Under the banner of Canadian Pacific Kansas City, the merger of North America’s two smallest Class 1 railways became official Friday morning as CEO Keith Creel drove home a platinum spike at a ceremony in Kansas City, Mo.
Combining Canadian Pacific Railway Ltd. with Kansas City Southern Railway Co., the fusion creates the only railway stretching from Canada through to the U.S. and Mexico and marks the continent’s first major rail merger in more than two decades after a U.S. regulator approved the $31 billion US deal last month.
It also opens the gate to higher cargo volumes and faster transport, despite several hitches on the network.
“We can control our own destiny for our customers, as opposed to being tied to interchanges or being cut out of markets for the lack of a stronger network,” Creel said, in a phone interview from Kansas City.
He pointed to grain, lumber and shipping containers as key areas for growth, including a stronger competitive position against trucking rivals.
“We can operate across the border 24/7 as opposed to the trucks, which are very congested getting to and from Mexico,” Creel said.
“But we’ve got to make sure that we methodically build out this network and don’t get ahead of ourselves and jeopardize our ability to be able to provide service to the customers that we’re obligated to provide to today.”
Stretching from Vancouver to Saint John, N.B., the 142-year-old Canadian Pacific network will now fasten onto KCS at their meeting point in Kansas City. The merged Canadian Pacific Kansas City line snakes down through New Orleans and Houston to Mexico City, reaching ports in the Gulf of Mexico and the Pacific Ocean.
Some hurdles remain, however, including labour shortages, falling freight levels and logistical snags.
Backups on the KCS line north of Mexico City were a periodic problem over the past year, Creel acknowledged, citing labour and railcar capacity.
“That they had some congestion, that they had some challenges with labour, with hiring enough people, with retaining enough people — perhaps so. I think the entire industry has faced that,” Creel said.
But he insisted staffing is not a significant issue, with a higher-paying collective agreement to be implemented on several lines before June as an incentive for workers.
“I would suggest that if it was a choke point yesterday, we’re going to create a whole lot of capacity,” he said.
In the short term, rail traffic is waning amid a wobbly economic outlook for the year. In March, container traffic in Canada dropped nearly 12 per cent year-over-year, according to the National Bank of Canada.
“We see international intermodal as a segment that is particularly at risk of volume declines as retail inventory levels in North America have remained high, which is leading to lower international container imports,” said National Bank analyst Cameron Doerksen in a note to investors.
CPKC and its bigger rival Canadian National Railway Co. have both pointed to “continued softness” on container shipments abroad, Doerksen said.
Longer term, the prospects look brighter.
“We believe CPKC will have the most compelling growth of the Class 1 railroads in the coming years,” he said.
Canadian Pacific Kansas City broke ground Friday on a new yard office for its U.S. operations centre in Kansas City, Mo., though its headquarters remains in Calgary. CPKC will operate almost 33,000 kilometres of rail and employ nearly 20,000 people.
Despite that vast network, the railway does not own the tracks it runs along between Chicago and Detroit and depends on other railroad operators’ lines to move its to cargo across the international border at Windsor, Ont., as well as Buffalo, N.Y. Moreover, the 113-year-old tunnel under the Detroit River cannot accommodate railcars stacked with larger shipping containers.
“I wouldn’t call it a roadblock or a nuisance; I’d call it an opportunity,” Creel said. CP Rail bought the Detroit River rail tunnel from pension fund manager OMERS for $312 million US in December 2020.
“Five to 10 years out, with the right growth on the network, could we potentially, certainly justify building a double-stack tunnel in Windsor? The answer is yes,” Creel said.
But CN Rail, with tracks stretching from Vancouver and Halifax to New Orleans, still offers an appealing alternative to its rival, said railway consultant Greg Gormick.
“The KCS is a pretty rough piece of railway. It goes up and over the Ozarks, it’s a razorback railway. If you’re looking to get to the Gulf of Mexico, KCS is not the way to go,” he said, citing CN’s “water-level” route that traces the Mississippi Valley.
Last month’s green light from the U.S. Surface Transportation Board cleared the final hurdle in CP Rail’s bid to buy KCS.
STB chair Martin Oberman said in March the combined company will speed up freight travel time and encourage tighter competition with the continent’s other five railways.
CN Rail had fought a long battle over the acquisition before CP closed the deal in December 2021, placing the KCS shares into a voting trust, which ensured the U.S. railway operated independently during a regulatory review. CN had wooed KCS away from an initial CP offer with a $33.6 billion US proposal in May 2021 before the U.S. regulator rejected CN’s bid in August of that year.
CPKC’s shares in the railway will remain listed on the Toronto Stock Exchange and New York Stock Exchange under the ticker symbol CP and are expected to begin trading under the new moniker on Tuesday, the company said.
Conditions on the deal include keeping connection points between the CPKC system and other railways open on “commercially reasonable terms” and formally justifying any rate increases over a certain level on interline movements, according to the U.S. regulator.
The agreement also stipulated that four KCS board members would continue on as directors with the amalgamated company: David Garza-Santos, chairman of machinery manufacturers Madisa, based in Monterrey, Mexico; Antonio Garza, a Mexico City-based lawyer and former U.S. ambassador to Mexico; Henry Maier, ex-CEO of FedEx Ground, a subsidiary FedEx Corp.; and Janet Kennedy, former vice-president for Google Cloud’s North American region and erstwhile president of Microsoft Canada.
The four appointees will also be nominated for election to the board at CPKC’s annual shareholder meeting on June 15, the company said.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
