed positive momentum, profits witnessed a 10% decline in the same quarter, dropping to $1.08 billion from $1.20 billion year-over-year. Beyond trade concerns, the rail industry faced additional apprehensions stemming from Union Pacific Corp.’s proposed acquisition of Norfolk Southern Corp., a move that could reshape the North American rail landscape significantly.
Creel cautioned against potential negative implications of rail industry consolidation, emphasizing the importance of competition and market diversity. The Surface Transportation Board’s rejection of the UP-NS merger application underscored regulatory scrutiny over such transformative mergers.
Looking ahead, CPKC projected moderate volume growth and a healthy increase in core earnings per share for the upcoming year. The company also planned to reduce capital expenditures by 15% to $2.65 billion while declaring a quarterly dividend of nearly 23 cents per share on outstanding common shares, payable in April.
Overall, CPKC’s financial performance and strategic outlook reflect a blend of challenges from trade dynamics and industry shifts, coupled with a proactive approach to sustain growth and operational resilience.