CALGARY -- Canadian Pacific Railway expects a “tough first half” because of the economic downturn and possible drought conditions for grain crops in Western Canada, company executives told a news wire service on January 22.

Chief executive Rob Ritchie said the company will continue to focus on cutting costs, building revenues and maximizing efficiencies.

“This is particularly important in 2002 because it does not look to be a strong year economically,” he said in a conference call from New York. “We're going on the outlook of a tough first half.”

The firm released fourth-quarter financial results on Monday showing profits, excluding nonrecurring items, fell 5 percent to C$118 million ($73.3 million), or 74 Canadian cents per share. In the final quarter of 2000, it earned C$124 million, or 78 Canadian cents a share.

A severe drought in 2001 in southeastern Alberta and southwestern Saskatchewan drastically reduced CP's grain shipments.

While it is early in the year, a mild winter and the resulting lack of snow are again raising concerns about moisture levels in Western Canada, Ritchie said.

“We seem to be in a multiyear issue (drought) here and so there is the potential not to see a rebound in that Canadian grain crop in the year coming up,” he said.

The company expects to spend between C$10 million and C$12 million on cleanup and repairs for a Jan. 18 derailment of 31 ammonia cars at Minot, North Dakota. The release of the poisonous gas killed one man and sent dozens of others to hospital, with about 10 people remaining in hospital.

Total costs will depend on any lawsuits but the firm has an insurance policy that kicks in after C$7 million, CP officials said.

The cleanup is continuing and the cause of the accident is still under investigation.

As part of its cost-cutting operations in 2002, CP expects to abandon about 300 miles of underused lines and to pare an undisclosed number of jobs. After shedding more than 1,300 staff last year, CP employs about 16,900.

Shares of CP closed up 84 Canadian cents at C$30.95 on the Toronto Stock Exchange.