C.P.R. PROSPECTS
Canadian Pacific preference stock has so far proved one of the disappointments in the recovery stakes. Holders are to go without a dividend for 1938, and the £i oo stock is quoted around £25. Even at this level it does not look particularly attractive, at any rate on a short-term view, in relation to the position disclosed in the preliminary figures. Despite a reduction in traffics working expenses rose last year by $163,204 to $121,506,515, partly owing to restoration of wages cuts in 1937, and net revenue from railway work- ing was $2,989,781 lower at $20,752,466. The really serious fall, however, was in " Other Income " which has contracted by as much as $4,266,038. This can be attributed mainly, one imagines, to the setback in the earnings of Consolidated Mining and Smelting, the base-metal producer in which the C.P.R. has a large shareholding, but there was also a severe falling off in revenue from hotels and steamboats. Taking the railway results and the " Other Income " together, net revenue for 1938 was sufficient to cover fixed charges and guarantee obligations with only $1,262,382 to spare, equiva- lent to just under 1 per cent. on the preference stock.
The fact that no preference dividend is to be paid rather suggests that the old skeleton in the C.P.R. cupboard—loss on lines abandoned and property retired and not replaced— has had an inhibiting effect on distribution policy. On this occasion the total under this head, including the miscel- laneous net debit, is $1,324,064 less than in 1937 at $1,498,382, but this has been sufficient to reduce the balance at profit and loss, despite the transfer from revenue, by $236,000 to $136,969,650. This year the revenue prospect is slightly improved by a reduction in the company's obliga- tions in connexion with the " Soo " Line as a result of the reorganisation scheme, but as gross traffics have again declined, I cannot think of the preference dividend possibili- ties very optimistically. What is really wanted is a unification of Canada's railway system, but to that there still seems to be strong opposition. At £25 C.P.R. preference is obviously standing at a price which sets no great valuation on recovery chances. For that reason I would not sell it. But I would not rank it as one of the really attractive recovery speculations.
Previous page
