UPDATE 2-CP Railway profit hit by charges, sees better 2013
* Q4 profit hurt by one-time charges of C$318 mln
* Sees 40 percent rise in 2013 adjusted earnings
* Forecasts 2013 operating ratio in low 70s
* Says 2013 revenue growth likely in high single digits
TORONTO, Jan 29 (Reuters) - Canadian Pacific Railway reported a sharp drop in quarterly profit on Tuesday as restructuring charges ate into earnings, but the country's second-biggest rail carrier said its aggressive efficiency push is poised to pay off.
CP made a number of "hard decisions" in the quarter, said Chief Executive Hunter Harrison, who is slashing costs and streamlining operations to improve the railway's industry-lagging efficiency.
Harrison, picked by CP's biggest shareholder, Pershing Square Capital Management, to turn around the poorly performing company, has announced sweeping job cuts, shut down inefficient operations and shelved an expensive expansion plan.
CP is cutting 4,500 of 19,500 jobs, resulting in a C$53 million fourth-quarter restructuring charge.
Earnings took a C$185 million hit as CP shelved plans to expand the Dakota Minnesota and Eastern Railroad line into the Powder River Basin coal-mining region. CP, which cited weakness in the thermal coal market for its decision, is also seeking a partner or buyer for a portion of the line.
CP took an additional C$80 million charge for asset impairment on locomotives it disposed of in the quarter.
"With these decisions now behind us, we anticipate record-setting financial and operational results starting in 2013," Harrison said in a statement that also forecast a 40 percent improvement in 2013 earnings over 2012's C$4.34 a share.
KITCHEN SINK QUARTER
The "kitchen sink Q4" largely matched profit expectations, excluding one-time items, said RBC Capital Markets analyst Walter Spracklin.
The 2013 profit forecast is driven by a big reduction in pension expenses, he said. Management has cut its pension expense estimates to C$50 million to C$60 million over the next four years from a previous view of C$140 million to C$150 million, Spracklin said in a note.
"We are at this point uncertain as to how much value the market will ascribe to the change in pension expense assumptions -- which we note are set at the discretion of management," Spracklin wrote.
Revenue is seen growing in the high-single digits over 2012, some 200 basis points higher than the analyst expected.
Calgary-based CP said its operating ratio, a key measure of a railway's productivity, will improve to the low-70 percent range in 2013.
That ratio, which calculates operating costs as a percentage of revenue, improved to 74.8 percent in the quarter, excluding items, from 78.5 percent a year earlier. The lower the ratio, the more efficient a railway.
"CP Rail's march toward a mid-60 percent operating ratio by 2016 is well under way and 2013 should provide a meaningful down payment toward this target," BMO Capital Markets analyst Fadi Chamoun said in a note.
Net profit fell to C$15 million ($14.86 million), or 8 Canadian cents per share in the quarter that ended Dec. 31, from C$221 million, or C$1.30 per share, a year earlier.
Revenue rose 7 percent to C$1.5 billion.
CP's shares rose C$3.70, or 3.2 percent, to C$116.39 in morning trading on the Toronto Stock Exchange.
The stock has soared more than 45 percent since former CEO Fred Green's exit last May, reflecting high hopes for Harrison's turnaround.