Canadian Pacific Railway Limited announced its fourth-quarter and full year results for 2007. In the fourth quarter, net income increased to $342 million in 2007 compared with $146 million in 2006 primarily due to lower future Canadian income tax rates. For the full year 2007, net income improved 19 per cent to $946 million compared with $796 million in 2006. This improvement was driven by an increase in operating income and a foreign exchange gain on long-term debt. In 2007, CP recorded a full year future tax benefit of $163 million compared with a tax benefit in 2006 of $176 million, both due to lower future Canadian income tax rates. Diluted earnings per share was $2.21 in fourth-quarter 2007 compared with $0.92 in fourth-quarter 2006 and $6.08 for the full year 2007 and $5.02 in 2006.

“We delivered earnings growth in 2007 in a year that brought us many challenges,” said Fred Green, President and Chief Executive Officer. “Most recently, in December, our operations were hit hard by harsh weather that affected the entire supply chain, including high winds that shut down port and terminal operators for several extended periods. This restricted our ability to move the freight volumes we’d planned.”

Freight revenue, excluding the impact of foreign exchange, grew in the fourth quarter by five per cent, however this growth was more than offset by the impact of the stronger Canadian dollar, resulting in a decline in freight revenue of one per cent to $1.14 billion when compared with fourth-quarter 2006. Operating expenses increased one per cent to $883 million in the fourth-quarter 2007 compared with $870 million driven mainly by an increase in fuel prices offset, to a degree, by foreign exchange.

“Even with the impact of foreign exchange, we had revenue growth in some sectors, including industrial and consumer products, intermodal and automotive,” added Mr. Green. “However, the rapid rise in the cost of fuel, and the inherent lag in our fuel recovery programs combined with the net negative impact of foreign exchange to reduce our operating income.”

The outlook for 2008 for diluted earnings per share before foreign exchange gains and losses on long-term debt and other specified items is expected to be in the range of $4.70 to $4.85.

“We continue to see strong demand in our bulk portfolio for 2008,” said Mr. Green. “And this, coupled with improved yield and a renewed focus on our Integrated Operating Plan, will drive results. We still expect to meet our objective for 2008 diluted earnings per share.”

The 2008 estimate assumes an average currency exchange rate of the US dollar at par with the Canadian dollar, and crude oil prices averaging US $87 per barrel, which is a change from the previous assumption of US $80 per barrel.

The outlook for growth in the North American economy continues to be uncertain but CP expects to grow total revenue by four to six per cent in 2008 while total operating expenses are expected to increase by three to five per cent.

Capital investment is expected to be in the range of $885 to $895 million in 2008, essentially flat when compared with 2007.

CP expects free cash to be in excess of $250 million in 2008.

The 2008 outlook includes the projected earnings of the Dakota Minnesota and Eastern Railroad (DM&E) on an equity accounting basis for the full year.