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Canadian Pacific Railway

Railroad Warns On Weaker Results

Canadian Pacific Railway Ltd. warned on Tuesday its second-quarter results would take a hit from declining shipping volumes amid a commodity swoon that includes grain and potash, wildfires in energy-rich Alberta and a stronger domestic currency.

Canada's second-largest railroad said it expects second-quarter revenue to fall about 12% from a year earlier while adjusted per-share earnings could fall about 18%.

Both measures are well off current analyst estimates, which had put earnings for the quarter ending June 30 up slightly from a year earlier and revenue off just 5%, according to Thomson Reuters.

The railway, based in Calgary, Alberta, also expects its key operating ratio to worsen to 62% for the period, up from 60.9% a year earlier and 58.9% in the first quarter. The ratio is the percentage of revenue consumed by operating costs, so an increase represents a worsening.

The ratio's projected increase would represent the biggest such rise since Hunter Harrison became chief executive of the railroad in June 2012, following a proxy battle led by William Ackman, CEO of Pershing Square Capital Management LP and a major CP shareholder. CP's operating ratio stood at 81.3% at the end of 2011, making it the worst-performing railroad among its North American peers at the time, but it has steadily improved under Mr. Harrison's watch to an all-time low in the first quarter of this year.

"CP will continue to focus on controlling costs in a difficult environment," Mr. Harrison said in a release.

The commodity sector has been hard hit by slumping prices, which have pressured shipping volumes, while wildfires in May around Fort McMurray, Alberta, added to shipment headwinds. A recent rally in the Canadian dollar will also mean lower revenue as U.S.-bound cargo is often priced in U.S. dollars and results in a hit when converted back to domestic currency.

Canadian National Railway Co., CP's main domestic rival, is also feeling the pinch from lower shipping volumes. Incoming CEO Luc Jobin told an industry conference last week the railroad's carload volumes were down between 4% to 6% this year.

According to American Association of Railroads data, Canadian railroads reported 15.4% fewer carloads in May than April, while intermodal shipments -- the biggest revenue driver for CN and CP -- were down 6.0%. Total Canadian rail traffic is down about 7.6% so far this year, while carloads have fallen for 14 consecutive months.

In April, CP shelved its nearly $30 billion pursuit of Norfolk Southern Corp. after encountering heavy opposition from rival railroads, shippers and U.S. politicians. The proposed merger would have created one of North America's largest railroads, with annual revenues of about $16 billion.

The company said on its first-quarter earnings call that it expected to cut about 1,300 jobs over the next year. It didn't specify on Tuesday what its specific cost-reduction plans are.

During an investor conference last month, CP President Keith Creel said the railroad plans to lay off an additional 200 workers by the end of next month.

Despite cutting costs, weak shipping volumes reported by CP in the quarter-to-date raise questions about whether the company can achieve the results it forecast for 2016, said Benoit Poirier, transportation analyst at Desjardins Capital Markets.

"We remain skeptical about CP's ability to achieve its 2016 guidance in light of the lack of visibility on a volume recovery in the second half of 2016," Mr. Poirier said.

CP had revenue of 1.65 billion Canadian dollars ($1.29 billion) in its year-ago second quarter and an adjusted profit of C$2.45 a share. Guidance for this year's second quarter is for adjusted earnings of C$2 a share.

The railway's latest guidance for the year is for double-digit growth in earnings per share and an operating ratio below 59%.

CP plans to report second-quarter results on July 20.

--David George-Cosh and Judy McKinnon

Impax Laboratories

Pact Is Reached For Generic Drugs

Impax Laboratories Inc. said Tuesday that it would buy a portfolio of generic drugs from Israel's Teva Pharmaceutical Industries Ltd. and Allergan PLC for $586 million as Teva works to complete its planned purchase of Allergan's generics unit.

The deal includes 15 currently sold generics, several drugs in the pipeline and the rights to generic Concerta, which treats attention-deficit hyperactivity disorder and was part of a partnership between Impax and Teva.

For almost a year, Teva has been working to close its $40.5 billion purchase of Allergan's generics unit. In March, Teva said the deal would be finalized later than expected as it works to obtain regulatory approval.

This month, Teva and Allergan sold five abbreviated new drug applications to hospital pharmaceutical provider Sagent Pharmaceuticals Inc. $40 million, and Teva sold eight drugs to India's Dr. Reddy's Laboratories for $350 million.

On Tuesday, Impax said the deal expands its portfolio of difficult-to-make and limited-competition products.

The alread-to-market drugs included in the deal brought in $150 million in sales and about $100 million in gross profit in 2015, a good chunk of Impax's $860.5 million in revenue that year.

Impax raised its profit guidance for the year because of the deal. It now expects at least 20% profit growth, compared with at least 10% previously. Analysts polled by Thomson Reuters had expected 9% growth.

The deal is being funded by cash and $400 million in debt and is subject to customary closing conditions, Federal Trade Commission approval and the closing the Teva and Allergan deal.

--Austen Hufford

Kion Group

German Firm Makes Logistics Push

FRANKFURT -- Germany's Kion Group AG, a supplier of forklift trucks and warehouse equipment, is buying Dematic Corp. of the U.S. for roughly $2.1 billion in cash to grab a share of booming, e-commerce-driven demand for automated logistics centers.

The move by Kion could help give its largest shareholder, China's state-owned Weichai Power, a foothold in the U.S. Dematic equipment and software have been used at production facilities of companies including Ford Motor Co. and Harley-Davidson Inc. Dematic also is involved in automating warehouses and distribution centers of Amazon.Com and Wal-Mart Stores Inc.

"Kion Group and Dematic together will design and deliver solutions that better position our customers to respond to dynamic demand," said Ulf Henriksson, chief executive of Dematic.

Kion's largest shareholder is Chinese diesel-engine maker Weichai Power, with a 38.3% stake. The remainder trades freely on the Frankfurt Stock Exchange and it is included in Germany's MDAX midcap index.

Kion said that by buying Dematic it aimed to become a "one-stop supplier of intelligent supply-chain solutions." It predicts that demand for supply-chain automation will grow 10% by 2019.

The company said it is the largest manufacturer of industrial forklift trucks in Europe, the global number-two behind Toyota Motor Corp. and the leading foreign supplier in China.

The deal comes amid growing competition between traditional bricks-and-mortar retailers and e-commerce specialists for online business. Peapod Inc., a food-retailing unit of pending merger partners Ahold and Delhaize Group, for example, recently built a 400,000 sq. ft. fulfillment center, running in part on Dematic software, to compete better with online grocery businesses such as Amazon.com and Fresh Direct in New York.

Chinese companies have been on a buying spree in 2016, making the country the world's top foreign acquirer to date, according to data provider Dealogic. If it finishes in first place, it would be the first the U.S. hasn't held pole position since 2007.

Together, Kion and Dematic would have had revenue of EUR6.7 billion ($7.6 billion) last year, an adjusted operating profit margin of around 9.4% and a global workforce of 30,000, Kion said.

The merged company should be able to cut costs and boost revenue by combining the two firms' geographical reach in key markets such as Europe, China, Brazil and the U.S., the Wiesbaden-based firm said.

The company will initially fund the transaction via a EUR3 billion bridge loan from a group of banks. At 1310 GMT Kion shares were trading 7% lower at EUR45.33.

--Ulrike Dauer and William Wilkes

Nissan Motor

Auto Maker Seeks Injunction Against 'Vote Leave'

TOKYO -- Nissan Motor Co. said it has taken legal action in the U.K. to stop the "Vote Leave" campaign from using its name and logo in materials backing a British departure from the European Union.

Nissan said Tuesday that it asked Britain's High Court on Monday for an injunction against Vote Leave, just ahead of the Thursday vote.

The auto maker said in a statement that Vote Leave was using its name and logo on its website and in promotional materials without permission, and in ways that misrepresent its views on a possible "Brexit." Vote Leave, which is the most prominent group campaigning for a Brexit, hasn't stopped doing so despite repeated requests, it said.

The Japanese auto maker isn't the only global company protesting the use of its corporate identity in Vote Leave promotional materials. Multinationals like General Electric Co., Unilever PLC and Airbus Group SE have also complained that their logos were used by the campaign without their permission.

Nissan, which employs about 8,000 people in the U.K. and ranks as the second-biggest car maker there by output, has said it opposes a Brexit. It makes more than 475,000 vehicles annually in the U.K., 80% of which are exported. A British departure from the EU would likely make it more difficult and costlier to export its vehicles from the U.K.

"Our preference as a business is, of course, that the U.K. stays within Europe. It makes the most sense for jobs, trade and costs. For us, a position of stability is more positive than a collection of unknowns," Nissan Chief Executive Carlos Ghosn said previously.

Toyota Motor Co. said this month that it had also repeatedly warned Vote Leave to stop the unauthorized use of the company's trademark, and was considering legal action.

The world's largest car maker also prefers the U.K. stay in the EU. Toyota employs 3,400 people at two production sites in the U.K. Last year, it produced 190,000 vehicles and 240,000 engines there.

--Megumi Fujikawa

(END) Dow Jones Newswires

June 22, 2016 02:52 ET (06:52 GMT)

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