Canadian Pacific Kansas City Ltd. reported a $200 million revenue impact due to the ongoing tariff war initiated by the United States, according to CEO Keith Creel. Despite this setback, Creel expressed optimism regarding the North American free trade agreement’s uncertain future.
During a conference call with analysts, Creel highlighted the significant financial hit the company has taken amid the trade uncertainties. He emphasized the importance of the upcoming renegotiation of the United States-Mexico-Canada Agreement (USMCA) in potentially balancing trade flows and addressing President Trump’s concerns about trade imbalances.
Creel acknowledged the critical role of trilateral trade between the three nations and expressed hope for a positive renewal of the USMCA, which has seen trade volume quadruple to over US$1.6 trillion since the inception of NAFTA in 1994. He speculated that a renewal could occur before the midterms, although he cautioned that challenges may persist.
Despite facing trade challenges, CPKC managed to increase revenue by one percent to $3.92 billion in its latest quarter. The growth was attributed to improved operational efficiency and a slight boost in freight volumes, with grain revenues reaching record highs. However, adverse weather conditions at the Port of Vancouver impacted this growth.
Although the company’s revenue saw a slight uptick, profits declined by 10 percent in the latest quarter, dropping to $1.08 billion from $1.20 billion year-over-year. In addition to trade concerns, the rail industry has been unsettled by Union Pacific Corp.’s proposed acquisition of Norfolk Southern Corp., which could lead to significant rail mergers in North America.
Creel voiced concerns over the potential impacts of rail industry consolidation, emphasizing the need to maintain competition and avoid concentrating market power in a single railway. The proposed merger is currently under review by the Surface Transportation Board, with speculation surrounding its approval under the current administration.
CPKC reported a three percent increase in core adjusted diluted earnings per share, falling slightly below analysts’ expectations. The company forecasted volume growth and earnings per share growth for the upcoming year while planning to reduce capital expenditures. Additionally, CPKC announced a quarterly dividend for shareholders.
The company remains cautiously optimistic about its future amidst trade challenges and industry uncertainties, aiming to navigate through the evolving market conditions.