* CP reports 1st-qtr earnings of C$2.70/shr vs est C$2.68
* Operating ratio rises as costs increase
* Revenue up 4 percent (Adds CEO quote on union talks, details from earnings report)
April 18 (Reuters) - Canadian Pacific Railway's first-quarter profit topped analysts' expectations as the railroad operator shipped higher volumes of commodities such as potash and crude oil, offseting the impact of higher expenses.
The results come as unionized workers at CP, Canada's second largest railroad, prepared to strike as early as Saturday after a stalemate in talks with the company over certain demands.
In a call with analysts, CP Chief Executive Keith Creel said he was in "very close contact" with the labor unions.
"We cannot make and will not make a bad short-term deal that jeopardizes our ability to protect the long-term interest and strength of this company, the benefit our customers, employees and the Canadian economy," Creel added.
CP said that while revenue from grain — among the biggest contributors to overall results — slipped 9 percent, potash revenue and revenue from energy, chemicals and plastics both increased over 10 percent.
CP's operating ratio — operating costs as a percentage of revenue — rose to 67.5 percent from 62.4 percent a year earlier. A lower ratio indicates higher efficiency.
Net income fell to C$348 million ($275.8 million) from C$431 million a year earlier. Excluding one-time items, CP earned C$2.70 per share, topping analysts' average estimate by 2 Canadian cents, according to Thomson Reuters I/B/E/S.
The Calgary-based company's total revenue rose nearly 4 percent to C$1.66 billion.
$1 = 1.2620 Canadian dollars Reporting by Ahmed Farhatha in Bengaluru and Allison Lampert in Montreal; Editing by Arun Koyyur and Sai Sachin Ravikumar