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CP Rail second-quarter profit hurt by workers' strike

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Canadian Pacific Railway Ltd (CP-T), fresh from a proxy battle that ousted its chairman and chief executive, reported a 20-percent drop in quarterly earnings on Wednesday due to the impact of a strike by its engineers in May and management transition costs.

CP, Canada's second-biggest railroad operator, said second-quarter net income fell to $103 million, or 60 cents a share, from $128 million, or 75 cents a share, a year earlier.

Freight revenue rose 8 percent to $1.33 billion.

CP's operating ratio, an important barometer of performance in the railroad industry, weakened to 82.5 percent from 81.7 percent in the year-earlier period.

The lower the number -- which measures operating costs as a percentage of revenue -- the more efficient the operation. By this measure, CP is the weakest performer of North America's big railroads.

CP's biggest shareholder, U.S. hedge fund Pershing Square Capital Management, made this underperformance central in its proxy battle with the railroad, which ended in CP's CEO and chairman both quitting hours ahead of a shareholder vote in May.

Hunter Harrison, the former CEO of CP rival Canadian National Railway Co and Pershing's candidate to turn around CP, was named CEO in June.

Due to the management changes and Harrison's appointment, the company said it booked a $38 million charge in the recent quarter.

Performance started to improve sharply in the first quarter of 2012 but operations were shut down in Canada for nine days due to a strike by locomotive engineers and other workers. Employees were legislated back to work by Ottawa.

Labour Minister Lisa Raitt last week named an arbitrator in the dispute. The arbitrator will rule on a contract within 90 days.

CTV.ca CTV Two CTV News CTV News Channel BNN - Business News Network CP24