CNI - Earnings call transcript Q1 2021 | Canadian National Railway Company

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Operator

Welcome to CN's First Quarter 2021 Financial and Operating Results Conference Call. I would now like to turn the meeting over to Paul Butcher, the Vice President, Investor Relations. Ladies and gentlemen, Mr. Butcher.

Paul Butcher

Well. Christina. you, Thank and first everyone for us joining Good XXXX thank financial CN's quarter results for afternoon, you conference call. to statements. I made like remind the about would comments regarding forward-looking you already President Corporate With is our And Houle, Executive Officer. President Reilly, President me Vice Sean and Services Executive Legal Rob Executive Chief Officer; Executive JJ our Finn, our Financial today and and our Officer; Chief and Ruest, Chief Ghislain President, Chief Vice Vice Officer; Operating to Q&A please that you yourselves do to opportunity so remind I want question limit everyone to one to participate session. the has in the The IR any available the follow-up call team for will be questions. after It the Executive call is and turn Chief pleasure Officer, President now to over JJ to my CN's Ruest.

JJ Ruest

hope to had constructive thank healthy and safe, XXXX. you all and you, everyone. Well, Paul, start a good afternoon I to

despite CN, our challenge at of performance is has Here strong good given off colleague, of and unprecedented a markets dedicated the The port our winter thanks we're running and And ongoing like underlying start. delivered grain demand and been severe this to operating number strong. pandemic. conditions, CN to railroaders

the you century. from can CN of X, on to As become railway premier slide track the is see XXst

we an engine implement precision growth schedule are on role a clear we're first to the environmental leader and are the and our industry We prosperity, leader. North railroading American and focused our economy as chain of as in and supply as well We ESG. network, pioneer across

for record CN throughout superior XXst and premier of strategic to and reach. toward integration acquisition has step to North strategy to invest business prudently a In our current the strong proposal CN our CN of successful acquire a made line successful long acquisitive the America, and century. with Our railway standing and in right becoming continue balance grow network. KCS. we next in to is the operational which our track both a excellence, is we testament KCS existing strategy, This resulted of rail has and sheet our as the expand

confident experienced KCS with success both able KCS slide to the combination very and companies. CN benefit to X, team, we are will Turning of talented that be of continue to that in we together a and

shareholders. the create in will also all Specifically, from that single It not land KCS buyers end in and amount to and Canada US, represent but also share, route three route would the also certainty and value owner to a operator has and would express offer just per robust KCS to deliver preserve single It with connect more cities. connect connects to ensure service. double a market significantly coasts more customer's greater competition. greater to seamless this end CN shareholders. of than CP CN's enhance vibrant cash the existing value to premium and a all access It competition. The new of will KCS Mexico inter choice destinations. sellers and interchange superior will XX% more resulting proposal a port proposal, option would it value, particular, the enhance choice combination for In to

of prevent are rail will country and We the combination to enable this to traffic jobs by better converting from open greenhouse to competition, We network. enhance create atmosphere coast up chain. down gas millions from of of gateway customers, coast, entering tons and to the believe our railroad country firmly to supply truck to companies also as committed speed solution of maintaining movement goods

superior to application the the proposal. STB seeking Director to of accept Board where a an KCS should an proposal notification update As XX, with on of intent file KCS currently stand, pre combine filing authority our on submitted our April we our to

that are soon trust the KCS' and to to approved, CP approved. with value combination those anticipate structure board equally the could We our voting we being the trust, and voting approving different XXXX. trusts be will second confident our to any are that are flows offered their receive interest the half is proposal both will that voting We in proposing KCS is to shareholders If a consideration ha of than be likely STB we in subject the standard of use consummated, transaction will when proposed that which trust identical believe not as CP. applicable an be as

team I of like to strong railroads. weekend, in and a with fully only our progress, ultimately proposal our one is merger pleased CN's that a we voting KCS were our and combination. have conduct this connected strong to a approval in two with enthusiasm, transaction, approval superior to forward to provide over X, reiterated successful on and all collaboration our achieve combine made the We commitment KCS. We regulatory determined lead our a combine On readiness, due finalizing close towards are to to to Saturday combination. to I committed a definitive We page then announcing begin importantly, and and CEO to brief that a receive permission to since toward expected great that agreement trust to offer company's into board would necessary were the confident CN's working confirmatory we as look learn week reasonably very deep KCS' KCS most update our diligence. the granted proposed to on with ability

trustee. Starling and earlier with application as named we of to a Secondly, today filed STB for approval the the an our Dave voting us

a KCS, CN and compete XXX have their and official market Finally, help KCS, government their voiced for by combine choice with their serve amount which supplier, greater for other support than received greater will and have of efficiencies. of a a them, combine we offering stakeholders. in better They to freight in more proposal an needs support less making great ecosystem port than overwhelming a partners of week customers, importance note,

and confident committed to to in this many We support and team, appreciate behalf have we're also as fully to are and all of well receive the CN Together, achieve ultimately trust strong to create North then into your entire combination. you railway transaction the shareholders with for of regularly necessary we and the in approval will our American approval we close very this XXst on premier myself I KCS. and to spoken combine a our ability century's. the voting

proud the X. on underlying I performance QX. Moving in very page that am CN's

realized solid and mix. our we to continue our yield work business we quarter This new on of result

X% where due flat During the quarter fuel we and up continue while RTM versus exchange adverse rate. were industry leading lag volume year growth mainly revenue to to deliver last

is strategy yield Our working.

X.X% very pricing network same well was our the of and store polar fluid Our QX, is in we February. from recovered vortex

capitalize outpacing to of well efforts industry driven business measure our growth productivity, CN length, the strong reflected which efficiencies gain on key velocity, other the Our consumer in with train intermodal fuel are was as up car as XX% rest and of and quarter, our significantly trend performance. and performance safety, financial for of ability labor our the and operational

confident will it are to Rob? our turn our I strategy. With that long-term We committed Rob. to in and business

Rob Reilly

solid and . of a thank who to quarter. deliver CN you, Right employees JJ, Thank the very talented you helped

vortex for As with QX you'll in in all that the just up see record X% team time February. GTMs about slide on JJ volume our moved the impact despite year-over-year spoke XX, polar of

active inventory train also up railroad railcars to X% down was X% length starts crew volume very were up improved only online of continues was X%. with our run in its improved velocity X%. While fluid and The well car

a All-in-all, solid X% In just labor quarter productivity addition, improved our winter operation. of

and efficiency. fuel same tons FRA personnel $XX cars detailed efforts time to leader of from inspection safety As living slide the efficiency improvements our million core standpoint, XX% and rate a improved improved time approved save to on values. our during versus the provide fuel our to to cost initiatives are impressive respectively, safety emissions autonomous the an we XX, rate and alone a in railroad. our X% We From From XX% year an American all allowed accident were North save XX,XXX perspective, planet our track last over record. These us rail QX up technology the and our quarter. coX injury

to and last we gross QX able main core our while on year Portal due network. of cars and to These move. wayside over our by In to alone, our $XX now our are prepare dense the detectors ecosystem inspections XX% X we this safety XX%. be reducing technology million of As XX decreased manual miles Phase cost of our program, XXX% line enter of covering and accident into overall enhance versus will QX

minus of experienced of dipping As of couple our I degrees temperatures temperatures previously a cold XX February, with extreme we below large parts on mentioned, network. weeks

use would This crew volume holding multiple the With continue otherwise delayed we sources monthly additional consecutive of intact due the were air we able XX time, XXX,XXX streak cold. car deliver which to for keeping quarter this has with move fleet, flat. allowed now to helped while an our have challenging to customers. this X% all During months. winter during our lost deploy this in to starts us more or to records set the traffic during throughout able technology, the February us that that grain, we're Along moved time feet for CN been time. Canadian air

and and more additional starting our key benefits more we're technology deploying including efficient track make from see train inspections. continued We projects to railroad safer, reliable. to And

Moving the to that the XX, next locomotives on XX To growth volumes the we to to year. as over projected our of an and slide board are look end, support the economic over we additional improvement. optimistic XX remainder months the XX out approved

as doing is strong quarter. performance business this Our by evidenced very well our

over global options continue the on for transportation a years path to customers recovery. provide to our sustainable as American North steady safe Our investments the capital three remain and and economies last

led XX, all by performance demand say can last total, but record I'll strong volume. beat strong see year's record I grain slide In chain QX revenue you XX% said, it setting grain time coupled sustainable new we high as a supply As to shipments, on over our with for again. operational watermark Canadian

delivering set also performance strong growth. now as outpaced which We by consecutive for records farmers. highlighted JJ industry tonnage XX months moment our XX%, have Canadian far now has a intermodal increasing the And grain very for ago, for been

are XX, economy we ability in delivering to page confident our as strong results the continue rebounds. to Turning

extreme leader to the to we've forward a fluid as temps from grow the opportunities in well in network This includes Our and our clear look growth industry of us. realizing intermodal. is We pipeline front in February. of position recovered continuing

very drive CapEx resiliency. to productivity We're diligently continue in store our yield managing on also and of a X.X% focused maintain We disciplined same including strategy and to pricing capacity management is working, to in best-in-class approach QX.

will initiatives come on This our recently we of scheduled independent the to execute including competitive towards point, undertaken CN's a environmental be pioneer. diverse establishment protection, class a announced future, our social we look digital continue to action be stakeholder new focused CN's building as a gender Council, least in ESG we indigenous on ESG plan. And climate on at QX, expect XX% parity, as will of As history railroading, We've engagement, mentioned, that major and responsibility, that already Directors priority. Board on as of maintain On continue active advantage an Advisory the leadership our annual governance. vote strategy. investing PSR groups, to and the change directors JJ from advisory

our expect as serve in We to to the leadership industry. grow an and example, ESG continue

strategy. helping over earlier, have I results turn to right in growth. our in our that drive I term over best-in-class to to place an to our As job Houle go financial in continue have detail. call carry we will the we out long sustainable, the mentioned done exceptional talent Ghislain that, to And employees With know

Ghislain Houle

our which on more Yes, that of bit Rob. performance of JJ earlier. will the comments on a first thank some My highlights you, the of color will discussed presentation, give start quarter page XX

an we the of last up During Act. Recall QX of from the $XXX year. included XXXX, of of booked tax recover on we non put in also QX cash CARES recognize for quarter, the million, resulting branch in earnings that million $XXX lines recovery sale income the we part charge non benefit to core

year. Excluding these so our quite of If income underlying was performance. of EPS with nonrecurring would solid items XX% the stronger up around $X.XX, for have EPS $XXX adjusted Canadian versus adjust lag last million, we and a impact been up adjusted fuel flat, dollar, adjusted diluted net essentially X%

nearly cash of Now QX, moving strong generated partly XX, from $XXX year, flow to slide on activities, cash we offset down last $XX million in from from lower operating million free by lower mainly CapEx. about net

KCS. light in of buying with combine shares to We our back are proposal fast the

are for we to year. perform XX, page is out. QX balance encouraged of the day which in to about the is underlying The and a on the us in the the confidence Moving of and rollout, performance the economic CN who giving vaccine strong dedication recovery day railroaders, testament

the we We rail forward fuels, are building ton growth digit The QX now We of financial improvement increase chemicals, metals, update of remarks EPS in such JJ digit in give centric in in miles. the the still and digit said, looking our production by of previously. With strong to cash EPS double to some that are carload are and the growth free part Q&A. as flow our a flow of of see deliver in forest industrial will ahead to outlook, This our revenue performance and growth products, high off $X I now versus further segment plastic. for single assumptions volume free to XXXX which moving single back call growth terms is drive expect $X.X will recover. drive backed business to conversion. range high pleased volume in closing billion turn will adjusted billion, to diluted targeting cash the

JJ Ruest

at you and a approach to joining for proposing Houle proactive And I growth more thank thank you Thank today. a like some take to connecting all It's of we're would buyers. pro-economic reiterate combining you to that you, a of merger and Ghislain Rob and moment safer sellers way costs, of on would us cleaner, railway. in head highly will our coasts service, the fuel three with all aspect This we for result compelling heartland faster, proposal, and America. head through lower of to efficiencies better KCS; like Mexico compete stronger safer,

adjusted bring on available analysis The April In expected additional preliminary vast Based addition, KCS our doing and $X of as thereafter. in cash company transaction. of accretion to benefit our the assuming of KCS the leading announcement. publicly the year close flow rapidly will a ESG first synergies termination We companies' and combined EBITDA to accretive anticipate stakeholders, the of the to and and full full of CN's opportunity. our strong from the the operating with diluted billion, of be combined voting will generation the achieve following business this will delever both we expertise double-digit of mentioned coming control earnings transaction shares XX is approaching information, revenue conservative allow the following to trust company CN per realization company majority to

for better will the solution we note, employee better the and of We forward communities. economy. board that some customers, Overall, with for are toward century. and business bid, to way superior a deliver efficiencies to we our relevant best start KCS questions. deliver the the railway deliver transaction strategies and for opportunities choice and North premier look Operator? all confident or and and becoming greater engaging in American with better progressed stakeholders the We enhanced better the and To constructively have railway strength KCS of take local XXst KCS. On a and to partner,

Operator

Instructions] comes question Vernon with David your Bernstein. line the [Operator And from first of

DavidVernon

guys. Good afternoon,

JJ what's again now I wan ago that lower time two I might like in point. than a to three of little question looking this changed here? a makes better or this is So years such But know the deal where why come with price competing a five talked been transaction, offer kind at in bid. made about the at Like the ask or market this to this when we right you bit. have

JJRuest

And where who then and something Therefore, the from the to you America odd specific be renewed of of earlier has very depending, Board as this whether much in also reasons to or the of was which new their you very, thinking beginning point is after merger believe, thorough railroad that also -- GDP last the south strategic with an be. but North why a although a then point partner value might won entertain have very then them reason the they're of good recovery, which who KCS the dependent forecast of for at is is not many time basically view them looks of And top it's economy a to shareholders. week, there's this for a of timing an partner post obviously can a combination. another now those for economic We have and had why decade shoring. main that doing time the or with covered now terms merger Mexico, the that dance. could Mexico so I decided that you So with value USMCA, the as crystallize

that that cost some when says rising between have together, together, point KCS Now time you offer fact you challenge North and the for fact China been is it good also yes, to to a has put all very that, there that the a you for that might China, decade. seriously. the put and term labor the in CN, is board make money them And that affordable, the of and long all it's relationship America Mexico to to consider better where to

DavidVernon

very of here, little south? or think rail one Maybe getting follow in connections value. of more kind if about unique squeeze as I further just west, up That's drivers clear. Is about you further CN can it the

JJRuest

the successful America product compete on driver to haul be rail network could I a a and haul to the here We to ask Toronto City And North it ready Calgary of product, long from, and there's create superior Wisconsin Mexico now, us or that. to east, Rob distance on truck. to comment long to for really makes is that Mexico In be putting for point, railroads as on really way designed be But appealing. a as with that value order successful. Detroit west. So need definitely two really do the right say, really that, City the not all in on together to can can

Rob product want about that the in You make some to comment, have mind. we

RobReilly

upper JJ. really does. at table different as the certainly it. strong and American When We sure. Detroit with railroad we at get would us from would options. really auto of last the actually and the the just USMCA it to option. help for being highway Yes, It's and industries, taking connecting things we and contract, get about, the David, I-XX. look service the really the become at it the lot the But needs finalized talked and a about Midwest true saving to on between industry Ontario don't Southern that you KCS fuel really second here that's Mexico, Kansas look it transportation to when it's today line City enhance of increase we JJ and a just Mexico year, increasing off Intermodal it, look continent. emissions, to North bring And choices service allows a when shippers. trucked really

Midwest, in southern Illinois, world, reach the the frankly, directly access our ability Wisconsin, for in Mexico. shippers producers Gulf, the farmers from with Mexican and in markets Iowa, to Atlantic US to aluminum the Indiana, to Pacific and KCS For Midwest in the better port region opportunities the In others open access Canadian market. the the would see to quite

unlocked allows backbone enhancing lot and and customers. optimization there's utilization over really this And further and bring Texas center keep I would of products a shippers panel fleet gets for beams going franchise combination being of for of boxcars. could CN's For USMCA. and things our buyers the choices of lumber fully but XX,XXX on in and force

JJRuest

focused competition, much you, on pro David. choice growth. pro and very Yes, Thank

Operator

with the comes question line of Wolfe Research. Group next your And Scott from

ScottGroup

Hey, guys. thanks, afternoon,

in longer it OR rails with in now basis? KCS. term XXs term, KCS to know low with because So sub to of I'm the the I see going longer some and earlier you about pro I your And a And a XX that to is want that quarter this maybe maybe the ask about operating maybe you How CP forma on talked get does think OR like It'll about, PSR you quarter. has to look pro about track? leverage this. then higher forma ratio, had worst do just talked do your the guidance, back on margins a among be opportunities success this OR

JJRuest

can So the we and American when Ghislain looked trial there's a term, maybe growth intermodal. was coming then about on talking start I so look and at I we add, significant North long focusing earlier, from network economic

will world than growth crude of lot the example, from very one for in you a So more a could to that get much CN EPS at lowest be move trying if of intermodal, a get the focus lot coal. growth, OR Ghislain? of

GhislainHoule

one on JJ. we're are front, Thanks, other down our quite the take sales, are results that earnings was rails you actually competitor, our up look, that quarter, you time on proud their down, Canadian this mean, million, for X%, out And $XX Yes. land up. EPS, earnings stated they're when our I of the they X%. But all if including

So proud X%. be up so is at XX% EPS, underlying focused quite consider business, of when we we when we're the up this we would on. of and lag, FX, you fundamentals as and And fuel consider we're what the the mentioned, we look

JJRuest

ahead. Go

ScottGroup

sorry interrupt. Go No, to ahead. JJ.

JJRuest

on we to As optimize. that's we focus focused on EPS. The I said, EPS, what is want were

ScottGroup

Ghislain and the clarify though? can Okay you on guidance OR is where

GhislainHoule

Thanks Scott. know the guidance, guidance that's up I single digit targeting our by And I the we're for that growth. we've upped EPS high our forward That's economy RTM bullish we what guidance backed mean, with our guidance, I guidance. as the on our is markets quite you as Not, digit think we to on mean, a mid, upped and we're question. quite proud, growth. coming double and Thanks

Operator

Cherilyn with the comes from TD question of next Securities. Radbourne Your line

CherilynRadbourne

your strong. ask guidance the Good increase been to to much. volume outlook. has very afternoon. Obviously, in I relation the intermodal wanted increasing Thanks very particularly for the in and year

know we'd of helpful side So signs starting be, carload I the business, think life see if would maybe in standpoint. the love from to to mix you're But which Thanks. a of the that's upside.

JJRuest

what want move to end So of year? to about we the and Rob, expect the you talk between now

RobReilly

Yes, we are Cherilyn, where moving upside the see to we so half kick second is the particularly starts economy some year of export moving through gas to the Products out Rupert. port about we to strong bit Forest here, continued gas, really Prince quite movement terminal the in positive see up. of a here, Actually, The we grain. second the has actually of really in, opened group as stay just talked

I to the the side really of carload think the frankly, second quite single, we the what franchise year, upside, starts the in move the half big of in is Cherilyn. see terms

JJRuest

Yes, broad pretty pretty broad base. it's base,

Operator

from question Tom UBS. a of line next Your Wadewitz with comes

TomWadewitz

you thank KSU. JJ, you wanted potentially question regulatory of some of And get sense with they regarding your try to the here. maybe of process. the I the negotiation concerns kind that how to Yes. have for address would the

to they would go in waiver that guess the visibility now able CP voting process. be has to I with So a particular,

You don't yet have visibility. that

an back do barrier and with concern they that you STB then voting significant an KSU? And no, in agreement negotiation of trust. you can Are terms address comes might would so a that is to with they you? But says reached that going a we're that the to agreement to not do things have allow that there

JJRuest

Tom. question, the for you Thank

trust. we've Tuesday So put that only and KCS, the to of an voting it's we last for week, this only offer file morning

fully concern has. every intend address that to regulatory issue KCS we and So

of we're you So different brief at in kind update the doing could these maybe process where briefing a and things. give Sean, of maybe

SeanFinn

Sure, Sure. Thanks, so. Happy do JJ. Tom. to

Dow with going obviously, a we dialogue to a with data have access KCS and coming to them. start in agreement So but the signed the we're days nondisclosure room,

that setting the rule letter views our the I voting think which process we out a will STB the the you by on saw filed today STB on trust.

is also a other voting all, petition voting First by forward the before CP. trust, the put secondly, was which of with trust identical to our we filed STB

they at Our just STB trust time. same to the as application the both voting do very approve that their we're simple, they the asking process enunciate

us same with So both trust a process the voting ultimately approved, we're is fair, interested voting been that the puts STB where be handed. even obviously with who that. in line do our track their that trust position even sometime both KCS transparent same by be same a and be comes adopted both to the we're the working XX, will voting approved decision in We've trust rule standards, in vote have and to May and June. the prior confident a at STB respect time voting CP's getting And them of very shareholders by and the that parties to trust confident saying KCS asked which in to

even everybody. is we not the think voting at So we obviously, able we're stage, have go that approach competitive, for trust rule public that issues. very confident choices, standards does the as our for is where in competitive customers position to But field again, that interest And show is the And trust, voting to this time, we CP's. that's the know to the you dialogue is interest, ongoing; additional to hopefully, for approved pro across identical May. it new an the transaction KCS playing to same have no US best with level very be network. to the we're voting we'll doubt STB early get will on the choices our and to in comes both that the June, with will confident And the STB be it at ultimately, when late

TomWadewitz

agreement them or KSU not for agreement an necessarily. or Do to review not first it an you with need

SeanFinn

filed the voting not have interest. you final we we approve proceeding required our we not, last No, a agreements that and follow signed -- week and before it's opened the interest voting they

Operator

with from comes question Your next a of line Credit Landry Suisse. Allison

AllisonLandry

on means. be Good what Tom's I some question. seems mean, afternoon. actually the interest CN's public up standard disparity there between Maybe view about just following to

compared the how public interest of outlining trust, standard. voting CP the view their with for Specifically is

will or be of maybe divestiture what I financial mean, trying how language, arguing it considered, you you. you is just that, the think think sort I means, to competition means? STB more you that CP hoping on could walk the So that asset, fitness is Thank voting is the public basically what if us provide what clarity something for through saying could it's understand trust. on specifically so and about, your you standard interest view CN some of the the

JJRuest

talk Sean, these technical you to points? want to

SeanFinn

the applicant process. voting very financially would it exactly will very post of I the goes mean, the there of and and industry trustee. trustee, are were Sure. but is trust, doesn't approved as our carriers. and no in no trusts. I our therefore, viable there's all, and criteria is is STB. history improper will experience is not this would financial the And at public respect transaction, and CN. raised that our same very you therefore stage application to KCS. Well, I to do his it carriers great specifically, transaction we when And same CP will that standard, voting standard have being bid the control focuses The harm but to position the Starling KCS if are comment, independence will have is comes CN test with view analyzed met trust that competitive, the is an And by approved, both there timeframe KCS for both that by context both to mitigated be rail is an welcome to same the to. are at clear. apply The through be is if be get no that interest to our our that the also same the have in control regulatory we're we're of choices trustee of remain there's for is were we STB worked not case, this Dave and a issue I that trust a And to for asking and risk able as are happy problems. obviously, confident also be voting both customers, to customers trust clear Allison, on the that want ensuring the be in an being it first public and the am it extremely with have of some as the And independent and our again, the very the reason, pro issue standards through be post the standards unwind must both competition. insolvable to is confident our companies with, that out the it if issues the these STB voting a trust viable create of voting

that public that to come the they So in STB. receives we're case, both detailed be interest interest on approved will submission when the STB our trust the our will made public the we the voting that by applicants view confident and trust

Operator

Bank a from comes line next with of Hoexter Ken question Your of America.

KenHoexter

good and great, team. Robin, Hey, afternoon Ghislain JJ,

kind your term guess and cost I and volumes thoughts mentioned thoughts XX OR cost the the side do relatively well. term as quarter. your the think the again, ramp near of the of you How at maybe cost on -- in ramp Looking line through you the on top long versus to your side Thanks. flat costs on employees as synergies performance on you year

JJRuest

Thank you, Ken.

I can maybe in. start add So then can and Rob

the vortex. was So some railroad, expensive the the X.X%. February month for of month price polar yield an same about of store of We of talked a bit

So obviously that not the We side, we've the the numbers. when that's us just positive a made volume is that all series Rob of all operation like going on constructive, fronts, and on trend. front. to is just about economy. look at the during presentation good if And you And of like KPI the progress all ahead

are mean I the if -- with year. to you don't want Rob, to that I positive of the things rest looks light, add for looks, know it in So we

RobReilly

on, operations up you even Ken our just Yes, our look so out though the in operations there to said quarter, headcount, takes volume X%. at the team, if what I first it freight was move

operations headcount down move roughly XXX less X%. people Our to freight. was And about that

of of the this to on And year. as didn't And here it, out quarter, we our depth second COVID, quarter, As of bring the look then been I came basis. up half in last the productivity maintain X%. resources first to a was one back labor quarter through into one certainly last at we the our all that third year, second we of year. we've able mentioned, When

different As April, you going year seeing of a we're at direction, look May, growth trough at quarter, big the versus is course, the really, saw, in we're year, this to of second in versus end downturn the last we started it where us. on

recall, set hiring. we're So we That the And now second the all to stopped we actually the as had right of of half a you people in. this at getting weren't for lot all. furloughed hiring doing as contrary, year any second We're in conductors as we made, ready hiring last COVID actually quarter soon year.

preparing terms preparing we're the move of And second that's in really we're our the about are volume. where So to this that. year half focuses optimistic of

GhislainHoule

I variances average if the the being labor point, maybe, down at incentive And X%. Kenn can employees number compensation, you're of the because higher. all in of Rob's JJ, our major looking add, QX costs quarter That's were

Operator

from of comes Your next line JPMorgan. question with Brian Ossenbeck

BrianOssenbeck

the Hey, good for Thanks taking afternoon. question.

you one on see the trucking? effective on Canada markets. mandate Can We becomes availability the being some devices you'll that on of end from us some Just impact you're mid quick ELD overlap it focused impact just a remind certified. that about end think this year? you when in concerns something having that markets of have the really with heard your Is what

JJRuest

equipment have do one in to in what maybe up. is will because the trucking that's require borders a firm So have pick can States. I this United cross Most legal Canada already,

the only left year. Canada that's to mid So that that by only with fleet running mandate then you're in meet has

say move number good qualify to economy positive. the is had would a strong. because I time I think so is a would equipment But going is at as up converted, already slight the to a of be the positive. portion fleet So border, cross a the when slightly impact Because be impact I coming of it's

bigger is really, to a economy implementation. So ELD the factor than going be

Operator

line next with Seidl Your Cowen. comes Jason question of from

JasonSeidl

I options through going my deal. the for us customers any to your walk exist. on maybe team. Hey, STB how to and some want that Thanks placate question. you sort with may talk on forward and the of taking And of JJ of the could overlap the customer

JJRuest

and think earlier, Rob, the that? them. that, we'll the where to parallel know, So we detail solve Sean well one color as the we want problem, both said are resolve Baton you I over of known unsolvable, a to And little line. that, New add between but none then other of them and Orleans have CN definitely and can And, is know Rouge overlap KCS we is don't

RobReilly

The Yes, do will Baton overlap, on from of again, between Tuesday, go in I it. less the said hit that we their like think X% Orleans, to New that few just combined we you is two and that knew We going than in Rouge one. have we a and really where customers options railroads said network. that represents

Council Mississippi, out X:X. X:X, X:X. been St. no will E Jackson, things Bluffs, no when divestiture number of cross handle X:X, Springfield, that there's I'll remedy we'll comes, no There's Alabama, line go that bridge just it, No do that quick. we it. a but you So the real that can places including other have there of time no Louis. mentioned. are the through them will with Mobile, Illinois, but we X:X,

merger. support port has In fact, proposed in our their sent of Alabama the mobile, for

as it. that's get note work out terms XXX it's we're said, a they letters days, little there. customers support, in of as important with reason significant If what that some of is in three that to out we over always Thanks there, to we'll question. for seeing over the remedy our for So business issue another JJ there have. And,

JJRuest

week. Hopefully, on everything said has in been clarify, the this last help this

Jason. So thank question, the you for

Next question?

Operator

line question of with Long Justin next from Your Stephens. comes

JustinLong

Thanks, mentioned. about orders I you that good afternoon. XX ask wanted to locomotive the

color they delivered? those the just give predicated the on contingent can this you the you're And board. and should of the this think I got expecting? expected units when stand an and on is from order approved? the be approval you merger being that's timing is Any growth for alone Or that on business

JJRuest

to the offer Rob. pass I'll expansion, place through maybe before it and made board the green the to took clarify KCS. So approval fleet of we Rob? the expansion locomotive for on fleet the just But

RobReilly

than half some not does merger do what do we that's over timing. based That's about variability the in and to prospects the could the like XX of we to pull half those first this there get, the of with on XX growth that exactly had those second and see of be in anything next right; forward. But to growth timing, terms roughly months, of year, It's expect year, in here XX, the it the of bigger we have next could volumes XX terms of merger. look other some of nothing with the to we really

JJRuest

Yes.

and coming, COVID. post we do when want to the for move to the hopper adding at that a farmers. we're We we prepared not focus and Canadian take grain we our part be our low recovery making and that's all want basically the renewing cube, cars, major to So it. X,XXX commitment losing new three flexibility capital And locomotive, high economy XX about able on our be as see we investment some enable Canadian We're over capacity to years got them. growth for

Operator

of next Chris comes line Your Wetherbee question from with Citi.

ChrisWetherbee

here. for taking thanks things the of I couple question. a guys, guess Hey, maybe

ultimately the about relative the sure a to kind downstream deal. the to waiver, potentially shapes to expect as seeking of effects make becomes the something on the And of look desire the to, the you that of what you to First, how opposed industry new in to by you'd same maybe merger think ultimately then, for would both of take terms STB sort the trust voting the review done? were and just this as be able the sense acquire trusts case, think else is rules something of opposed trying understand are in make your And think like Do have sort one I that you it. to is reason to to the them. why reviewed you this you guess I is yield there when if approaches future? rules the triggers this similar do I'm this

JJRuest

thank often question you, asked. a That's So Chris.

here, that. So we cover will refer expert Sean, to to our

SeanFinn

believe we specific, what no, waiver. on the we close asking or of Thanks, rules. new Maybe about old the can you're Chris, be on rules but transaction question the

from in new timeline of does are first the submission, reviewed think to under comes trust, our that public secondly, we're the are letters want we So for of STB or position taken reason, interest and voting all, this that the evaluating approval -- taken has but this transaction we our the fact recognized should to be support can provide outset the XXX new more trust. some we've view rule test the that, for it the And apply get that we rules, the it what we that transaction the the same the CN standards were find obviously, is position confident and the the of the and clearly we approved closed. that same when voting rules, and said again, that we

will field Our allow submission trusts, us that the hopefully level and adopting both rule ask is to fair, leading process is playing handed. which voting the me, it to and STB same the for time, both to that which same transparent is a at even excuse even

comes obviously, getting identical that regulatory is next So CP the it when to when position as on trust, vehicle approved use to a to comes level move of it transaction. to our this the voting it assessment to to is our

JJRuest

So I help. ahead. hope this Go

ChrisWetherbee

think Is effects? that that? downstream What about do you

JJRuest

it explained And as competition, by clearly that rules, this get assessed address there through. we there there's will new has Rob and we Well, approved not are I closed. remain the no transaction obviously have they confident address -- to of that on overall can the we based has mitigation, with but new where think on our come and -- we'll the But again, there's demonstrating capability areas the be that's rules something transaction. on that is board that those pro-competitive,

Operator

line the comes from And question your ISI. of with Jon Chappell Evercore next

JonChappell

port Hi, this perspective want around? from was was Obviously, it sounded And the you do what JJ. and Halifax. what's like this or a can to now. there cost in the about right how the already little impact expected. was to time Montreal remind bit be prior shift impact shifting if one for And freight? was it positioned I your both expect proactive How of you to the us afternoon. network on a a of And going in the just business Good ask on similar volume different more strike?

JJRuest

we was So importers deadline. the this shippers have And it that in this six caught was and or surprise, a by had this months second was also disruption. labor specific a second, last a time it it about second the is it time time, time maybe because was they

take would it saw last So operation. took coming place disruption the of was year, many that When no, place it customers important another ago. freight diversion weeks that's disruptive That's to aspect. our own

but new say would was costs I result we, it a there also a business, as was So of. unplanned

that sure So regulation currently, close to I'm this party the some looking time, having is bring two both. government John stoppage and potentially or bring federal to may differently. we're diversion already There's maybe also their actually at the a St. Halifax, either And organized of importer together. is work organized closer the freight differently. been

all not big of do second in our in, to So quarter terms it's result. a

Operator

Brandon Barclays. Oglenski comes Your next with question the from

BrandonOglenski

on, last public thanks Louisiana. how shared I be rail your competitive Good discussion JJ of for wouldn't it afternoon, guess. like I somewhat about my Rob, would throws lot it week a potential just think the in and or be combination a taking And questions. perspective. anti from line

going relation to agreements, those response challenged comments, give forward? us supposedly be more which underlying can So extensive you maybe some especially more could in

JJRuest

buyers well CN these good will financially the has that with otherwise, another proposing to network, CN it's their new Kansas we with Well, is as combination more shareholders bring CN competitive, from continue to can railroad brings railroad more been customers It business the shareholders. make we railroad no there's with to really interchange our there's and as new CP City. connect services all creating grow is or pro competition, All I compete new money nothing actually remain more definitely it a beginning frankly, The open. not focus, incentive as KCS. maybe wrong good. harder, competition including innovation, creating -- changing is about products, really make we're helps services, traffic the start. connect on mean, value at after their And destinations. I'll gateway so including for bigger sellers. the CN with

railroad century with with really for related based of we the bigger as ahead, truck bigger not So And that's the We're therefore, is, a pie. competing not going the pie. in looking bigger to a growth as much freight obviously with well on a a a bigger railroad for a is small another merger harder overall a consumers be pie, as America, for to for looking now focus a of pie North a we're what merger that's on or economy -- size economy looking much to interchanging premier XXst is created more the us and crude to merger a and at too and good, or has do a crude and volatile, to intermodal, thermal less been of bad is good coal lot actually size. this reliant on time ahead of

view beginning. a to I the it's I create use is mean, -- competition to something. so This for And Rob you And pro is add freight network. know, to want about rail don't new there's It's shipper our always from growth. region is creating about products.

RobReilly

it. nailed you Yes,

the plans no hit gateways those. on all re said, to on that key as JJ you shut think plan points keeping I open; the just emphasize, we there's

plan. on that's the So, as line, question your our far as inner

JJRuest

something three in ports, to an American New continent Kansas to economy add, enhance an and you're who product it Asia, Veracruz, be import more Kansas at map, City Quebec Vancouver, to when Houston, when or potentially do all the look export west what back Memphis, you from land opportunity Orleans, those at to option look for the to could Houston products going City, USMCA to you just of Louis, South could even as you and within requires to enable Cardenas control this Lazaro trade actually North look could again you to potentially from also, to Lazaro And coming coasts, combination the St. America all inter was City, itself, a Montreal, finished can that content enable effort content give with the do Gulf, you Yes. with more of now to made the the transatlantic a well, vehicle, have connect higher Mobile, North connect Cardenas, ports, lot market, from together the the City, for at trade and America. these Kansas put Halifax, really Rupert,

parts and So haul. that that's combination the of continent, within more economy support this moving long no or means to reducing product, with more is all gateway. ahead, enable, closing about the what And very is competition intention not

Operator

Bank. Deutsche from line Your next question Amit Recruta comes up the with

UnidentifiedAnalyst

opportunities CNI a a for Thank But implications to how is, I mean, us does the merger, a quite question. respect outcome CNI then at I impacted a pursue obviously like with need way is is for me of have, I done offered I for binary. that's letting KCS with me the second. day, and proposal, work necessitate also CNI, And lot board by hoping the you question ask to CP different you slightly a if and competitive other with what so, guess asks to undeniable. and compelling the the want company, a I previous end could could, acquisition both, you implication. a bear potential team was for outcome competitive your of JJ, to help counterbalance the the an I that that think

JJRuest

So thanks for the question, Amit.

our question attraction the days, was a for did many that as many, a to the what NAFTA with there of obviously, has board on The focused early made KCS later. beginning still with of a early at with willing been last the they're the as time called really partner labor, end we different KCS. partner known has Central, marketing It's we and that's the today. thing that And to is an we alliance Elanor for was hand. now the NAFTA. talking first railroad, lot strategic we've of been focus about, was at been years what acquisition when the very a really another privatized, the, so So decided game; CN somewhat from renewed NAFTA on something of opportunity got had then we've

focus really that's have. So the that we

different amount a resolve that look if we're today just think, time, that issues Sean the saying as this focused there's right coasts, we'll at believe, these at they And doesn't that's come. potential, stand Network But on I just point we huge lot of as but value. earlier, what the And that can it happen, was see way CN at then, alone. is three now. of with we

was started that is today, it XX-XX Just case. we remember the XX we way ago, growth. years different up it acquisitions, we no up And over build company build be big when with was organic the and what always small, it

is future that we But have long think transaction. different We are one being is one this NAFTA It future matter very our doesn't time railroad. -- KCS. nimble. we're innovative, keep have a And specific, the that. term, to the very we're we no on the the railroad, USMCA focusing doing this bright mean we that to what. do Right going now, any And

is another actually since KCS time willing merge actually First CN joined I that with to railroad.

that. jump we'll on So

SeanFinn

clearly I ensure STB be the done the that trusts of I the the the the our prior just But the and the year. to both looking if to prior vote. no timeline we're later clear yet standards clear take criteria, KCS that's may today, to CP before voting could to I'm that'd this JJ, our said for be But trust we will There's voting application. assuming when June vote clearly, talked place. be same voting or on by same on May while approved wanted the end trust want that and our have it -- date same to shareholder about in trust for I KCS. want rules as voting to When shareholder interest voting that application I the trust KCS presumptuous

JJRuest

Thank Very Sean. important you, point.

Operator

Poirier Desjardins Capital. next with of Your comes from question line Benoit

BenoitPoirier

And assume about color more good Yes. look it's your data merger Obviously, to provide binding the But timing finalized, to if could first now data provide -- you and you. Thank we the some it's I the voting make timing days. could color more about very trust. room, in also not afternoon, definitive would room the time. proposal Good about virtual And analysis? I the my these when know agreement. maybe everyone. color you at perform

JJRuest

Sean, you want to cover that?

SeanFinn

we'll thank access said, started Yes. They we've tomorrow, Poirier, Benoit you. Yes. -- data hopefully be starting the to room. getting

your material finalizing. take a there That two Benoit. a to agreement. already and then a room to to question, half that's and move could draft us weeks diligence tabled it virtual data weeks, two therefore merger in due We've us is get the our to completed, at Looking confirmatory allow

have We go. to one ready

with engaging And very have update we're to next hopefully, the looking XX team. hopefully, come be due merger a diligence in So we'll just very to days. the respectfully and KCS be proactively it XX to line forward with agreement, in in days in and the a we'll the to position

Operator

Thank you, I would JJ like to turn Ruest. the meeting back over to Mr.

JJ Ruest

joining for an time today. Obviously, you us history. CN thank in it's important Well,

operating us important efficiency safety to fuel and are is injuries on of of much quarter solid, looks results, train first Very the accident. proud metrics earlier, improved mentioned our personnel also economy performance, our good. ahead we The good. As we're is us

So come. of things good look quarters lot good that the for a to

onto the view, combination term CN of to mind. give very long that a week. to the desire of the coming with we're to much On consider obviously, and to lot effort top be of of board focus reason us putting And a going KCS the in is

us weeks you thank come come. to So to the today months joining in more you. Thank and for and

Operator

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

Paul Butcher	Vice President, Investor Relations
JJ Ruest	President and Chief Executive Officer
Ghislain Houle	Executive Vice President and Chief Financial Officer
Rob Reilly	Executive Vice President and Chief Operating Officer
Sean Finn	Executive Vice President, Corporate Services and Chief Legal Officer.
David Vernon	Sanford C. Bernstein
Scott Group	Wolfe Research
Cherilyn Radbourne	TD Securities
Tom Wadewitz	UBS
Allison Landry	Credit Suisse
Ken Hoexter	Bank of America
Brian Ossenbeck	JPMorgan
Jason Seidl	Cowen
Justin Long	Stephens
Chris Wetherbee	Citigroup
Jon Chappell	Evercore ISI
Brandon Oglenski	Barclays
Benoit Poirier	Desjardins Capital

Canadian National Railway (CNI) 27 Apr 212021 Q1 Earnings call transcript