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A 26-day track maintenance worker strike and severe spring weather didn’t hamper Canadian Pacific Railway’s financial performance in the second quarter.

Today, the Class I reported revenue of $1.1 billion, an 8 percent increase compared with second-quarter 2006 primarily because of strong demand for sulphur and fertilizers and coal. Grain revenue increased 9 percent, industrial products revenue rose 6 percent, and consumer products and intermodal revenue went up 3 percent while automotive revenue decreased 4 percent and forest products revenue dropped 2 percent.

In addition, quarterly operating income increased 9 percent to $296 million and CPR’s operating ratio improved 0.3 points to 74.7 compared with second-quarter 2006.

“We produced 12 percent growth in adjusted diluted earnings per share and posted further improvement in our operating ratio in spite of a strike and tough weather-related operating conditions,” said CPR President and Chief Executive Officer Fred Green in a prepared statement.

However, quarterly net income dropped from $364 million to $247 million year over year because of foreign exchange gains on long-term debt and other adjustments. And operating expenses rose 7 percent to $875 million primarily because fuel costs soared 21 percent and equipment rents jumped 29 percent.

For the first half, CPR generated revenue of $2.2 billion, up 5 percent compared with last year. Income rose 7 percent to $286 million and the railroad’s operating ratio improved 0.3 points to 77.

But net income decreased 21 percent to $371 million year over year primarily because of a $170 million reduction in future income tax expenses that was included in first-half 2006 results. In addition, operating expenses rose 4 percent to $1.7 billion.

‘We still face some significant challenges through the rest of 2007 with rising fuel refining margins and the strengthening Canadian dollar,” said Green.