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Canadian Pacific Railway’s third quarter was one for the books, as the Class I generated higher freight volumes than in any previous July-to-September period, and posted net income of $95 million, a 45 percent increase compared with the same period last year.

Expecting a similarly solid fourth quarter, the railway this summer stepped up its trackwork program in western Canada. While the maintenance work took a short-term toll on network fluidity, it "expanded CPR's freight capacity for a fourth-quarter rebound that is developing as expected," Rob Ritchie, President and Chief Executive Officer said in a prepared statement.

To meet the new-business demand, CPR recently brought on 35 additional high-capacity locomotives four months ahead of schedule and trained crews for western service areas. By mid-November, CPR expects to add 2,800 cars to its grain fleet; by year-end, the railway plans to replace a large part of its intermodal car fleet with 2,000 more productive and standardized double-stack cars.

"A larger grain crop has begun moving off the prairies, our intermodal business remains robust and we are ready for a recovery of coal volumes," Ritchie said.

CPR officials just wish they could get some relief on the U.S.-Canadian dollar conversion front. For the quarter, the railway recorded total revenues of $904 million, a 1.4 percent decline compared with third-quarter 2002’s $917 million. Without the impact of foreign exchange, freight revenue would have grown 5 percent. Grain revenue increased $15 million, or 9 percent, reflecting strong U.S. volumes and movement of a substantially larger Canadian crop. Intermodal revenue increased $6 million, or 2 percent, driven by solid West Coast imports. And sulphur and fertilizer revenues were up $5 million, or 5 percent, reflecting strong sulphur and potash exports.

Ultimately, the 13 percent year-over-year appreciation in the Canadian dollar reduced CPR’s revenue $53 million, and expenses, $36 million. The net impact on operating income was $17 million; for net income before foreign exchange on long-term debt, the net impact was $7 million. As a result, CPR posted operating income of $209 million, down 7 percent compared with third-quarter 2002, and an operating ratio of 76.9 compared with 75.6 percent for the same period last year.

On the cost side, CPR posted operating expenses of $696 million, up marginally compared with the same 2002 period. Compensation and benefits expense remained flat. Job reductions related to productivity measures announced in June were partially offset by selective hiring to handle business in growth areas, CPR said. And CPR's fuel expense also was flat despite higher volumes of freight and a 15 percent increase in the third-quarter price of crude compared with the same 2002 period. The railway's hedging program, improved fuel efficiency and foreign exchange offset volume-related consumption and the sharply higher crude-oil prices.

"Our key productivity indicators moved in the right direction," Ritchie said. "There were improvements in safety, employee productivity, train weights and lengths, and fuel consumption rates. We also successfully implemented a pilot for our new freight yard management system."