Canadian National Railway (CNI) 27 Jul 222022 Q2 Earnings call transcript

Company Profile

Participants

Paul Butcher	VP, IR
Tracy Robinson	President, CEO
Rob Reilly	COO
Doug MacDonald	CMO
Ghislain Houle	CFO
Amit Mehrotra	Deutsche Bank
Bascome Majors	Susquehanna
Benoit Poirier	Desjardins Capital Markets
Brandon Oglenski	Barclays
Brian Ossenbeck	JPMorgan
Chris Wetherbee	Citi
David Vernon	Bernstein
Fadi Chamoun	BMO
Jason Seidl	Cowen
Jeff Kauffman	Vertical Research Partners
John Chappell	Evercore
Justin Long	Stephens
Ken Hoexter	Bank of America
Konark Gupta	Scotiabank
Ravi Shanker	Morgan Stanley
Scott Group	Wolfe Research
Steven Hansen	Raymond James
Tom Wadewitz	UBS
Walter Spracklin	RBC Capital Markets
Ari Rosa	Credit Suisse

Call transcript

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Operator

Good afternoon. My name is Julianne, and I will be your operator today. Welcome to CN's Second Quarter 2022 Financial and Operating Results Conference Call. [Operator Instructions] I'd now like to turn the call over to Paul Butcher, Vice President, Investor Relations. Ladies and gentlemen, Mr. Butcher.

Paul Butcher

everyone, Quarter you Results XXXX afternoon, for joining Conference Good Second CN's Financial Language] and for thank us Call. [Foreign and Operating

to additional begin, forward-looking presentation. the we I'd to the your Before like beginning of statements information legal attention and available at draw the

results statements Canadian risks reminder, a actual more securities implied limit those fully may statements remarks, follow-up subject in we to cautionary forward-looking laws. to IR The yourself uncertainties from remind call I be regarding prepared meaning our and of cause a projections and conduct forward-looking contains to Q&A session. and These differ As the certain X the and expressed after any question. described statements that these for in conference in will the our call other are will today's materially within to U.S. do questions. team and the are or please presentation. available to After want statements statements you

Joining MacDonald, my us Reilly, call Officer; It Chief now Tracy Officer. Operating Robinson, turn our to President Officer; Chief the Tracy CEO; Doug are President Financial and over Officer, our Chief Ghislain Houle, to Robinson. Rob Marketing is and our Chief call the CN's and pleasure our on today Executive

Tracy Robinson

proud joining Good QX. quarter [Foreign the in you're the Very phone by with has I'm of Whether pleased team afternoon, today. or very everybody. welcome. you Language] to be that all here delivered webcast, this And

the very to say results of this of together advanced with I we the And have principles. coming number and pleased continue last all Now I'm the that take to us, business we that they're quarter, that run would as some the way is that last ahead time. while team And is going said work principles producing. these guide grow. of and way a to we on that quarter, happy laid the our I'm we've out we way

a we've in and that we've to bottom our improvement improving book operations, More our we're selling but performance deliver We're train top improve service start. the beginnings into Now continue performance. velocity. ensure business of yield line. of customers, work we're our to leaned we that in begun and work and customers, the our our our into We've our to to to our growing We're model great scheduled operating seeing can got manner growing we line. a do, on

of financial XX%. Now We let up me points highlight $X.X achieved billion, key few performance. our QX revenues of a record

on commercial network. achieved and of team together a the higher us over bringing the last and teams We The The performance The in has EPS. XX%, a Now improving XX% over strong the rest basis last the quarter, surcharge on for operating done X% XXX point great the has team yield and job QX growth, fuel of strong these revenues a management. year. with across yield, network is to year. the was volume quarter that's up a the operating improvement ratio a had quarter record fluid, deliver work $X.XX enabled of

the by performance Solid team.

to of with reflect I these excited as during great months time say lot day, I every to of my priorities, with my system, in on as Now months the bringing in, about have, I April, feel with back but the leader progress leaning key that including the organization, focused I first I'm doing I CEO provide and employees QX am going we're team seeing got government meeting conversations it the start in that investors, But from since our same. of thoughts. our on many of making. the I'm about far I of said, few this over done, a remain our last and that we're few to encouraged we CN I've it our future let before I'll some is a a you. and I colleagues turn these together, really as few highlight my being more of customers, with some with spent call them, CN. spoken And to industry. a today across high-level the

operation. our into spoke Now firstly, very customers about network. performance for to and we and well launched across leaning improved scheduled a This leading it's the has

with be is preparedness growth Rob a you our more volume also We continue we expected this second believe to accommodate strong going in to the of half very will on details some build momentum on here. provide to and year. what this

and thoughtful business. about book being about it's our of Secondly, intentional

business, Western this. the of Our it. going lot we're parts important this also This as in year. we remainder drive way network we levels ready will on customer service focused This a for It's the corridor. our grow lean into to we the years, tight the going we're going operation up that But growth. region, and We And forward, stay region. going fully important to resilience. we're of earn an Southern stronger and in as We've of us. the keep capacity returns. utilizing seen for freeing our is strengthen to more is region particularly Western the densify the to to growth efficient volume Eastern over other by over move our know network, This focusing the in for coming, a on are the running better, ourselves

on we Now for to provide in significant Doug the future. provide will opportunities a little is which on with that an gateway is CN the and environment you going believe business bit a update double-click Halifax,

strength. integrated Third, schedule need working and have basis. into We operating our that sell I leverages that a the in we to much about talked a more the way model in

pricing every Doug do Our meet I we success pretty is these in every decision. investing. right on Rob, to a regular places. that know the we Ghislain, all contract, it's generating are resource having set where the in about way levels, work and worked we're capital levers We and results. crews, We at equipment, efforts basis, spend, this look whether a coordinated and much our

not is always the decision the about time at do it's think finally, we it's bottom team, a it as ensuring And the and I we that right top we're growing our but line outcomes. that driving same Now grow easy, line. the

our Our this results I'm quarter. this with reflect pleased here. momentum progress performance the effort, our and more quarter Ghislain in details financial provide and will our of

working. And year. team, of we So solid our full this focused team, second on our as see is half plan into the results delivering is this move

over Rob. me let you, pass to Now it

Rob Reilly

then, Operating plan. a thank operational in running keep during duty of uninterrupted. we the to safely were their as want and All thank the and and Signal the also when to emphasize results, progress that improved right. who the as on quarter focus year second Thank employees very you, the Tracy. The I and recent to hard we to field want delivered employees for the solid dedication XX-day I our solid last key compared and quarter was railroad continue Communications our team seen in on Employee worked yards we performance the running Strike to our continued our railroad to then Since flat on initial our yards switching April. X in improvement May. we train at started in we've turned in plan. nearly And June. to hump attention performance, from departures, origin The of June the up in which plan. helped executing on-time departures, XX% reached to team connection to up XXXX. which XX% our solid It's made was XX% has train over in XX% progress Clearly, also the on focus June,

since the fastest car more railroad and part also achieved as customers than we best the and we gets is winter, is Canada, when typically of in marketing a dwells, coming of to velocity train operating closely quarter 'XX the metrics is where QX While the team seen QX typical the team have we your XXXX, Team capacity. to execute number second since on improvement the network operating of out footing look speed performance of after The performance Western for of since the where particularly pandemic, year's 'XX. team working to through highlights plan. since the is densify dedication network delivering prior to that QX haven't of our its is do with the and of lowest the this the

down due our to in West region GTMs grain the While for the Southern volumes volumes, quarter. lower records in delivered were all-time daily

emissions. -- quarter, team and for XX,XXX of team this approximately set record once for drove the tons quarter, of this all-time for carbon addition, efficiency again the which avoidance an the In CN fuel industry,

normalized and that busy confident are with operational efficiencies a as these are continued in crop. sustainable a get Canadian broad very ready drive will grain for we changes demand We fall more further

volumes. resources handle We continue expected to our to prepare these

that the increase a of We conductors locomotives all XXX up last end that year, a we with large of XX is end prepare headcount strong of from Our in part be as the QX. service by purchased will September. for being

more XXX high-capacity X have grain our add and fleet additional to projects. continue We additional capacity the siding with Corridor to Western to hoppers

about Finally, a word safety.

all are that Our accidents safety belief are performance the injuries and on fundamental preventable. aspirations anchored

serious the of now over fatalities are since over our experienced in strategic marketing to provide since ask injuries the history. We're railroad a I'll XX months injury which With been proud serious Doug the reduce fatality, objectives year are it's Our on both that, color our last streaks company's longest a side. on-the-job some simple: and become safest we've in eliminate America. to in North

Doug MacDonald

kudos delivering Rob, and operating for in and to you QX. a solid Thanks, team the performance

the for We to deliver operating customers. hand-in-hand are our working team with

due and X grow. capacity more a our and a in from we positive RTMs filling expectations to petroleum few delivered up balance on minutes network to to shipments. and a on Russia. capacity take revenues me parts of strong to our also X% is the Automotive Let remain volumes grain grain oil, XX-month QX in to the growth back growth Ukraine coal to is crude Canadian orders. in volumes. the solid performance in revenue which sales decline for sanctions line QX war the year. focused refined continues despite where top unfortunate record. U.S. backlog QX, Canadian and available of with new our We and eastern with us and P&C the We in up volume XX% came from to products solid highlight have strong due XX% grain We a southern This lower saw

supply. Domestic orders shipments flows metals no for car contracts with imports remain the metering demand. inflation services. down and with intermodal car management well shortages supply plus June storage as Western interline cycles are Montreal well International as warehouses. we for our empty and to as remained are were and reducing above strong ensure overall car destined slowdown additional Products industry in volumes full on on Elongated Forest fluidity pricing on intermodal as strong of in on terminals and faces and yield focused driver We other surcharges Toronto of older and to remain customers. renewals

to the last On As grain, we think year. to any continue RTM second year. a weakness. the about demand versus signs million remains less to of are expecting for year, the continue grain strong, single-digit crop customers growth we of metric tons Canadian assume low The still over and than with half million we monitor current dialogue we XX $XX

are We chain to and the Montreal and our destined solutions partners alleviate with working containers import Toronto. challenges customers supply to with on

We additional add supply the to have to each up chain. in area flexibility capacity opened recently storage some

strength both strong in remain will shipments, Valley from coming production of We on strong benefit contract Coal continue CST prices, mines continued and from renewals above export. rail with Kanuma, higher We focused driving restarts yields and well as in U.S. domestic coal coal as inflation. to

business future. Before part on eastern densify me to to I highlight Ghislain, Port opportunity served an to plan of the of which it has on let the example significant additional is to we container attract our solely by The CN network. the opportunities how take pass Halifax, in

of about years. Halifax Halifax are years very way of unique part network view port's a more of With to Halifax, investments is significant partners, closely is make to the positioned see production wants TEUs North capacity. accommodate opportunities with leverage has have the that over working as owns production business PSA gateway. both shift currently to grow. next million X.XX operating capacity XX% incremental our we The terminals on to America. its few well to add coming about We PSA the now this to at and that and over Southeast We capacity and considerable this CN's to Asia, made

have Halifax. fastest with out moved ground weeks, I'm service XX% our and transit Last And Our about daily the Coast has partnership Toronto, very Detroit X prospects reduced Halifax we we after the of started by out and excited to of times of the from Halifax service PSA's and Montreal, more a East PSA. second month, XX%. count Chicago. containers

So and have the to closing, providing on line expect to bottom customers my to on driving it our is in come Ghislain. I top growth that, of line. team's With level focus service the will from us pass

Ghislain Houle

and Language] strength of will more presentation, we [Foreign volume in X% growth despite in XX% of the drove combined which Canadian quarter. earnings performance, Page headwind grain. as I a the of the terms top operating of will talk delivered performance. with line in our visibility second XX to from highlight on record These franchise RTMs growth results quarter our The significant revenues a solid performance, provide

operating costs adjusted related on income details nearly quarter. shareholder My more up reflect $X.X XX%. results, comments We in advisory billion which of matters. adjusted will the with delivered exclude QX, to you provide me Let

ratio basis points Our than same was QX year. which adjusted XX%, the XXX at last operating came lower period in

as to prices was expense saw up fuel Our in over quarter. rise we the XX% fuel continue

year, flow We generated fuel unfavorable deals effective versus X, repurchased a the XX cash were higher have price the lag quarter, as year, June. with XX% for we at last like surcharge fluctuations We reached up diluted noise of term. fuel $X surcharge QX, $XXX it free earnings. mainly over the January versus an due of billion almost does year. some which short from billion runs have year. share Under current this, Adjusted we February program, create next shares program XX the $X.XX, In with in in but through million last fuel impacted our up record quarter EPS of million end just over last repurchase XXXX, $X.X from of to that

adjusted year XXXX remain on growth operating the range for our in a Moving financial our EPS are ratio reaffirming of starts that with XX. the an including of confident X. XX% Page on to balance outlook We XX% the with and outlook, to

We in expected growth to expect starting for the including strong single-digit up in second a the the grain Canadian be RTMs in normalized range crop with the volumes the fall. in of year, half year, low

$X.XX of of currency the of in price the WTI year. barrel, continue range will in average to that assume XXX be XXXX, to XX the We the value per and average U.S. will USD in USD dollar the approximately for Canadian

focus an less the the bulk any year, in modeling outlook does not being running current fluctuations recession. are me few points. That disruptions We major grain, by economic current service as we and and a our to second velocity. that run In a half fluid scheduled and a The with and said, assume not economic is remains potash reiterate network of environment of continue strong. impacted demand The a lumber have strong traffic. franchise, including well railroad car coal is we backlog a on conclusion, let

situation we inflation control and contract While rail expenses monitoring the on we and some continue above we costs, impact sure to making our pressures closely seeing are price starting to are renewals. our inflationary that

an can advantaged network this produce. and We what network have know

balance We have our provides capital allocate sheet drives in value and that shareholders. a for we us financial our manner a strong flexibility, that long-term will

it Let for me closing back to some pass comments. Tracy

Tracy Robinson

Ghislain. Thanks,

Now few let key remarks prepared points. me a just reiterating close our by

book We network have with business. of a advantaged balanced X-coast an

side with you and with part X growth highlighted eastern operating railroads as running significant have network. making more good we're on Doug to opportunities fluid, our we're a the and densify opportunity the sigmas. progress by example, We many of in provided faster Rob, some solid pipeline And across a efficiently. Halifax, the of

capacity develop forward next only spring. the railroaders. future. looking at together I'm Day of in also we're those potential, with a our Investor company not excited discussing of our to significant our opportunities, great about And accommodate to we growth the a in an invest more strategy generation talent but growth is This our very to and will We when in get

and pause Now take we're happy your to questions.

Operator

question The Instructions] Citi. first Wetherbee Chris comes from [Operator from

Chris Wetherbee

kind in the the maybe the I on to focus half wanted guess of of operations I back year.

back I the forward second RTM a efficiency the of us by in you to year-over-year? I'm how or in exceed you you'll inflection little the So think positive included do opportunity what's able of given curious, the the opportunity opportunity, the moving to macro? the quarter. you've want think pressured sort XX% get see of for about and half or will you be XX% realized be sense have year? or growth EPS cost from where guidance the maybe be as maybe bit either a to And may to much

Tracy Robinson

of tremendous to to pressures done in the putting the second Rob operation. the The are to their a this Certainly, of going on kind in the will Thanks, this network some environment Chris. be team going job where to different of and on has operations comment it's ask half. I'm foot gas be. And a opportunities where

RobReilly

look Chris, by the of a portion in has at Yes, network crude XXXX, there when tale We've and delays because southern the of halves. X down been some volumes handled. we've volume. driven that half year the it's first you just this experienced GTMs of our really of Really,

well normalized of look that to that Canada we year is as in Eastern grain really big the QX as we're improve see going crop. in second The Canada. and volume to half see with So the actually Western this

pick some to terms benefits scheduled seeing to dividends, we and of So a the some year, that from we'll we'll really to times the as of high-volume up. that. that expect see the in railroad, down our in here, But the we've velocity continued continue even emphasize to as pay press and may to continue come right some of running a volume now little bit focus of that we're starts

Operator

Brian question Ossenbeck Our comes next from from JPMorgan.

Brian Ossenbeck

break for And context quarter, visibility year core that? for next back even expectations the and And in of talk you for then some just parts, maybe Doug. fees into you the sustainability maybe Maybe Can fuel, FX, perhaps half can yields? there the of a that lot down would certainly price, mix, you well. the about X moving mentioned, your your around year, as be some helpful of storage

Doug MacDonald

It's Okay. Brian. Doug. Thanks,

don't don't well we what do is, continue inflation. So above our on listen, price -- we it to we guide really but

supply from through great is there, had we've we rest for contract So renewals out for with of lot where a coming the as to is go the providing really that's services that on additional where And coming customers that done. of disruptions from. And success it are the things is we're storage our it that. other chain they of need rest and

year you we it we've So see rail see of continue rest And it we're for and really when right now. that for happen all keep the combine actually our into to been will well next pricing. able above we this able together, inflation it even year, to

Operator

Ken Our question next Bank comes Hoexter from of America. from

Ken Hoexter

quarter. Congratulations, on about Doug, the and a great a team, Tracey talk ramp bit of Maybe, volumes. little

the the You talk also kind Maybe to get low you Coast, of to single-digit a target. there? there, need ramp pressure need that getting double And but downside the in the target. low maybe economic sizable that labor of targets -- about of terms RTM get thoughts noted into built maybe opportunity you've in you East the that to of what to grain, rolling

Doug MacDonald

We're what say, to to is. tons we're forecast then Canadian increase lot come and talk see we're about talk a is that. we're -- Rob of is that's so going the XX Like metric Ken, so over well crop. little labor. the to looking listen, where now to bit of we're turn markets, the year. I'll But it million grain I'll out a this I'll the really big for. that's going right guiding set But seeing about a towards And this above as what Well,

we've only place Now international taking recently is we've solutions little are strong away put put that, seen the in remaining same in we've everything the actually. at I'll well right is effect else intermodal, that time. place for say the and hiccup

over it improve thoughts should we that, Rob So turn labor. August. With for see I'll to any that for on

RobReilly

we're a standpoint, it QX. labor we to today appears to certainly, been here have for be going levels. more preparing this from back in Yes. sit grain Ken, crop that And that's what And as normalized those we

as the in we're So locations QX. good hard-to-hire we we've than Other into of that go see, Canada. been hiring Western in typically we some pretty shape

South, in quarter Some crew here with so experienced issues We issues South hiring been a the the better some that. get much as to we freight comes to where of more the allowed Ukraine move the us of geopolitical that the for really close. we've in

stay it. to continue after we'll So

look for into plan year, continue next we attrition as As to we'll well.

Operator

Our Gupta next Konark question from Scotiabank. comes from

Konark Gupta

quarter. differently ask a Congrats great little bit a labor the I to question just wanted on here.

resource demand how expectations? to In can soon relative where versus slow you to and the adjust terms is, you the if of down resources network level starts are where your economy

RobReilly

Yes.

other we're at forward. playing sure So down hold labor repositioning do other to comes look certainly make different that some dealing and things into certainly departments the furloughing shown go ability we'll the We've labor, versus people take it on a with we scenarios to of to or when we issues. that. as And to adjust training like we'll

of terms that signs. also things walked and with something we'll if and out see those to do can we'll we number do we a Obviously, locomotives, laying growth see quickly very and some scenario think of up, we less are doing that we right as railroads there, of than start cars, be in of the But I scenarios those any now. U.S. nimble. through

Operator

from David Our comes next question Vernon from Bernstein.

David Vernon

growth Northern those challenges theme, looking a the where now? talk U.S. that So from you Could challenged level in gives some just backlogs in some the then, Halifax you ports. bit And little volume lines some is Rob, seeing of you and Eastern up availability guys I'm risk sticking you metering longer the Canada, East if intermodal industry of congestion did those heard the commitment kind of volume Coast term? the Are to wondering I've former what of shipping of do on if any in to of right shift off service sort of we're was from be of Doug, the to cost. sort Montreal. ship on will? the some Truck Port the the to tied linkages, sea colleagues on could have inter the in

Tracy Robinson

David. over turn that into going Doug. well. been that And question, we're as one some to to trucking for Thanks issues He's leaning the of

So Doug, why both those? don't of take you

Doug MacDonald

Yes.

are So David, line. say so the really to issues going in more

us, it the So and Toronto it's little areas a Montreal, we've also for seen bit in Chicago.

So for being terminals, then no they full, with to That's ships at go land. warehouses up the backing there's in ports, backs place get backs the the harbor. once the which at containers been which the up up

So how we time, focusing been is a that create extra been space. move found out. what there's been same we've of shortage also we've At and we the that doing drayage do on

it's what So XX% it down in roughly from been was June. year-over-year

July. it that, to So able have in improve to we've increase different and the month forwarders companies of seen been and we freight drayage working with be really the the

news, So that's dramatic all we've seen good and improvement.

Now working running running on a week. facility outside which what will next locations we're in we're also Toronto, is new storage new be up Montreal, already and and up here and doing just which is

any through don't us Now have customer on there. commitments specific Halifax, give to we volumes

the and will to have that is business. which know new build attract there, We service, up already our we

customer the great of the over weeks, X more there. and that So we with that's base service have see we did because the expect already last of to success

David Vernon

sort XXXX or from would volume or in confidence -- [indiscernible] Anything of give that you services schedules vessel

Doug MacDonald

Sorry, you're David, up. breaking

David Vernon

if wondering vessel I commitments lines Sorry. from in calls. XXXX on any the was there steamship of terms were just

Doug MacDonald

No, have we of for as yet. numbers don't commitments any solid yet

Operator

from comes Markets. Poirier question Desjardins Benoit next Capital from Our

Benoit Poirier

plan, with on now, impact oxide the long which adverse on to My potential [Foreign Toronto respect in any comments for reducing granted fert? nitrous question term any Tracy, focused emission fertilizer, wondering that? government Language] has climate just on the

Tracy Robinson

I'm that that But fertilizers [Foreign forecasts we've one Doug. some and to me first, turn got Language] to for say going pretty grain. strong let

Doug, Canadian of do our economy. we unique want comment to it's you forward, benefits As specifics? look on But of the one the

Doug MacDonald

Benoit. Sure,

a actually throughout spring, fall just specifically, fertilizer all a year. So the listen, We're so volumes actually the wet the we saw had lower expecting next around market, we in half. actually shipment pattern there some first into and fairly normal

want for half and to about in see as that continues seeing you so If market right domestic well. the strong But the a second obviously suffered the fertilizers, we're be very potash, same offshore, it pick as up very a talk the to board. specifically the strong market market across we

Benoit Poirier

Okay. And what about the XXXX? Doug, by to wondering impact term? longer the by target, potential just XX% any I'm reduction reduce see the deferred you about whether here, desire

Tracy Robinson

Benoit. that one, take I'll

great is done something that this has So this organization a job on.

our right have We the now from is course, in fuel which of we're locomotives. right of the emissions, targets place, the -- come starting those Most on efficiency. our

I think, best railroad a have we And continue improvement be, we laid the I see, So tremendous -- in the a efficiency Rob think, out year-over-year, which is to fuel sector a perspective. X% in from fuel improvement. efficiency

Phase X. that's So

a developed. out pleased a that the towards our And we more we're team what Beyond is little lay bit that, the with with of piece. X plan have progress plan the and that forward. team pretty has that I'm the do target scientific-based we that take that to us that's place in has to will go on But investments going a Stage as made

Operator

Next Mehrotra from Bank. question Amit from Deutsche comes

Amit Mehrotra

I just EPS laying, XX% the guidance, to year. If at up year-over-year. guidance is look EPS for the understand Just half, first wanted this the I adjusted

half to power your earnings implies second the quarter. you in step So in I second get guess to the guidance, relative in it what a did year full down to

as about Ed company If an then, the him team some did just results wondering And talk his scope that? bring you CN believe decide Tracy, and you can bringing that occurred as the of if you has work operational could since Harris brought consultant. address of I why the I in maybe is think I well. and -- just at the him with share that, to

Ghislain Houle

Yes.

So I on Maybe you, thanks, it then Amit. pass Tracy can start to back. and

an I talked half what talked standpoint, operating year of the in a yes, second and Doug we volume you heard from standpoint. about a little of from can do revenue listen, bit what Rob then about mean, So and the

when guidance all XX%. we reaffirming again, that you with, math, our So do of of XX% come to in

you here, what we purposely right guys $X.XX. we in up exchange, big numbers. exchange if like can how of and down foreign fuel. -- as you foreign look number assuming at are or The I understand today, is the those and intentionally a we Fuel $X.XX. said well, on what's now quite current you think, as we is it to significantly. our spot assumptions get Now laid And $X.XX going to to happen And out help is see

lots there's parts. So moving of

that have think we're couple railroad then last the a of you interruptions we did back And get the of the remember, when to year, well. the service as north. end I of year,

get we sometimes quite early. winter on hit So

you our put and reaffirming feel with when of that we starts of all in, comfortable again, with guidance these a XX% an XX% X. OR So with to

started So little if much bit XX. from QX, you we this tees quarter remember, a back better on in We the XX. did that on

always on on Tracy. to seasonality from we're And turn to top because line. operations. our going on push maybe it expenses over the And a our continue this, standpoint, QX that better QX. than expected and is I'll We to and you,

Tracy Robinson

we things just laid range spoke to scenarios But we let make with control, year, I assumptions quarter. And and lot expectations And the our year for me made that When working considered the put optimistic. certain. of the in and at do you what's what we of in the we're were that think on quick a now. them number today kind we There's remainder on Ghis. building of out I of year, look we've hard not last a those and and that. we're came get don't on comment looking that a a a left, of front Thanks, particularly guidance just ready positive, whole the to as we about there's that's lot you We're of coming. to yet

guidance based coming. we're doing. comfortable with We're we we and now what So on see how we're sit comfortable our confirming with and where

we're where us we have going. question, the advice, second -- your and are a that as quickly intense there pretty getting we're to as people As on we on can. property giving few

arrangement, Harris focus one is in if Ed the you is, to you on Ed you've And speak what those Rob's asked best maybe as And to purposes. so of do. say, for largely consulting Rob

RobReilly

obviously a the board Ed great Amit. team. knowledge. sounding experience fortunate have to He great brings Yes, and Very for as

our really goal Our facet of about improving cetera. et every marketing, operations, is it's business, whether finance,

that So improve, with continues help when in it. have people opportunities -- can we help continually we and bring us do to that

appreciate about. operation and the end, is expect a efficient our in the customers and what where continually is question. is goes. what really that's it's running the results, operations driving I really need. field about Our credit And safe, the the will and In team the service that meets the that's

Operator

Fadi question comes next from BMO. Our Chamoun from

Fadi Chamoun

maybe I'll well. do X on X as

on really on the main my talked in to business. you Tracy, well. that pricing on are opportunity question pricing what In you side, the terms inning So kind some about of business? revisit ROIC you the And revisiting of pricing the of on as say would the

move top kind industry? in of of around up of to happening that to about the in of of Do that talk of kind CN the and teens. you years peers top-tier the scope the kind at dialogue in ROIC a your ROIC, bring back we've of back performance the past The mid-teens see tier industry. You have into couple seen next been high few in kind of bringing the kind to

Tracy Robinson

the And Thanks for Fadi. the let question, me first listen, one. with start

our being of network the we business about where just call So pricing we business, the not understanding of about about intentional have or book our as curating and operating and capacity. we think plan what book it's

more we our as demand adjustments and book than term there the to Doug cases, operate talk at that. team all effectively that where that. have capacity sells got in deliver drive for well. we we long-term, We make ensure earnings into or drive and operating we've it's Where appropriate can't more it's heard capacity, customers, pays that this, or you short efficiency want about and whether we Doug's we have available price. So a And through

get on So into cleaned we'll put going team bottom quarter. a that this velocity shoulder And some that to our this up. isn't is clean but and up We're hard the I the we're really they mean, think -- what do service, what being this but -- sit as network, well we has something to growth. that. continue right I of drive to need the putting line intentional, right And right

delivering There really see But comes say over out what lay for forward you'll to and an to it turn on, think But really us. you Day that for right what Investor to So year. just anything When I'll as we're go focused opportunities, you this add then longer we're generally us what to term we'll do for look when we that that? we the goals do and And be always to this. get be spring you to of out it's holds something focused will to continue together kind now ROIC, that the I expect well. we about it at on next forward I'll talking Ghis, our we Ghis. is laid want as

Ghislain Houle

covered you think well. I it

hit that would we've an ROIC XX% that guided I of this we think year.

I will we already when that. our these Day in think more time provide that we've think of that on some some longer-term from May. very for -- confident we measures standpoint visibility a that the were I always have we we'll Analyst said hit And that shooting on we're

on more we'll time. visibility provide of these at So that metrics some

Operator

Evercore. Our next question comes Chappell from John from

John Chappell

back network think green can focusing the metrics operations last double days, a shows freight Tracy, in to deeper it the a half focus even the of of alignment. the your network, a outlook operational year, of the for little I Doug XX the arrows metrics, And in the dig definitely service that and wanted the has to you've all over taken lot the that positioning pushing network? little solve to really that you When really about looking that XX. the you're in them at leaning bit Slide some and and are the more that on you of gives and line a from lean to then into you comfort the what service the for growth, top on

Tracy Robinson

question. Thanks for that

of kind meet shorter term. into term the longer getting You're the where

a pretty of clear we our So fall. book looks what like this business of have for view

Rob well, we of we're the way and that when what have that capacity to the more identify is we Where medium bottom top delivers term do to of like customers, have different making as well that for whatever growth that, it so the with our drive full. sure to the can the we'll got to it our growth done look we whether opportunities, that be which last importantly, doing manage opportunities parts be means And short, is West that that or the going to opportunities do to network they is fill we a team if capacity, more Doug of the part most of we've the But quarter, we're other in Where in and long drives on. -- focus network, we line. have line.

going those to the So other. way you're each to us that's same X time see connected working a in at

of on So right the second half volume now, this making that's big us move we year. in that what that we're the the to is focused sure way coming

Operator

from Group Scott Wolfe from comes question next Our Research.

Scott Group

operating maybe back earnings worse. the right, the would be to moving here. volumes implies any to of So OR there there second Is feel Is guidance the this But may there but And earnings better you Ghislain, great. than a a ratio guidance. any help better is confusing. just about? Or there want second the that -- some more at a be if understand guidance, piece I little and right? it we're share? are any it's to little I that looking quarter, half Is the there's color parts or potentially come more

Ghislain Houle

don't provide guidance either typically Listen, half the do away annual from of run or we -- We we Scott, providing guidance. quarterly year guidance.

under think it of the Tracy and ran at scenarios I'll we lot Doug that I and I team, leave and different with that. -- think a

We guidance. And said, that. assumptions our intentionally are I out at guys. you to We've, out our help it to there leave put comfortable reaffirm as I'll

Operator

Our next from question comes RBC from Markets. Capital Walter Spracklin

Walter Spracklin

as the that I mentioned with if second that's led XXX,XXX the TEUs know, the Deltaport clarify one led to just mean that? running clogging or are on you increase the increase or worried norm. How and a Are potential But now capacity? comfortable you indicated and clarification increases. added been the that just go your LA at as seeing West you're has much that's handling at Wallace -- Eric train I any that's up as you head. now Are on there? further to in know Coast, from could above main might Long a at XX% disruption that to Does Beach disruption you you disruption XX% in question Halifax. XXX,XXX, potential about happening past labor just Any my disruption? has Long visibility that's it wanted that its layer be I seeing when Beach, increase. labor LA Long historically, you Doug, whether as in labor reared the of type is volume

Doug MacDonald

Okay.

thanks for the Walter, So questions.

a through little the by out. rest lot So running shorter than well. full Eastern at that of also we're the picking to today a Halifax, bit time of freight it's running we're And -- as operation, train yes, Moncton full train starting running it's up but leased, is train It's for as it listen, a in our size.

full combined a been start out train train, a a really it. -- to it's got in as And end, going do with full day successful it's and -- working so and intermodal out the to can't well. X, train. starts try to it's been but we're we've we very that So which and somewhere, We and but it grow

seen come up the right. lot strike in potentials U.S. Coast, West On There's for a talk we haven't port the absolutely of anything yet. you're Coast Listen, north a been about West

are kind -- right about us And anyone had it. haven't we now, of already. the We are to Canada full in terminals talk

working we September for And available when in it really them, but we of to potential, really depends those so some need have kicks we're because on would won't There volume? take chain. bringing is end the grain to they're extra fluid. before do it. any do supply the down capacity some So numbers we then on it Could

Operator

question next from Oglenski Barclays. Our from Brandon comes

Brandon Oglenski

would if I in point physical this And about to Doug, a that's is limitation Like the Toronto to follow-up. more a environment, think, guess similar response And I of Is positions if your that a that can weakness these don't permanent you signs or still terminals? and a on softening sneak Montreal, there I correct. if storage today broadly, a your solution? in are I portfolio solution guess temporary you metering economic more -- question, in into any mind? talked

Doug MacDonald

Okay.

So metering, and more the went June else it July. for the on anything in of has than half first really

new the a what in solution in put to to we Toronto terminals. vacate week, us is last and allowing do So that's

there and there place was the So because that issue we we to wasn't pick them. one would did no some take and boxes the capacity. were all Toronto, Montreal The have plus -- enough warehouses would any up in full would wasn't -- them arrive grade

created So a to Toronto ability that and drayage now the store we've partnership boxes. service its in has own

So helped Toronto. in that's really us out

really be starts speed to So up at With to and Montreal and to full through freight respect there. help our already. out we'll started already same running extra the next we're ports. running there back Coast improve actually some the solution Toronto But position Montreal, West has in week,

speed, expect of if and not how running all that's that's see August higher. So at to we full working,

to have all no we of we'll any seen guidance keep until of Now the in giving our markets, -- some differently. that respect customers us and our weakness with at tell

Operator

from Our next James. question comes Raymond from Steven Hansen

Steven Hansen

your in commentary movements by-rail crude opportunistic some the referenced for You period.

of through to as how the of Canadian the back see of the half kind the curious interplay and what it might arrival with business year crop? that of you longevity grain Just

Doug MacDonald

it. we around Steve, So actually really plan

talk it larger been it. the and the from Coast, So into Alberta really, it customer customers through month. month It's me Rob who month, it by has as we've every taking moving and to Gulf market down And go the well. the we do opportunity about it's with X

finish say, will it, actually rest we I'll -- through of QX. the through rest probably the we'll partially to and So and we've QX, it in take -- -- agreed of finish

be the fully we that are at crude take we the for table September, of we starts grain and at end when expect capacity off point. the and that So the will planning to using it,

Operator

Ravi from Shanker from comes question Stanley. next Morgan Our

Ravi Shanker

meaningful guys like well, poor on quick shift A Asia. and in Again, doesn't based it how Halifax. sounds time sound a North impacting on it, coming your over it to America expect partners as you volumes excited you sound question from in like about near-shoring customers guys and

you what do strike what quick great. follow-up, that just that Ghislain, think in with the impact unpack be would time, a as And over quantify did the So you if sorry, I'm can was you happens quarter?

Doug MacDonald

Okay.

off. I'll start So

just of as to to with production we're West volume -- Asia easily coming for seeing sourcing. East Coast. the no, lots So Coast, coming Southeast shift for to Halifax, over in And that's as the and go

Coast. take place that's attract So the I to focus ports business. the East is But to more diversion really, positioned to East put has Coast it, that on into all we're been. Halifax service working think customers in seeing the are with the And the And the what and of do we're greatly to seeing that. we that. had

and near little of or into impact but yet. Ghislain? that come volumes a seen will that, haven't near lot North nowhere a We a it, bit next. for of we've this anything shoring talk, of lot year seen the There's America

Ghislain Houle

Ravi. -- the on Maybe Yes. thanks,

in blip Tom days. And would railroad impact that the the I to -- team zero Rob's zero. thank were I were running I unionized XX under without for say On and these was strike say, strike leadership any Hillier's to leadership the quarter. management folks minimal that impact, XXX our would again, on want kept the

as all safely the and want a really the to I I flawlessly keeping, that in second So running team quarter. railroad job wonderful that said, thank did

Operator

Our comes UBS. Tom question next from from Wadewitz

Tom Wadewitz

Yes.

to been consumer, Revenue -- component? then in softness per on XQ intermodal I so big that And and intermodal. into a is the think, sense I'm I kind some of any another intermodal the slowness And might that intermodal guess we when XQ? even recently in points to on concern up, risk be a might a revenue potentially guess, Do look the revenue you side. in side. meaningful that storage international piece look Obviously, news I XX%, you you of pretty while. for piece intermodal was piece per guessing fees. a a see the increase kind XXXX? on some how at kind give So maybe that's of Can of a question a per in piece Walmart in just to Or And

Doug MacDonald

Okay.

so of guidance that. give those revenue we so unit, a lot on Tom, on There's there. the in per So really mix don't numbers,

really, So is on done we've our we've continued pricing seen taking action what renewals. contract also progression with

So we've we'll that. seen see to continue and that,

things in of the we're terminals are the We continue storage one to the see charges. seeing like and

go chain will that's big supply a Those away to part regulates. the start So of as it.

the lots that to rest lockdown, in drop happens, effect expecting volumes this coming don't of year at to when least. to go supply of but off, we We chain bullet know. see as charges a trying not still volumes continue for of in, see normalized storage a see we're those the Now

say, now, may us, they're Now right this softness and not demand supply the international, chain. a come on seeing because that's side telling but here some we're seeing month, customers consumer full on be some dips but please issues we month, there, of to the more and in. expect boat the the the soft next of small We're load it's just demand -- around anything

running planning we're to what doing. the us. right based keep on it's customers are now, we're what So And telling

Operator

Our next Ari Rosa from from question Suisse. comes Credit

Ari Rosa

risks there's merger obviously, So we pending. ask big I this kind as heading wanted of into about to about think of kind XXXX,

to guys about goes network. goes about tri-coastal through? -- kind think conversations volume And I kind bit network, a as Any hear the CP-KCS that wanted or landscape? you mentioned that exposed I customers through. if that thinking perhaps of shift with erodes perhaps competitive That around little that? You the of any as if being uniqueness potential deal you're you in about of uniqueness to how obviously, the CN's deal are having there's think wanted is

Tracy Robinson

question. say would for Ari, that game, our we're it. that playing pretty on own we're focused I Thanks, and

We're say with. growth in that that of getting guys you see to operating is about its see. do. make can choices have talk there. railroad about this at compete we're front keen some best, And us think to what when we the we we that place of we it's year this heard and that come. this tough more opportunities and the there's of of some early like of We next before You've that coming And pretty you the in showing we can pretty future the some

about So we're own playing pretty game. excited our

far we add growing front, the going try to anything working As positioned ensure business the we're and in are with do and mean, I that? their continues customers properly see customer always our want as for the I they that and to future, to you And case. way Doug, think the be to that

Doug MacDonald

Yes. Like to want evaluate markets our risk they go. we customers go, what and can constantly where with where and we

So work KCS CN's. the of with them. say all of not partner I'll is we interline a listen, big

products get our work low the So with the begin risk sure customers risk very we'll and whatever to is market. That's key but there they us make for is there with, thing. that can to their

Operator

from next question Stephens. Our from Long comes Justin

Justin Long

the you're the expecting in businesses? from non-rail contribution for the on color back strategic alternatives these any provide half could year? And the the you any businesses if wondering was on potential I update of

Tracy Robinson

Yes.

Justin, in of we've listen we of the modeling, the are offered. businesses now, just part for of those a they matter all guidance model, that and have

top in businesses, and those it's As in we or put of some at and their the would becoming competitive. their actually, they watching of nearer us. I'm of look to I segment increasingly what there bring becoming TransX kind the cool as math particular, kind at competitiveness efficient

that of contemplating where we into go we to is look year model in beyond. as we our remainder as something XXXX be that's the So longer the with term and go that and we'll

Operator

from Cowen. from next question comes Jason Our Seidl

Jason Seidl

how Tracy come there. come and into do a in think the more is to could that the people? might some to I going bit think other what other other that on wanted growth you of to call team, at from? you be just congrats ports In of try little quarter. growth Where risk for dive Halifax words, this

Doug MacDonald

from shift get to West ideally, good Well, to just say, that I'll Southeast timing as We Asia East right? with Canal -- we question, Coast, the Suez and through at fully canal it's to system there's So Coast think Jason, believe first, easy the come and, can cost a we perspective, the volumes there. over aimed, it's right?

can those markets markets reach that but we we service Chicago. are and those as Toronto So think a well There's Montreal, Detroit services great ones. the to, we key provide other key as in also

Jersey, is come if it will New York, in the optimal not There now come moving from to powder. Savannah, New potential other for even So terminals. it Baltimore, from an it's

is West move today. focus going So -- can't but our after Coast key business that Stock that

Operator

Our next comes Majors from question Susquehanna. from Bascome

Bascome Majors

the Can you U.S. as rail increase that So your respectively? with some how Cs actual XXXX U.S. with were true it subsidiary uncertainty is communicate to is there's accruals? uncertainty forward. about union wages to be actual from a up and bit what carriers, bargain little than do managed to going your that when talk if wage your retroactively expectation, and And you us, come in different that to

Ghislain Houle

Rob jump then and in, you if start to. can I can So want

there's anything accrued But that mediation back-end the we tell So appropriate. this in at change when if would will I that -- it's that potential we that Rob, is happens. these completed, or wages completed you want change that then yes, what appropriate. a we point believe accruals negotiation on? and accrued you have have U.S., are when we believe for so the add And the to we make from from it, and

RobReilly

it. answered you think I No,

moving on look we and thing the pressures U.S. in we understanding as they from Just as standpoint, and this real forward the our understand inflationary done and forward. getting workers And an all do in the rail certainly settled of all much workers are

nothing So further.

Bascome Majors

labor how Union agreement? Is expense way your much there any of size to related is to up us U.S. help

Ghislain Houle

in going mediation that U.S. in go as the obviously. all I railroads Well, -- we're detail, to not we the into as speak. said, are And the

not detail to the Rob's sitting We're let think So forward done forward. play get we're -- we're out. going it going part this table. we're to the move at to And point, looking I that of and give we're and to

Operator

Partners. Vertical question from will Jeff Kauffman from last Our come Research

Jeff Kauffman

more here. strategic question top-down a Just on

I think It kind at the XXX be you Rob end attention the since looks head how did a I on you employees, improved And great your of approaching fluidity. year. flattish job count. and you more could I brought about like the to paid year-end. yards last toward headcount presentation, about was year-on-year talking mentioned think, looking of you

we older we and different? As adding others? I'm trying beefed-up big versus X,XXX employee changed. of was a of Have areas distribution understand in strategically how have employees younger cut how and there Did some labor we organization, employees? the look bring count about at to workforce and is I operations then the the call in people how has back, we're understand changed. the

Tracy Robinson

start question. detail. that to going to Rob give to it little thanks and over for Jeff, the on give a then to you I'm I'm going more

largely in the the and office employees. center year, to cuts protected our made were was the we on that or was not workforce a on running trades great management trains. focused that It that effort focused when reductions operates last head make anyone were So made who made on we on sure capability. that The

as note. I'm And that's the to in one changing that how it's hand over And important Rob, to you. so to far as going field,

RobReilly

for ended QX, the where Yes. it. year. crop really attrition. for Really, really of in what seen hiring. terms rest flat conductor volume; you've and surge really been grain departments and The this for in That's for normalized pretty here stayed you've in that's we One, of hire they And the X the where secondly, have that's things. And seen for. preparing we've

Tracy Robinson

a hanging the quarter. off Thank for your all happy Paul's be for you We've team a deep your doing for been to great will same second with quarter. the into pretty around for are We're bit questions. Okay. start and and afternoon. interest this little this

you out you reach of him. great Thank know know day. to questions, some all additional you, you I to have If a and have how

Operator

The conference call for you has now ended. Thank participation. your

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