CMQ Profitability

Discussion of present-day CM&Q operations, as well as discussion of predecessors Montreal, Maine & Atlantic Railway (MMA) and Bangor & Aroostook Railroad (BAR).

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Re: CMQ Profitability

Postby CN9634 » Sat Dec 29, 2018 8:13 pm

roberttosh wrote:I don't doubt that they are profitable/growing and some onesie-twosie cement and feed moves are no doubt feel good marketing stories, but they don't compare to customers like Sappi, Verso and ND Paper that handle 30-40 high revenue loads a day, 7 days a week, 52 weeks a year. The Twin Rivers traffic sounds good on paper but my guess is that it's not much of a money maker since they had to outbid CN and Pan Am to win such overhead traffic. I guess we'll have to agree to disagree on whether 6500 cars per quarter, which comes out to roughly 71 cars per day (much of it lower profit overhead traffic) over what's nearly a 500 mile system is going to attract a lot of interest...


When is the last time you were on property? This isn't 'onesie-twosie' business, this is incremental new volume. Also not sure you are familiar with how this works, the traffic for people like Twin Rivers doesn't just arbitrarily go out to bid, you have to establish a relationship and provide a value proposition (ie trust and goodwill).

Also, what about revenue per carload mile? Or CPTM? You have the figures, why don't you calculate that first and come back with your analysis.
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Re: CMQ Profitability

Postby roberttosh » Sat Dec 29, 2018 10:38 pm

If things are so rosy, please explain to me how they lost money in the last full year results (2017) as well as the most recent quarter? Again, we will have to agree to disagree.
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Re: CMQ Profitability

Postby CN9634 » Sun Dec 30, 2018 9:02 am

So FTAI uses an adjusted EBITDA formula (common practice) to reflect spending activity ongoing in any given year that explains why an end result is negative. For example, last year (and subsequent years before) they invested a lot in equipment and infrastructure, being the Maine Regional Railways TIGER program, roughly $4M in track outside of that (Canada mostly), Derby shops and in locomotives/railcar leases.

That is if you say, 'well yeah they finished in the red' unadjusted, they actually made investments that if they otherwise hadn't made they would be in the black. The result of the investments is expected of course to contribute to revenue and cost savings (think AC44 fuel efficiency, locos with hot starts, less maintenance on track ect) at a later date. So for this, you have to use the adjusted formula to get a sense of the overall health of the company.

Last year adjusted EBITDA was $2.9M for all of 2017.... as of now three Quarters in adjusted EBITDA is $5M. So in three quarters, they've already exceed all of last year... but they did have some help from SLR detours back early this year, which is an anomaly.

CMQ capital plan through 2020 is $4M per year on track (which is a plan, so subject to change) while recognizing 45G tax credits. Also likely some more locos and railcar deals to come.

Also factor into your previous analysis, you were assuming a 7 day work week, which is not the case. For the most part CMQ is a 5 and a half day outfit (some jobs work 5 days some 6), so you have to adjust your calendar year for that. So we can use 290 working days in a year (thereabout) or 72.5 days per quarter, meaning they are moving about 90 carloads per day. If you want to go deeper down the worm hole, you can segment out divisions based on job frequency (IE, they go to Millinocket 3 days a week, Searsport 3 days a week, Moosehead 5 days a week, ect) based on 'best guess' observed volumes and you can likely extrapolate pretty closely so stronger figures. Also, run some scenario analysis for upper and lower deviations, plot a few different paths to get an overall sense of what their growth trajectory is going into 2019 assuming all things equal (is growth expediting or is it cooling?). You can likewise do the same based on carload tonnages (assuming things carloads are mostly utilized when loaded, say 90%) and determine you cost per ton mile on routes also based on their tonnages.

Hopefully if someone buys CMQ, they do at least the above and likely more to determine if they are to buy. Don't forget, a scenario exists with no buyers and Fortress keeps running it.


To summarize-- if you don't actually read any of the above, to answer your question why they finished in the red (unadjusted) last year and last quarter, its because they've been investing in the railroad (what a concept). Also, seasonally speaking they do better in Q4 and Q1 (which they acknowledge) due to the LPG traffic, but overall things are growing.
Last edited by MEC407 on Tue Jan 01, 2019 5:52 pm, edited 1 time in total.
Reason: unnecessary quoting
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Re: CMQ Profitability

Postby gokeefe » Sun Dec 30, 2018 2:18 pm

I really appreciate you taking the time to provide all of this. I am particularly impressed with the rate of investment. $4M a year in trackwork is a very healthy figure for a railroad of their size.
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Re: CMQ Profitability

Postby CPF363 » Sun Dec 30, 2018 3:05 pm

Was going to ask what Fortress is doing differently compared to the two previous owners, MM&A and Iron Roads. How much more of Irving's traffic is going via the CM&Q compared with years past?
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Re: CMQ Profitability

Postby CN9634 » Sun Dec 30, 2018 3:15 pm

gokeefe wrote:I really appreciate you taking the time to provide all of this. I am particularly impressed with the rate of investment. $4M a year in trackwork is a very healthy figure for a railroad of their size.


$4M a year in improvements is cost of doing business if you want to be successful.... remember MMA let it go into the ground.

As for what they are doing differently, for sure marketing/sales staff and strategy. There is some new online business MMA/CDAC never had, particularly in Canada. CDAC was actually a proof of concept for viability-- towards the end of their tenure they were pulling some impressive carloads but costly derailments and outlaying capital way too early without a rainy day fund pushed them quickly into the brink. Remember too, CDAC started only as far west as Sherbrooke and quickly put up more $$ to expand, so they very likely bit off more than they could chew.

The story of MMA need not be retold in this thread.
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Re: CMQ Profitability

Postby CPF363 » Sun Dec 30, 2018 3:49 pm

Where is the new business in Canada? How much of the line has welded rail on it and how is the overall tie condition? Is Irving sending more of their westbound traffic over the CM&Q verses running via CN?
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