Ackman says CP results ‘distorted’

Shareholder activist Bill Ackman again criticized Canadian Pacific Railway (CP-T) management Monday, saying the company's improved first-quarter results were "distorted" by the weather, among other things.

In a letter to CP shareholders, Ackman took aim at the railway's chief executive officer Fred Green and the board of directors, saying the company has delivered declining results since he was named CEO in 2006.

"The incontrovertible fact remains: under the stewardship of this board and Green, CP's performance has deteriorated," he said in the letter.

Ackman will be on BNN at 12:30 p.m, ET to talk about his latest letter and his proxy battle with CP management.

Canadian Pacific's operating performance improved in the first quarter, but Ackman said the gains were non-financial and "are distorted by the material benefit of a record mild winter and the outsized capital and operating expenditures of the Company's wasteful 2012 Winter Plan."

Under Green's tenure he said CP's first-quarter performance, as measured by the industry standard operating ratio, has worsened to 80.1 percent from 79.6 percent while other major railways operating in many of the same conditions have seen their ratio improve on average to 71.4 percent.

"As they have in prior years, the current board and Green again ask shareholders to believe that sustainable progress is just around the corner. Unfortunately, the first quarter's results serve only to remind us of why we shouldn't. After six years of promises and 'detailed plans,' the company's performance is worse than it was in the comparable quarter in 2006, just prior to Green becoming CEO," the letter said.

CP has heralded the results, telling shareholders the railway is gaining speed and they should stick with current chief.

Some analysts, too, see a big change.

"Although Q1 results were in line with guidance, we would note that guidance was well above expectation when it was released," said Hilda Maraachlian of UBS Securities Canada.

"We believe that CP demonstrated strong execution with its Q1 results and should continue to deliver strong results going forward as it executes on its cost cutting initiatives."

Ackman's hedge fund Pershing Square Capital Management is seeking to change CP's management with an alternative slate of directors that it is asking shareholders to vote for at the railway's annual meeting on May 17.

He is proposing that former CN Railway chief, Hunter Harrison, replace Green as CEO. Since Ackman acquired what is now a 14-percent stake in the railway last fall, CP's stock has soared by more than 60 percent. The strong gains, the activist said, "reflects the increased probability. . . that the current board will be restructured and Green replaced."