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

Moderator: MEC407

  by CN9634
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.
  by roberttosh
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.
  by CN9634
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
  by gokeefe
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.
  by CPF363
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?
  by CN9634
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.
  by CPF363
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?
  by Cowford
FTAI reported Q1 2019 results 10 days ago. Not much to report. The biggest gain is salt - up nearly 400% YOY due to business gained (on the Newport sub, I believe I was told) in Q3 of last year. Less the salt, overall YOY volume was flat... and though flat, revenue per car grew significantly - a traffic mix issue: Chem and propane segments were up 50% YOY, offsetting unit losses in building products/lumber.
  by CPF363
Investing in the property has paid off in the end for the CM&Q.
Last edited by MEC407 on Tue May 14, 2019 9:52 am, edited 1 time in total. Reason: unnecessary quoting
  by NHV 669
Haven't had much for reports of Traffic on the WACR coming off CMQ as of late, but regarding salt, there was the 54 car train I witnessed last fall that was over 40 salt empties, the cars were definitely coming in bunches.
  by Gilbert B Norman
A well produced video, Mr. Backroads.

According to the TRAINS article, CMQ is not handling crude, so I must wonder what is being handled in the tanks on that train? At least they are wisely spaced throughout such.

Oh well, at least with the "Products of Forests" being hsndled on that train, how often did I hear on my road that certainly had its share of FRA Class 1 and 2 track, "if you spill some lumber, you just pick it up and move on".
  by KSmitty
CM&Q handles any number of liquid bulk materials, I saw predominantly LP gas cars, with acid cars and an unknown chemical tank car or 3 in there.

Irving's refinery in Saint John produces Propane and Butane among other products that may be shipped by rail. There is a CO2 gas distributor in Saint John as well that takes tanks. Any number of assorted chemicals, fuels and liquid clay products are needed to feed paper and lumber mills in Maine and Saint John. GAC in Searsport takes Acid cars, and a few other chemicals.

CM&Q was playing nice by agreeing to not haul crude oil. But the market for crude had pretty well dropped off anyway as oil prices for foreign oil fell and undercut domestic and US sources. Irving has been buying Brent oil and getting it shipped in directly to their pier instead, so its not like CMQ gave up a huge market for the stuff, and it kept Megantic happy.
  by Gilbert B Norman
A lot of stuff within UN 1075 can go "boom"; maybe not quite with same intensity as 1267 (crude), but it can. But judging from the video chasing "Job 1" X-Maine, the HAZMAT cars are wisely spaced throughout the train.

Presently, there is a spread of $7bbl between "Brent" (Middle East; I think Russia as well) and "Sweet" (Permian and Bakken). With US and Alberta sources that much cheaper, Irving could "rethink". One must wonder will CMQ throw "hat in ring" - and what will folk in Megantic think?
  by carchecker
They have also been hauling a fair amount of hot asphalt in the last few months. Placard 3257. You can notice it showing up on the video of job 1 crossing the bridge because it's a white placard. Looks like about 8 loads on this train.
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