CP Railway: Cut spending by 5%, still $100 M for DM&E fixes
Here's a missive from our neighbors to the north. Dakota, Minnesota & Eastern Railroad Corp.'s new owner says it needs to cut 5% in capital spending in 2009. It still has $100 million budget for DM&E upgrades.
Here's some from Bloomberg's railroad man in Toronto, Hugo Miller:
T he reduction of C$200 million ($162 million) will push next year's budget to as low as
C$800 million, based on projected expenditures that include DM&E, Chief Financial Officer
said today on a conference call.
``I do not think it would be prudent'' to forecast earnings because of North American economic weakness, fuel-price volatility and the value of the Canadian dollar, she told investors. Profit next year may be C$4.74 a share, based on the average of 20 analysts' estimates compiled by Bloomberg.
Canada's second-largest railroad is reining in spending after posting a 21 percent drop in quarterly profit last month. Canadian Pacific has been hurt by the economic slump in the U.S., where it gets a fifth of revenue, as builders and lumber companies pare shipments.
Here's something from a story by Brent Jang, transportation report @ The Globe and Mail newspaper in Toronto:
I n an internal memo to staff, CPR chief executive officer Fred Green
named Vernon Graham as DM&E president, replacing Kevin Schieffer, who
resigned last month.
"There are significant opportunities to reinforce the DM&E's
profitability by leveraging our information and operating systems,
our purchasing power and our safety practices," Mr. Green
said. "There is considerable work ahead."
CPR placed DM&E into an independent voting trust in October, 2007,
after it bought the regional railway for $1.5-billion (U.S.) from a
group of private equity firms. DM&E, which began operating as a
separate entity within CPR two weeks ago, sought in the past to
embark on a massive Wyoming venture to haul thermal coal, which is
used to fuel plants that generate electricity.
Mr. Graham, CPR's engineering vice-president in charge of transition
plans for DM&E, will be based in Minneapolis, a key CPR hub in the
U.S. Midwest, although an office is being maintained in DM&E's South
Dakota headquarters in Sioux Falls. Mr. Graham reports to Kathryn
McQuade, CPR executive vice-president and chief financial officer.
Calgary-based CPR has made no decision on whether to proceed with the
coal expansion route, but analysts say the railway will need to find
partners to help finance the $6-billion required in capital spending,
including installing and rebuilding tracks from Wyoming's Powder
River coal basin to DM&E's South Dakota lines.
It could take five to 10 years before CPR makes a decision on the
Powder River project, assuming it is able to win over critics such as
the Mayo Clinic in Rochester, Minn., where civic leaders are opposed
to increased freight traffic on tracks near the renowned hospital.