OTTAWA -- Canadian Pacific Railway Ltd. said it expects to report lower fourth-quarter profit this year, despite slackening fuel prices and a projected increase in operating income, the National Post reports.

The Calgary-based railway, saddled with heavy interest payments as a result of its spinoff from Canadian Pacific Ltd., yesterday forecast share profit of 69¢, excluding unusual items, for the last quarter of 2001. That compares with 78¢ for the same three-month period in 2000.

For the current fiscal year, CPR now says it will post earnings of $2.28 per share before non-recurring items, down from $2.53 in 2000. Last month, CPR said it was confident it would meet analysts' expectations of $2.40 for fiscal 2001, although there was some confusion as to whether the railway's target excluded unusual items.

Including these items, the company is forecasting 2001 profits of $2.55 a share, compared to $3.36 last year. Rossa O'Reilly, an analyst with CIBC World Markets in Toronto, characterized the quarterly forecast as "very respectful," adding the 69¢ target exceeded his estimate by a few cents.

"Clearly, numbers are coming down for two reasons," he explained. "One is that this year they have the interest on the funds borrowed to pay the $700-million dividend to CP before the spinoff. Also, the business trends are starting to reflect the economic decline that began earlier this year, and ... the fourth quarter will have more of the impact of the Sept. 11 terrorist attacks."

CPR's shares dipped slightly on the news to $28.40, down 30¢.

Despite the weak economy, CPR said it expects operating income in the fourth quarter to be marginally higher than it was last year.