Canadian National Railway (CNI) 20 Oct 202020 Q3 Earnings call transcript

Company Profile

Participants

Paul Butcher	VP, IR
JJ Ruest	President and CEO
Ghislain Houle	EVP and CFO
Rob Reilly	EVP and COO
Keith Reardon	SVP, Consumer Products Supply Chain
James Cairns	SVP, Rail Centric Supply Chain
Ken Hoexter	Bank of America
Cherilyn Radbourne	TD Securities
Ravi Shanker	Morgan Stanley
Benoit Poirier	Desjardins Capital
Chris Wetherbee	Citi
Fadi Chamoun	BMO
Scott Group	Wolfe Research
Walter Spracklin	RBC Capital Markets
Brian Ossenbeck	JPMorgan
Konark Gupta	Scotia Capital
Jon Chappell	Evercore ISI
David Vernon	Bernstein
Jason Seidl	Cowen
Allison Landry	Credit Suisse
Tom Wadewitz	UBS
Seldon Clarke	Deutsche Bank
Jordan Alliger	Goldman Sachs
Justin Long	Stephens

Call transcript

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Operator

CN Third Quarter 2020 Financial Results Conference Call will begin momentarily. I would like to remind you that today's remarks contain forward-looking statements within the meaning of applicable securities laws. Such statements are based on assumptions that may not materialize and are subject to risks described in CN third quarter 2020 financial results press release and analyst presentation documents that can be found on CN's website.

As such, actual results could differ materially. Reconciliations for any non-GAAP measures are also posted on CN's website at www.cn.ca. by. stand Please

begin will Your shortly. call

Paul Butcher

James our Rob Operating Consumer to JJ Q&A and President available IR Products remind Okay. you the JJ Thank President, Reilly, statements. Senior Vice Supply our any you Executive call. the With my participate everyone question and comments to session. so President, Chain Chief thank Houle, me Good I one our Keith for joining is call is Patrick. I to President made President to and us forward-looking Rail like earnings afternoon, be Chain. for Centric XXXX Reardon, and turn for remind Ruest. do that Vice pleasure yourselves and want quarter questions. Cairns, the Executive to the Supply Officer; CN's and everyone you, CN's Chief will opportunity Vice Executive follow-up to regarding team the after about you would already It today Vice Chief limit Chief call Officer; our please Officer, Ruest, Ghislain to our Senior Executive over Financial now Officer; President has third The in

JJ Ruest

all recovery The everyone, your you, Paul, health. enjoying that and then family joining Well, good are thank evening. underway. is in economy thank for of hope and this sure making you you, staying We us a is fall safe

was And back business. XX.X%. different sequential are recovery operating many heroes since of to improving. of kudos an month adaptable ratio added The to the The star. We train at July. employees the services a some railroaders. pandemic. truly swiftly, mix recovery underway brought of to team QX of service, They producing of entire back and thanks our active for we very Looking the our operating CN of is a engaged matrix recovery. has and team QX, the very of acted essential The quarter this are

recovered market Some fast in V-shape.

markets yet Some recover. to have

freight evolved miles quality different in - the to the again. involved grain. the significant our is as and right optimize ensure ahead and and to this increase ton decline into is of the of return we in quarter proactively revenue significant consistently capacity making mix team, rail on and precious price same-store value compared Canadian a in inflation crude of All the always, We investment decisions, the so our the CN is our pre-pandemic with third in a network and quarters in as of that business to rail that achieved come shareholders. target we return to the

remains Our strategy, intend on we much very focus ride. the that positive secular to long-term the on train

upcoming the on by will battle for trucks long-term over channels. disruptors I competing and unique of to preparing On note, Coast very pass aware like the For North to economy, the cost American example, the the growing East and secular and gateway freight that, and all sales for the it trade, service Rob? Rupert that mode shift the consumer Rob. control driverless while being

Rob Reilly

that not chain All And pandemic the railroaders is but team in to also thank of to men their have the right, women for started really our credit a want the keeping not missed quarter, since beat this you, America. a I critical CN. thank JJ. and past in only of efforts, supply North We essential open and

the rightsizing resources recovery a quickly to adapted third we demand As the month-over-month and way. JJ mentioned, quarter saw the along in during the team sequential

pandemic are We implemented our last lower with this in back costs. similar year means have cars discipline move and our throughout we to changes versus crews, that but labor to brought locomotives, volumes volumes, year the able this structural handle

that have into We run one which yards we've months, us network several Canadian completed offices past three of the our consolidation the Edmonton, Over remained efficiently. multiple allows in dispatch more offices and closed. switching location idled to shops from locomotive

dropped During the XX% quarter, we were able volumes while our yards to X%. reduce by our

train train increasing us off length starts. paid on the focus freight quarter, fewer allowing we during increased as X% more with length to Our crew move

remains As also the during improve going as seen the volumes by the fuel car since on our on efficiency the our The quarter, a pay best-ever into off new quarter, month end key set in returned months. winter record all-time as continue efficiency we've to team's third in leading record. metric velocity fuel XX% July efforts of fluid to we network new every quarterly very for

fuel far efficiency to emissions fuel initiatives saved this efforts XXX,XXX alone. over avoided so year expense close tons have from our in Our and COX CADXX million of

in We intention and fuel are every North efficiency railroad American we leader the that leadership. maintaining of locomotive have

fuel Our firm efforts best continuously rail the efficiency. footprint recognizes that reduce is way carbon part solution underpin and the our our is to belief that of climate our improve to

a a robotic everyday inspect communities our and ratio unit As lower Most us Learning improving block team's for rail safe the XX% declining work at process and forward our in pleased Machine to train everything our the the and Despite with to the respectively, everything of importantly, engineering cost do. with agenda due relentless of operate have of use Intelligence engineering how get our the volume disciplined I we report centers. railroad dispatch accident to of both has Artificial on seen, the the work focus ratio we as installation personal tracks in fluctuations through remains on modernization running we needed. fewer resulted has we and costs for and as we planned, This cars. our am employees, on pandemic tie our by our tasks done injury allowed safety resources railroad operations increased automation production core and pushed and value have in to our we XX% from customers execution and teams

fluid prepared is every month and week Ocean winter inspection routes the on record monthly railroad core delivered unlocking the and Atlantic covering phase that CN for the all-time and to by railroad safer, down delivering movement fact costs. has of the U.S. are straight Ocean track The harvest the seven Gulf of reducing Pacific program our is Mexico, the consecutive the from October. track the ahead and grain. autonomous now the we're making records season evidenced is capacity now entering our record team to in our two to for And Canadian in cars into Our a here and grain

As we a to I'll productivity. and aligning resources momentum responsive fuel I to nimble to that and positive to labor that, let reiterate it me over on turn and remain maintaining turn With this over very James, James. demand

James Cairns

Rob. you, Thank

saw experienced weakness record crude, During our and petroleum in QX, as V-shape frac while economy, Demand delivered automotive, to consecutive levels, Rob we monthly a products. and setting the and for lumber refined tied grain, said, seven hit business, in we recovery Canadian which not ports sand is we records.

including recovery, hard and we key we Canadian through markets, drive will grain, Canadian manage propane. coal As uneven on this

side discuss topics detail now me Let the carload in the further of some on business. of the

TECK Coal XXXX best record finished Canadian last permanent and a to temporary Valley closure was the beating Canadian CN and River of ahead the best by grain impacted As the Cardinal in bright well negatively XX%. our with continues for grain CST year. mines also coal quarter on closure U.S. by was of mine. third spot be very and volume I previous strong of mentioned,

strong which petroleum up QX frac products, position activity. construction in Forest XXXX. shift the sand our ramped our finish for contributing tonnage out well to were quarter. brought for we outliers refined QX saw Crude, overall capacity customers year the help sharply products in advantage and idled us heavy the in business positive QX, us segments, momentum take The are in to as mix will back of the weak strong long-haul and

an the are market dominant benefit this forest Canadian recovers. We market see player the as outweighted products in and

all-time brought the has may investing grain years is and the to back in making are the hit recently cars our auction change Canadian alongside U.S. lumber Canadian spot are that U.S. we and and demand all XXXX. The were above and be added record been have step be at lease to crop prices. we to growth and in additional QX drivers expected function in customers. storage meet cars in XXX grain grain capacity an chain average. The expected crop supply We

high-capacity hoppers By high-capacity purchased hopper our next X,XXX have have on will we invested new grain in X,XXX over private end the fleet and new cars. new cycling have our cars customers QX payload We also similar high year, of network. of

resources. grain We the and us faster of using to allowing also XX% Coast served capacity, CN, West take expect by to grain, fewer increase exclusively advantage all move more physically in export

fuel will volume volume export from to long-term three network advantage Gulf for for for work. approach and upscaling several the the opportunity disciplined market projects running We of and value CN green portfolio with and a is grow Our export. driven production up our will right pellets be coal a strong unique on commodities to new Propane U.S. a moving also alternative Prince by our ramp continue we as U.S. in a structural and cannot demand coke the ensure Coast customers pet see as wood is to coast International that is in volumes this QX, replicated. new freight maintain network. Rupert reach Chicago to pricing through

across face of With a mix that managing I'll segments. over not Keith. turn on focused consistent that, to are the recovery We it been in has

Keith Reardon

Thanks James.

the fully retailers, strong Whether retail all chains domestic the engagement those or the or Our chains markets. support of enabled with in the to CN e-commerce home were segments grocery originated bricks bounceback third there in improvement customer V-shape recovery the international and we participate business, mortar or of our restocking, supply quarter. supply to

customers mix on accelerated, surge the East In the to West overall in QX, container Coast. impacted the enabled both manufacturing our markets. was demand imports As we auto American our and business Coast pent-up North successfully by in meet a

The customers on and Coast was growth they loaded matched gateways John's. in rapid of Coast in Philadelphia. as Halifax also several leading the and opportunities wheel driven Port at the QX ocean York, business New as traffic West of imports exports. a our stoppage New CSX Montreal import in was strong the created temporary the other It chains. from year-over-year benefited from from for volumes and St. with and moved to Our supply imbalance significant in ports volume our the steel yet not gateways, did surge East We work other experience of interchanges Jersey

compound customer base, ocean service And marketplace. also serve to Wisconsin auto New providing terminal new will feedback based our down we in the from intermodal Montreal imbalances faced strong retool additional Minneapolis as our will of Richmond, that We shut upon well. also Opening disruption. as headwinds the related we were manufacturers were experienced for December, with In in automotive, some Port short-term to models. temporary new with be

As safety, Investor at and advancements are we the chassis, North our evolves, with to consumer cranes. on our continue focus that market security Day levers. and producing we XXXX ongoing Technology efforts American many you yield productivity containers and benefits in its shared

business improve the our I us of to financial Our economy Centerm ongoing cargo North efforts drive on rail presents next inflation and couple intermodal years. and at the supply and continue in including volumes margins ecosystems plans successful perspective. continuously will partners to with service above work now the waves as in strengthens at continue for those in our the to deliver with through Prince World DP our to consumer-based and Ghislain beneficial Longstanding GCT with whatever invest Deltaport to our upscale America. continues, over long-term business future and the will XXXX. pass Rupert relationships it expansion Joint that chain economy will owner price to automotive of

Ghislain Houle

everyone. each remained comments we saw of Thanks, tightly Keith Throughout in evening, will focused disciplined of volumes quarter improvements our XX with presentation quarter My the sequential on on as costs. and and the third controlling our good Page highlights performance. start we month,

X%, terms changes while Revenues in significant We business by in the continue XX% us. RTM to Volumes for almost at versus X% billion, are while impacted were certain to billion. XX% mindful recovery versus of CADX.X was front being year down down CADX.X down RTMs opportunities over the income adjust Operating for just revenue were last year. of quarter down per resources last long-term was mix. in in that our of mid markets, the

XX.X%, up points basis down was the versus financial versus year. in income CADXXX million, operating ratio quarter. million was results CADXXX Net last Our XXX

offset few by XX% versus This the adjustments a fringe quarter headcount to Labor partly Turning expense year, Page was key benefit let to highlight This lower trucking me categories. expense XX, transload workload material higher was expenses, lower accruals. quarterly lower X% related X% prior XX% the fuel than services, XX% in of material was decrease driven than than and lower record lower in was an period-over-period and by last year. costs. efficiency. expense our last last outsourced Purchased the incentive mostly XX% mostly and to average lower year. services compensation a of by driven price, Fuel lower was result and and expense year, lower all-time

on through September, CADX.X close a almost billion conversion. free resulting Page cash flow flow in period end the same was to to moving year, Now higher of Free XX. cash CADXXX improvement in the million than last significant year-over-year cash

year-to-date higher cash our to the adjusted excess was is debt the achieve share will flow company in repurchases. times expect performance billion adjusted the of of the continue we X At X.XX to prudence, QX, slightly Our fully flow very for than financial for year. free times, terms cash in and free in pause leverage to solid of CADX.X its our And target. EBITDA end

of an We basis. on reassess will, ongoing course,

you withdrew As we on recall, our QX will earnings call. our guidance full-year

months limited our January with in value the Given guidance that to reinstating sequentially now volume our in we far That that momentum aiming of have QX, we good upcoming and being are this at we we recovery report actuals we time. annual seen on that call. volumes, the said, weekly and have provide for XXXX see guidance so nine

tightly operations. sequential control are continue in volumes we growth. shareholders rebound, seeing in markets, dividend momentum to are reward good with experiencing our as consistent continue We a we conclude, costs To as key to and we improvement

remain back on to We the And volume to and we JJ. are in value long-term this to you, markets, ability our supporting recovery deliver certain confident shareholders in note, our

JJ Ruest

second of of Thank business we've we our going which In new commercial women be a the CN, you, recovery for quarter, wrap your different Ghislain. our business a mix to on and up railroad. business, the at quarter, can kind of managing book quickly, demonstrated we our go proactively the and kudos I'm is experienced to of right through resiliency. impacted so our team to In men questions. the third with this running

our valuable is capacity for again forward, Going good deliver to long-term value shareholders.

Patrick, turn going to to So, we're back questions.

Operator

[Operator Instructions] is Bank question of Please Hoexter first from America. from Ken The ahead. go

Ken Hoexter

your guess, talked repurchases just about you're to or Ghislain, hit times what's X to improving about into on understand and magical the just the point, about and performance. XQ 'XX? in expect and the I seeing share have to confidence some back - that guess, want on last to debt want I growth the just should you to the I into you're step what sequential as you seeing we paused EBITDA? Maybe acceleration think

JJ Ruest

Ghislain?

Ghislain Houle

it. know and we Yes, see upon key thanks, question. I touched Ken, the think loud certain for recovery And the clear markets. I Listen, and in James Keith

leverage we've leverage to level. level the has to a to know, we've been you and very As as share communicated our Ken, X.X And market internally this tool targeted always used X.X to times. flexible a always get buyback targeted

sheet. pandemic. X.XX%, the $XXX I We U.S. So times, paper loud in the market lot we I remarks comfortable, for second-lowest actually And of in was think the the corporate I end mean, going or position. went QX, we're frankly, to I it at we're I mean, a balance as and and the like alluded the in we saw And second any think rounded bond have X.XX already and out know, million which we're we strong as since X. lowest, us. to my over the at to we're of through of that coupon benefits a X clear I that XX-year right quarter in think you issued at this created the it

sheet. we see in value So having balance strong a

the right, is the our that limit that credit have You're - rating. the targeted we supports X.XX

targeting and So we good around is feel that. good about X

reinstating It's at higher of and little stay a fact the far are, recovery. looking we're that lack we where what to buyback again, point but just XXXX. us do share tuned, for because, at confidence we're being in tuned our a from it's going stay not So is this for the

Operator

Cherilyn is next Securities. The from ahead. TD question from Radbourne Please go

Cherilyn Radbourne

is might there you V-shaped move? to that still versus be And and forest which of much if inventory pivoting just spending restocking volume the their note recovery, has over is of sense terms to intermodal, products automotive, how how pronounced been consumers in have the for In that a curious backlog most to the services? extent goods of restocking, much left it's a

JJ Ruest

that? you Keith, address to So want

Keith Reardon

a of Cherilyn, little Thanks, It's the both. for question.

seeing overseas a call. our everybody's quarter. But happening. an in is our restocking, going opportunity sure versus As the customers, vacations do also that into for still household some the specifically required. There first sprees we replenishment talk buying of that they're to it's most trade think customers, is much I on for that on say that's I'm happening

see there. we a of So little both

So thank Good you. question.

JJ Ruest

And business ports, very right is high, still right. at now, the Yes. the

actually fall peak a you, So there stronger this will Cherilyn. and lasting the Thank is very fall be year. peak

Operator

is Stanley. ahead. Shanker next Please go from Ravi question Morgan from The

Ravi Shanker

Ghislain, expect OR? of of terms or not point? give at this or the But I kind that get volume when the here XQ of any frame do from full-year the you do strong a margins to we one logic go. or other have how how you in of quarter color of can think kind really we only Given you fourth pace incremental of us introducing recovery, guidance quarter

JJ Ruest

a quarter left Ghislain? Yes, not even but to go,

Ghislain Houle

now both they volumes you is are look, on basis. then but get try RTM In said Ravi, quarterly provide from weekly our we think month-to-date. my or a I carload I think And I as up away October, I mean, carloads will and you, on in tell our to on guidance, if I Yes, X%. do we X% remarks, and

of hopper will in of winter. about So works. there we star us mean, mean, the cars, come well. pandemic on we're to fact need Grain well in think started that whether the the of grain in significant QX. think not, quite will a that January, cars I slated CN people some on I going cars I those grain in that to XXX to get QX, advance actually advance we're is Good is I help been mentioned investment front were news And the that grain on the doing making eat. James commodity. is has or those

I and And our I we're listen, favorable volumes what's so quite check right think on now but every quite week - positive think happening. and

JJ Ruest

Ghislain volume grain. for talking And more loves the mix, would I Yes. a just quarter to track think about as reminder, look to KPI the this be RTM.

Ghislain Houle

Yes.

JJ Ruest

Thank you.

Operator

from Desjardins go Please question next Poirier, Capital. The is Benoit ahead.

Benoit Poirier

the Could a available resources locomotives? resources you've OR, with the cars number online QX, also maybe Thank the of bit that maybe on back that be bring impact you. in fact can little you the on employees been about short the the about talk quantify and and

JJ Ruest

Rob. that things Yes, in tightly the quite We question good third would quarter. managed for be

to the You resource, want Rob? about talk

Rob Reilly

question, thanks Yes, the Benoit. absolutely. for And

flat sequential in was to as down increases up in month August depressed of said, then managed X%, and quite were it on to and in well. improved month Ghislain actually number. the a spoke third October, actually September to we we're X% just July, volume quarter as entered month X% it you over So XX% quarter, saw the for in actually over month the We

bring one. we do very as of of are And XXX really stretch As locomotive we have the and V-shaped in in cars. service, dispatch shut nearly those one can coming running And mobilized said, people consolidation this centers. furloughed we fluid. we of though had take-out recovery, resources of had down. Throughout less. quite out cost the switching we permanent we Canada, out X,XXX that and found We thousands locomotives had recovery. of railroad three we of terms stated, V-shaped now we and and had back able one and over that it time This we've more with actually last quickly yards shops very, to year, ourselves. finished We And our didn't to was a

nice and up So velocity, there time. at are really we've job. last actually velocity, velocity year a car The this at were done actually back they dwell to train where

team. of in quarter. spike So, heck of question. really Thanks quarter, a a the a to significant back for third the second with here only Really downturn the in job proud the

JJ Ruest

is lot actively of back is is a employees think and a of than tighter which to team to was, the marketing asked lot return out manage yields. the of families our for a of Capacity a work, I good Yes, it thing little there.

the Benoit. teams one it to come. in is quarters Thank So our of you,

Operator

is question next go Wetherbee Citi. from The Chris Please from ahead.

Chris Wetherbee

RTM bit sort you. the know in per bit for understand sort a I yields of are Maybe quarter. Can of like thoughts and us? maybe cents bigger getting the of drivers into for or I forward. maybe seems I disaggregate maybe little fourth main cents touching make on maybe to what per difficult there of headwind breakdown you RTM mix of a kind the the price sure and It little sort around see was little of bit but you going mix a a that just predict, how it's want and to then fuel.

JJ Ruest

given talk we've so lot through of Yes, a that.

the portfolio broader to want the CN? picture from you broader maybe of give James, So,

James Cairns

Yes.

reallocated about decline capacity energy move by in carloads, P&C, was jet QX if think that crude volumes. P&C the the as the grain to amount it, you you So, would of we carloads, big record picture, driven a expect. mix had and We fuel - change crude, like, in significantly

X,XXX-mile we crude haul. X,XXX, long-haul So traded for business off X,XXX-mile grain some

to So we're a we think going rebalancing. see moving forward,

bit little to ports both crude want we're mix. side? a that is bit to you level, see Keith, coming Some that back, of do talk a not certainly but on XXXX little rebalancing of going to a business of

Keith Reardon

business intermodal have the very we in fact approach. balanced overseas our love a that We Sure.

were influx or as through up for go match equal and on exports third the large to as the much one back boxes not the of out get we basis able a to However, to chain quickly, normally have. happened with one the in imports the quarter that supply go very very,

that showed up your thing that well. So us have in was another hurt as that may RTMs

JJ Ruest

quite a of So tsunami a bit of import on lag a export. and

a So was summer. this empty that's moving the - trains affecting platforms, affecting few with that mix

Operator

question from Chamoun go from next Please is Fadi The ahead. BMO.

Fadi Chamoun

like, really So your well we in over the I that weight, seems like quarter, and incremental to a quarter, revenue how like little time, should Like the Rob, on the like comes at operating through XX%. this think length I'm metrics the under of look At trying QX? quarter in if versus quarter of going muted operating differences, the stuff. it looks XX%, train kind QX square about all explains all kind this it here of like increase, we this bit what QX and your kind third high data and increase leverage income into same and performed saw

JJ Ruest

want about you talk Ghislain, that? to

Ghislain Houle

units. an Number then, think into not at related when some look talked that in Fadi, was I I third share was performance labor Yes, two-thirds you of there was true-up that. bonus count. labor year it a you are compensation our some of was head of reversal that mean, two look there CADXX necessarily to expense - million the variance, about of about of it, accrual about it, to a of - at there of a we one, related came last And there incentive when things. a accrual, when is

be And CADXXX a necessarily said about count. We is CADXX came about headwind is headwind the a was head not every in We've at you of that a variance the quarter basis is well, year, million it a to evenly. related quarter-to-quarter pension and pension that as headwind. that's we've that still I'll Again it's cost million. depreciation you, was said the that came that. said beginning a that million. in, continues So about so then tell that on hits to CADXX

that the in see you may not metrics are that the at those So our when some of look you things costs. are

JJ Ruest

training volume mid-summer. meaning have the here, and XXXX, reopened are question. only growth second one thing, Chicago, we've were labor our closed meet and center you maybe to that Winnipeg they something is your reopened in will of Fadi, for training we last people Thank because - which And expected quarter unproductive we

Operator

The next Wolfe Scott go from Research. question from is Please ahead. Group

Scott Group

a just last want be about to that was sequential question, headwind. asking down pension I he where to probably So because incremental sequential back and was I go margins depreciation think wouldn't

give-or-take a So thoughts And there, we And thinking down or any revenue up sequentially, other then about XX% employee XX% year-over-year, specific forward? ultimately of there. down worse though, going incrementals per just thoughts better XX% then or year-over-year be maybe was questions, big… comp should couple any was two modeling just

JJ Ruest

Ghislain, you want to question? expand on the earlier

Ghislain Houle

think Yes, I it part think I what sure. and just it bonus for as that's I explains in the about accrual I've And that talked said, the is. labor of

JJ Ruest

you. Thank

Scott Group

going And then forward? on just those other employee per parts on other revenue, the questions other comp revenue and

JJ Ruest

about James, revenue? you want other to talk

James Cairns

vessel were down sequential good on range, fleet. drawing range activity the be I'm came at on into slightly our very think would basis on the here. the talking revenue a very pace I COVID, inventory a iron this very, a our as We had the was results. expected. on we Yes, iron - of here, with vessel lot But fast We range down

vessel on So the revenue. slight side we had of decrease the

The that other revenue decrease, so. seeing I'm not

JJ Ruest

Yes.

So we moved less iron ore vessel. by

James Cairns

Yes.

JJ Ruest

In the the than before. Yes. third year quarter we did

Okay. you. Thank

Operator

question Walter Capital RBC next Please Markets. go Spracklin from is ahead. from The

Walter Spracklin

fairly and to with Obviously, Port regards that how certainly into preparation, had react can it volumes some look pinch the you expand how as volume when the from up in how did quickly, that Halifax you was you JJ, East? what assess the of Halifax that, What improved address capacity I'd be to opportunity was and there it? stepped of And strike obviously at to but, would when future? down, to came, might come like they diverted at now. characterize hopefully would Montreal Montreal, of be to the how and points Halifax learned went the the to in with were able that was turn that you unexpected Port So to - had see the you

JJ Ruest

Yes.

maybe I'll So that take one.

served of So Montreal. City we never the

Greater city. vessel into As coming city always right in such, of is the with directly the served Montreal

we're strike port. why in set obviously a send was empty the from rail notice to quarter because trains the XX-hour usually worsened, of notice, by serve pick reasons to another So our not up - imports. the one what to And up the with happening city had actually mix third to up is we Halifax only XXX% ended

the then have couldn't it the freight as We one-way were back. and freight. freight get sort one-way bringing to we The at in-gated we're of already a going port a of not and basically strike. out lot exports, whole And the because port Montreal of

this profit view, a point point the view. best not from a CN's of So strike from was yield of

The these thing is temporarily all to of notice open you Valleyfield. terminal when short to notice, in have had get and freight in on we a Taschereau, coming XX-hour our tsunami at other you a you a terminal

what because to typically point open a view, a could more it had lot hours, out one-time maritime with more notice freight and the from also of be the kind of obviously the Montreal. up move PSA ramp just lot also from with in will temporarily But move we CN if XX here, wish. can close in of a a We very coming and balanced we a office you to of effect,

anything, would not City of to to like we service of for of and only terminals best I'm train mean, vessel out customers not of gets labor the position no the are Montreal. help required something whole this to get position a we the overnight prepared really did respond time, of conclusion the notice. could of I get was we So, But to that. exercise very out sure they when short strike that the kind in because and

James Cairns

Walter, here. It piece that. vessels not We're a add to diverted just handled of pony we diverted like to Yes, a we very had one-trick Halifax. I'd little well. which to wasn't had John's that We St. vessels

that York, had handled very also diverted New we Jersey vessels We to and New well. Philadelphia

we at our one can our we multiple of for handle the each So have where outlets customers freight. gateways,

at versus So look just that and take to it that together all of one volume have place. you

Operator

Please go question next Brian from from The Ossenbeck ahead. JPMorgan. is

Brian Ossenbeck

for that those at metrics caused can and side, and in the more the of impact that be trending of how the shift top quarter, you compared system had of operational that fourth in quarter. And in what mix, dislocations do bulk, were how in during line on both you year-over-year question saw the Was quarter? that much just look you the the start because impact? something more service imagine nature mix the look at that quantify One shift mix or then in those with when down the one-time the but the some the from impacted intermodal was would

JJ Ruest

in operations. maybe, to in They car one and was actually So back pass the But start their added in a think to I with that's labor Brian, I'll on one it shipping about just has then a right. of And result one-time, disruption. dissatisfaction a Halifax can James. obviously as fact Montreal, the lines strike the there of

to little resume. for Coast, while the West there the coming took in export a it of and On tsunami was a freight

not not level that a much sand, better is Our that there is train sort on jet meaning that thing fact. a here conducive that's much work the from back to we diesel as going have balance get is not amount But as to a to is to little much eventually is that fuel, and Asia there real crude, in to America as the North time, is of was back imports. export there of secular frac is get

domestic freight, before mindful more allocate be are we a the we while light therefore, And a worth gets a train to as train which on more slot more when here the earlier, the that's because invested energy and green said network, create train going intermodal we've on green I and to take the moving want overseas is markets we will recover. be that capital to that network You freight, gets to that of light capacity. grain each be money

I regarding want more balanced will think - be anything you So add, with else start Keith, to when to imports. export

Keith Reardon

They are. already

JJ Ruest

Already are? Yes.

Keith Reardon

Yes.

say the James the to up prairies that, heading other are pick and grain across records set all that foxes as also didn't again to transloads levels up grain of talked exports, close, our of the would last year. of lot as and we didn't very, we our was to a we network. But quarter, very containers in for second grain movement, I significantly have We close - record containers, record get movements about them. with get over it in close

we're balance. think I So, the with there

Rob Reilly

And we're the really really and railroad going shape. good shape time in this more handling into running, is far Brian, last good and as as how fluid we very actually winter. We're the volume year than did

we've So Thanks, it. worked through Brian.

JJ Ruest

adding gross Thank network. now right that, Brian. Thank you ton for the solid in Rob. you, mile very Yes,

Operator

ahead. question from Please The go Capital. next Konark from is Scotia Gupta

Konark Gupta

are that end the and next we have So the into recovering all how and the margin contracts? margin just about you organic like recovery? my coming Obviously, next XXXX heard be those see and Thanks. kind as you about think coal, year, do one here heading you year think but year into of grain automotive obviously you we onboarding have things, new would intermodal, volumes lot how about are improvement and a improvement those contracts from opportunities into should

JJ Ruest

into to talk without getting about this Ghislain, want guidance? you

Ghislain Houle

economists Yes, think a next yield very focus look to us I of of create with think, on improve. are will you railroad, recover that exciting only continue and year, optimistic expect that the people expect about will during margins came you as then on have can some to we technology, and Rob margins that seeing coming are to going and And our help management, And people a at this, a done and as be XXXX listen, GDP year. X% believe not not we XXXX, this consensus have we're out that do up but will obviously, versus one, for so where actually that production we adding industrial one talked recovery I and if next or either week X%, changes as pandemic. can as all our can we all remember you basis improve quite this. value, about to our technological this us that we're this and forward projects continue permanent deploy then Therefore, comes you continue expect

JJ Ruest

add some next broadly maybe to want you speaking costs for color on for just Rob, year?

Rob Reilly

Right.

And I stick. talked to good have ways momentum we figured We expect this it more - pandemic. that about out we through efficiently do to really as

So into go go certainly as QX we we're we and seeing here into next that as year.

Konark Gupta

right And permanent do place next any will initiatives are you year? pending now as have you. Thank take in cost-out they that

Rob Reilly

I all that, sorry. didn't hear I'm

Konark Gupta

permanent that initiatives some cost cost-out any have year. you running Are next you initiatives into there are that So year? have taken, right, this

Rob Reilly

Yes, absolutely.

we next as XXXX we new some down into what this into As on go take have year to more cost. initiatives the we up double go plan year, for and did we'll

Ghislain Houle

have we'll done year the the full full year, we'll year, those what year of And next effect we've of effect this have take-outs.

going So our plan Konark. I forward, quite we're about think optimistic

Operator

from is The ISI. next go Evercore Jon from ahead. Please question Chappell

Jon Chappell

bit normalizes? intermodal You and some Rupert issues so fluidity incredibly the the this on touched somewhat North LA? and spoken of a that been you've that basis. is far, have across from of share market and both a congestion-related an the maintain to when network American little what's but that volumes being Beach entire taking in And on in imbalance absolute How system able share Vancouver given of relative strong, Keith, Long your the your about, the much confidence

JJ Ruest

Yes. Keith?

Keith Reardon

of to on creating be pride for the opportunities in periods Midwest Canada servicing time. for chains supply We Thanks, ourselves long and U.S. customers these Yes. Jonathan.

Midwest read next that out I've I U.S. If Coast that it's they over and that change about the something of Rupert from well. there all the one know, how talking the that at you whether the is years. works XX I on gateways much look are West CN articles if lot to a could know a shift business U.S. that Vancouver it's or carrier it into and to the from away five think shift another of carrier, works

sure are our pinch where what working people a make chain partners that points them that supply provide capacity the that And as in experience. move we've back their to the are to chains We ocean we our away a created. for customers these resilient. so We match profitable from that putting are economic have allows ourselves don't they lockstep that with doing have doing so we're line supply are those priding we round-trip all that cause problems increase have we the can on to in capacity,

Jon Chappell

Yes, it's Thanks. very helpful.

JJ Ruest

at Yes. And right. maybe is add, capacity just right now, to running Rupert

So TEU our realized taking so freight, about the more about X.XX it's selecting freight. it's this million not fall,

Operator

David question go next The from from ahead. Vernon Please Bernstein. is

David Vernon

a think it sequential kind network, maybe long ask if you JJ, look I you you're the today Keith to be that any sort doubling into basis. what how on traffic road lines? that will just ports in you, I'm that connect been on effectively going of across And capacity of relatively has grow wanted at the the density wondering to low of to do to or to the do you need take Eastern expansion up-spending on all capacity ports? anticipate is line

JJ Ruest

quite… think I

Keith Reardon

I think he was asking Coast? about East the

JJ Ruest

Yes.

Keith Reardon

Yes.

David Vernon

ports. eastern the Yes,

Keith Reardon

We was - harder muffled, you. Yes. a it was little just had it to hear

David Vernon

Sorry.

Keith Reardon

okay. that's Yes,

a to through our that them our there, partners increase is as underutilized. with capacities. network As their the that's we from business work marketing eastern increased going standpoint And

it running. before it not You've say That for lot and heard and now. a was running up manufacturing was of times numerous JJ up built is period the industrial where

going double, see and with I And you're our best probably out. hard we have. we and doubled of can is corridor places now, we're that additional so capacity volumes the years that's why to what be Halifax some least I one going today. And sell we Midwest triple-tracked railroad handle two will. or mean in it to to the East pushing is think the four The it's is partnerships that or Chicago at to three certain it from the in from

to our want have bring fulfill said, efforts to with there marketing vessels we're that. customers PSA that continuing today As and we JJ

JJ Ruest

also you some And I the Mobile, think, Alabama. Keith, development have in

Keith Reardon

guess. Busan, has from Mobile, announced in call and good a first I And Korea. now is call service our the vessel Houston that direct a Maersk of Yes, partner first that's normally

to see as going hope we and on opportunities that, U.S. the for automotive up see we way into Midwest hope So exports some that go also to other traffic well. that would

glad we're that of So to call port partner Thank first has see call, that put you. Maersk our first in.

JJ Ruest

Thank you, network. Three-coast David.

Operator

from go is Cowen. question from ahead. next Seidl The Please Jason

Jason Seidl

how you and actually does long-term combat of that eventually about can a mentioned trucks. you threats the hear and that rail yourself I'd up talked of autonomous brought show as the to your thoughts I bit the rest love you happy it in to the little some was that work on JJ, up. marketplace. industry

JJ Ruest

Yes. for the Thank you question.

would that potential able I to lot truck, look to long leverage need at work what rather capital that mainly we more the study be do money truck, we're costs, we money, are users we of like benefit, do competition on to intermodal something than on then a we more it of It's happen, get number from is the victim how the we of on going we that or people such question operate. from that there we tent, need do cab driverless we intense. on get when and on come have it's convinced it, into how do point for a a our the eventually of we we the some inside going to driverless to for driverless understand it of go start-up when might know, network. to also how term, think truck. Therefore, being of is us many that. of a one how to the prepared it But will And work here, our that to road,

is U.S., point But It's will A, five on without long-haul, actually getting to we is an real. what happen mind, for caught if the up. important depending some or so point. southern look at years on and be your it. it ice, up don't bringing details nice B, in prepared at And want that highway the Thank recognize you ball. snow, here big saying no yes, I'm no blindside, it all into we're you we're for we in it we crystal have getting So, the next recognize

Operator

ahead. Please go from is question Credit next Landry The Allison from Suisse.

Allison Landry

and about that you're how could achieve speak to OR right between longer-term? thinking and able be-all, the growth was OR being is potentially what talked the I your So this I hoping balance but OR know about mid you to morning XXs not ROICs in end-all, XXXX, the a the competitor is

JJ Ruest

two, Yes, the balancing maybe I the can start. Definitely, we, at into we're right. of CN,

return the a shareholder does about And these think to crude we when of trying have about do you So I flow come these - look balancing it's What balance. do the little that. XXXX, balancing run EPS all what does and things contract balancing to growth, growth, in able be cash contracts, also to and free where OR total bit Ghislain? understand you or confidential think, at

Ghislain Houle

JJ's I a times, we've to and we're our preserve be CADXX and point, a the with We rather ago many billion, this XX% mean, said be billion than balance. Yes, CADXX the I not Allison, want math. it's to OR - just foundation we'd think, I we've implemented and enamored We're about do PSR at OR. not years a XX mean XX%.

technology the and our to I And don't as what that stay get at on move CN. not deployment, we I plan mean really as we would say target would from - and that can OR expect think benefits more that's more I game I forward well. we as think I - tuned. improve. we way yield, on that works for the And focus I and that we So, say think OR I specific extremely think would our That's have and XXXX. a say. you

opportunities. these executing of and opportunity the result on on on have the we focused opportunities are and these We will be OR execution

JJ Ruest

of definitely vision we growth. profitable have But Yes. definitely of a a vision growth. have a We

about good talk is a use you want this profitable make to you your when of where So capacity. growth,

don't give out You it to everybody.

use of it. smart make You

the same And able decent type the a be time, and but business want return available. to is investment when to to at provides of looking grow that EPS something you that's that growth the want properly, for. it You we're price on

have itself, CN, OR So at we think compensation in our in factors. OR fact I bonus the of don't in system, we one as

we balance question, in that for think how Allison. itself out. So I things Thank you the you tells

Operator

The go Wadewitz is from from Tom UBS. next ahead. Please question

Tom Wadewitz

thoughts think if like in what see add potential approaching you periods perspective, XXXX, might If RTM XXXX. to So if RTM be an so off wanted some at where XX% in for, on you at the came XXXX. some weakness, offer growth you could XX% I from prior just you I growth look we look

you it muted So, look or are at kind reasonable reasons do to XXXX of say that of of a XXXX? be why you XX%-ish would and can look think number to more ballpark is you type similar than you there to be kind maybe when

JJ Ruest

we Winnipeg. Well, said reopened I centers training as Chicago we and are, Tom, have in earlier,

we want that, sense volume. attrition, handle gives capacity have, that A, that and are we we that B, start creating So replace be you - we sure capacity through normal to to the train more a

employees then least at tell the But time we to ride little here want pre-COVID would price whatever working things will tend the COVID of than to like to talked of aspirations be mix business always of of inflation. preparing aspect. impact the is see to closer shape is that and because We're we we be out, would mix and unknown, election, growth energy of one also We a and our of Same-store versus on about on for post-COVID XXXX sake And for the of what but us, outperform that this our election, rail That above sectors. maybe to will wave - phase of or to seems then how there better is happens, XXXX. that lot be definitely available how are definitely the economy a second U.S. Canadian winter kind maybe the relax, Canadian will but economy. for or economy.

kind always GDP-plus. we it's said So of

give most we - when in the it's economy, So to more, have quarter at will that for than have which likely Try more and average. move been always and target, boats guidance times. at call the we has able you outperform bad XXXX good the whether to at will quarter economy rise and times want guidance we rise economy our We'll faster the with next we be a to slightly little the or time. all first

Tom Wadewitz

you looking better than been like sounds have doing and it is back maybe reasonable But a at that XXXX framework?

JJ Ruest

nice. be would It

later in prepare the ball January. our for guidance is more we'll third see wait get to we Tom. the than and the Thank as you, what crystal week from of year economists all So the

Operator

Seldon from Please The is next from question go ahead. Bank. Clarke Deutsche

Seldon Clarke

going the through Just and to you operating back some as commentary leverage on of move earlier XXXX. margin progression

of to normalize just cadence saw the leverage XQ? in deployment comp and asset XQ to the relative improve recovery to try from operating XQ for you you accrual volumes, about incentive from and should XQ relative If what to the underlying then think

JJ Ruest

Ghislain?

Ghislain Houle

We guidance, away get providing tried quarterly from to Seldon.

So, I very did heart the a adapt team job of to quarter. Rob's pandemic tremendous we think, frankly, quickly - to second the in the

recovery I came using quite obviously the mix current to very that now talked we're came versus being again, we're not the think I productivity. on a situation into railroad, created offer. people on key we're others We're on this railroad. being on and an outstanding bringing it what the the that's about. that And careful the I would I of on say color. supporting what some efficiency bringing that recovery then on And team fast as can back offer that's back job improve markets that can one-on-one. assets And and the on think and issue the careful we're a And bit we've improve the did very I

some said, pleased October think our I on two there that we're that and here by - but in than of with And think with is second We're are did months and us more a a the X% with starts up good OR the go. and quarter got wave uncertainty. in mean, I as And I better is quarter. the front we've to pandemic. energized - living that team year-over-year some an And I I volumes pleased X% quite basis of very got know we're this we we've a there I X. still delivering Montreal, in past. that, visibility is or think this in

be cautiously at us but and see in pleased this so we're with about far to optimistic the what's at volumes October. time, happening, have quite we coming So

JJ Ruest

that leave now railroad right busy. doubt no the is Yes,

Ghislain Houle

Yes.

JJ Ruest

our are we work track we like to you an be to And else have OR definitely mean, do and do know our the a we I who want mean, given - revenue. and is in I last we opportunity, track above inflation. on same-store have decade leading the busy. we pack everybody record if record price grow railroad

side, I have Thank the luck So in on if decent XXXX. you, a we a get little little or should economy a we think better environment Seldon. year

Operator

go Alliger Jordan from from Goldman is Sachs. question next The Please ahead.

Jordan Alliger

and come headwinds assume a from I that of Just the I that sure fair answered coming bit cost earlier, if employee back you we headcount if these per moving directly think to a was great. the of would perhaps can had not but on think question forward it with as on add normalizes Thanks. of that, out any way, here. some color up be that

JJ Ruest

the train you talk operation, positive Rob, maybe, could we're So train could some length, help. about weight regular the on train just and impacts the on now, that maybe right of on the that way

Rob Reilly

Yes, absolutely.

freight train saw I starts. what comments we and more mean, crew it in I with So length move to my we're said with able how fewer

volume XX% was down were Our while down X%. crew starts

actually operations into focus more less We with freight in about continued moving quarter. year-over-year. X,XXX that fourth We're the employees with

third year-over-year. labor productivity was quarter actually XX% for Our this up

- We're by we'll in talking into for about the well. We're straight. seven here to as evidenced going and here good make to in momentum XX, days be running look fourth of straight But railroad days, months an XX quarter. going shape grain record So about some to continue movement efficient. XX in going and more the it good quite really opportunity is every eighth

Jordan Alliger

Okay.

JJ Ruest

more. Very good. the Thank for time got you, We've Jordan. one

Operator

Long is ahead. The Justin question Please from go Stephens. next from

Justin Long

percent revenue volumes reconsidered a the and of the the me pulling call, topic look your I if talked wondering should network. ahead modernization some CapEx, have then prepared beyond. the we on as of about for changed as near modernizations? was way beginning year forward have remarks you CapEx something for Thanks returned, also as you next In the of pace of of be the that's framework the thinking the we the about locomotive in. fitting And to that's of

JJ Ruest

to stock rolling want about you Rob, talk and technology?

Rob Reilly

Yes, absolutely.

things. of invest see think - next answer for finalized I in haven't CapEx, that But see continue piece let in Ghislain but year it, things about And us technology. anyway. I'll in you'll there doing us there. out a invest we continue to like of of to feel I'll take a take to We technology. few lot the moments leader different you'll to the the just we're some a CapEx talk we're

that in On a portals, us to railroad. entrained service actually XX autonomous in two, cars said, able autonomous now. two regular allows to have we algorithms safer are revenue inspection phase inspections track Those our well. have are as our I and As now phase remove inspection now regulated we're in

end of have year. the by We will XX the

teach and seeing Anybody different We out by have be Learning is will actually portals. that's time That's the to XXX is can defects put to ownership X is year. with of of of significant those more actually really ours. this finding in the that today. those impactful. the find next a value the there, to use portal Why unchecked We'll on to components that's could the that lead the value it on the finding if that much but daily different have algorithms algorithms. Machine important a Artificial left we're and on we're types some and car, what hundreds defect We're each basis something of cars a defects Intelligence there

So of all-in this next in operations advancing level, in the a we'll new on-board, who Officer continue here of Information technology. terms to Technology is invest. Chief We've got to terms

Ghislain Houle

you and CapEx, provide XX% CapEx, 'XX And we're a XXXX the 'XX bit as mentioned, on JJ I maybe in at tell that, years color around Justin, January that - comfortable, look think I quite can we But of in more elevated on envelope earnings we've little call. will on - of you and our typically was we capital XX%. catch-up historically, of typically revenue, if again, had at two

I up. did caught that think we

January. we're I that we'll in And ahead color I I more staying provide But that again now in think of that think mean we're the comfortable game. ballpark.

stay on that So tuned one.

JJ Ruest

you you, thank close to time maybe Rob. questions, Ghislain and up for here. Well, it all And that's Thank thank you. your

be to very and are a inflation. are we - that want sure, make clear commitment is we Just above pricing everybody

and - cash the making solid industry We are really the driving flow. manage team yield the We've managing they're steady commercial modern. rail to is We're comes team, the and generated productivity. Rob's leader industry it as

industry And but well. the And offer just entering of the the remaining not on positive the for SG, fourth might on year. what good about and positive, momentum are to and the fuel, we're leader it We SG volume on have as we good XXXX looks XXXX us. on right the now quarter constructively

all CN of long-term, is So CN Thank Patrick. see of growth. end the you. night is and about January. back And the you. you, good to focus in you sustainable that on about Thank on is This long-term, profitable call the

Operator

this your participation. Please time. your thank welcome. you conference You're at The ended. for And we now disconnect has lines

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