Canadian National Railway (CNI) 25 Oct 222022 Q3 Earnings call transcript

Company Profile

Participants

Paul Butcher	Vice President of Investor Relations
Tracy Robinson	President & Chief Executive Officer
Rob Reilly	Chief Operating Officer
Doug MacDonald	Chief Marketing Officer
Ghislain Houle	Chief Financial Officer
Ken Hoexter	Bank of America
David Vernon	Bernstein
Konark Gupta	Scotiabank
Chris Wetherbee	Citi
Cherilyn Radbourne	TD Securities
Fadi Chamoun	BMO
Brian Ossenbeck	JPMorgan
Benoit Poirier	Desjardins Capital Markets
Amit Mehrotra	Deutsche Bank
Scott Group	Wolfe Research
Walter Spracklin	RBC Capital Markets
Tom Wadewitz	UBS
Steven Hansen	Raymond James
Jon Chappell	Evercore
Ari Rosa	Credit Suisse
Brandon Oglenski	Barclays
Justin Long	Stephens
Ravi Shanker	Morgan Stanley
Jeff Kauffman	Vertical Research Partners

Call transcript

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Operator

Good afternoon. My name is Abby, and I will be your operator today. Welcome to Canadian National Railway’s Third Quarter 2022 Financial and Operating Results Conference Call. All participants are now in listen-only mode. After the speakers’ remarks, there will be a question-and-answer session.

that limit ask question. to we which you yourself kindly one During would the of Vice turn like Investor over I to Butcher, call now to Paul Relations. President and Ladies Mr. gentlemen, Butcher.

Paul Butcher

for afternoon, results financial call. Good beaucoup, quarter conference Merci us CN’s third joining and Abby. for thank everyone, XXXX you

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

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

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

Tracy Robinson

I'm be some I year. very Merci, joining. webcast, Paul. with on to today appreciate or call. us all Welcome start with pleased you're we CN Language] will with today, phone the by [Foreign our to you here comments whether you

focus through our a network assets out the to our we We about and of our that on quickly. consistency winter. we our our interactions that our to improve X, going this partners. to this started declared the service difficult and a moving the be last the our operations and with focus six we and of this Now going months. are am results we into year, provide with on plan. were and to when And earlier We of fall this they I April we very book into operation over strengths intended we're supply how were that tell efforts time sold operating this we that We building into and scheduled this at the program to pleased said chain leaned that coming you progressively team can't the the lean more business of customers and our intentional I joined producing. and of ensure team of I

service see you and it across see financial and it our in can You metrics our operating can results.

demonstrate the and was our doing team program driving this positive that. line, some great forward. this We're that and This done has growth to just Our line bottom discipline finished drive intent the we have momentum. in to start yet, great but top a will a we're of not job

to expectations deliver came be adjusting can guidance how proud of all and of result what excited single is And member And increase every flow of create. a result this produce about growth earlier of of this to about plan. up billion. $X year. as from what billion $X.X We expect year an our even team results cash leaning XX% comes approximately previous year. free together, to this expect and XX% I'm we're billion, as working I'm this a to as into more $X.X to from this Now our we the a of expected we EPS we're winter, our from of now in we of we XX% work, up of this out

Now the third quarter.

results before I about QX the us. of on quarter positive with see up the put when turned in has the year quarter will Volumes me and surcharge points Rob, through to details and the Ghislain record few basis. revenues, we lower combined Doug us RTM Canadian our we do, just a the just just pricing this for quarter, what this go key and on a But performance. let performance they And spoke delivered Our X% and highlight fuel dollar, solid month. revenue. in balance deliver the position a

on will While details of our part through you line continue western some on provide certain on fourth the and top quarter, Doug the busy performance. seeing to we're very signs in softness will with be the of we early volumes markets, particularly network. our

We discipline from to an continue close time nearly the our origin to at on to running We're optimal. make good and probably of XX% progress plans. perspective, in running QX

basis, of able QX, in were very provide as Our with finally, the best was day safety. quarter and you are Rob on well. quarterly in line few will car you up driving XXX in velocity the quarter, XX.X%. with is third which volumes EPS to miles Ghislain since And important insights an per we to the a XX% performance. provide movements record deliver some velocity a representing car that adjusted will the the side on operating on $X.XX, an and bottom of grew XXXX. as we more key that operating elements ratio

I further when that the leaned team. assess a I'm has made So announce a that on as today and on role move team, very delivered we very note, who our into plan. our strong to Congratulations And we'll Marketing as plan. MacDonald, was to Doug, this to officially Rob. pleased into the XX Chief been I we very continue with on I mentioned And good into now pass with joined me earlier Marketing team basis, the Doug would that I team, assess that Chief on it our our starting launching Officer. by quarter year, Officer let interim an to stepped

Rob Reilly

line to to to opportunity outstanding on that worked acknowledge clock to thanks team team I operating the Doug. delivering take another And after also service an of week's products Alberta quarter in on the our and rely in our congrats to market. engineering bridge customers was heavily their restore efforts customers Thank rail time a branch to where The a you, fire. the Northern ship excellent to Tracy, an of over just area around back want results. service in returned for

quarter demonstrated third the The we in to plan of the power adhering place. put

to we've leave since As laid ensuring out second in last trains early focused we running on plan, on schedule. quarter, quarter the the been

Our from last origin at to up continued XX% performance this has quarter, yards train year. key XX% upward, reaching trend

better seen daily average on like and cruise, quarter we've reaching also and are resulted year. utilization re-crews trains where resources Our versus destination schedule. of by respectively XX% deadheads same declined last the in This XX%,

more consistency. We speed are the cars with moving across and network

these of quarter grain best This this third which QX XXX same performance was per since last season GTMs is average improvement despite and XX% over Our that of we day, a now, is velocity quarter in swing achieved what full weekly the miles period. we've handling off the Also year. while car with XXXX, X% third we're to over and amount maintaining more we've results weeks railroad. a two largest I'm achieved most a of that very is safe moved an grain good proud delivering What start, ago just operating recording as outstanding achieved -- ever well. we've record all-time the of September for second Canadian

their his currently We in with freight network, X,XXX and our our live and third is of decisions. in XX% versus training. Both and have operating in we year. XX accident our injury safety Poland results committed accommodate which eight, now an XXX environment to informs Our meet XXX service by to year. be are and XX% representing quarter. so have operate. fleet locomotives to acquired to team, QX are the far the will been resources serve, company's up year On Approximately box versus on slide improved XXX And this cars we network. These are of safety of we now with our XXXX. cars streaks XXXX railcar in additional in where we rate next grain qualified Doug customers' the they XXX of and improved in employees, foundation the us end remain XXXX, longest and prepared year days uncompromising commitment to add come last has we our laid last year nearly which excess a days to We've been vision and injury. so to place help next the out we we adding since quarter isn't the high-capacity health this an since We've added of the the the XX All our with our fatality across more needs conductors and coming alignment ratio there in customers the the It's in communities serious that and understand fourth hopper opportunities. history. solid the XXX an have early commercial this additional capacity have growth and

which railway track have to year, Canada, finally, taking during capabilities with impacts the out And our when we at actions our periods in new this Western support particularly sidings capacity in of and are sections fall We with winter. that continued investments operation and we double service to levels. operate to the resiliency plan, normal are winter sets the our XXXX-XXXX and ability our enhance released winter improve this

it preparations will over its impacts. Doug help to color provide the provide now will our While on to Doug? winter marketing I'll pass its some mitigate side. challenges,

Doug MacDonald

lean deliver My and the as Thank another we our team to for the quarter. closely for into you, to customers. team to Rob. stellar Congratulations operating this plan operations operating with organization work you continues

fuel pricing of and of RTMs by the the saw to expectations and markets record number quick business QX major resources XXXX, very Let solid both how deploy traffic. to delivered increase performance customers solid together driven as uptick also a operations new the Canadian as our our up team, in growth in We lower surge the dollar September with in coming QX field. minutes X% rapid the a We of came XX% year. for are the me starting segments. speak the and over in to efficiently -- revenues topline the take key when well balance We surcharge, a revenue of across Higher a in in grain a off started whole $X.X few Canadian commercial impressed our all quarter. were in highlight contributed billion, to attributed meet harvest to gains,

year's Canadian year, confident Canadian that laid have year, resources year. we earlier out in strength quarter plan continues strong grain products, to Chemicals volumes of our we're this in and crop the we as continued the lower next the programs, performance refined capacity filled higher volumes As grain volumes of its in the expect propane crude to third strong some well export into earlier green with this see Petroleum due in the oil quarter. move crop sustained our over available we to and we

demand Our through Forest strong the car segments Products Metals as and empty supply. persisted above quarter remained

front, overall we a or XX% Intermodal in Halifax were good XX,XXX volumes Halifax On flat, in the daily volumes up get continue but train containers as QX. traction with were our second to

inflation continue contracts up renewal. We pricing for come as an to achieve plus

Turning to slide XX.

We Canadian continue QX. in assume be moving the to a of RTM uptick feature year, for growth crop. which on single-digit volumes new continue to the low grain as implies execute we will QX strong the volume

looks strong. on water US levels into in came change very US River strong crop and the grain recent in the CN in The QX, now lines in XXXX. the Mississippi QX With very

of are positive from segments. We number a seeing demand other

thermal expect to both being continue months. the solid months remaining the Western demand strong to to We XXXX coal US remains and well XX shift for With the that strong, for manufacturers into is backlog automotive coal as and are into of coal. told X and year, we balance Canadian prices, metallurgical demand remain

up We backlog terminal the West now some their strike. be the coal will back moving following and running shore of also that coal is

other are some signs hand, softness. the On of we seeing market

International of are sort downtime We inventory feet dropped roll mills are itself for taking out. chain the from elevated to remained have as to Lumber high per about $X,XXX adjust demand prices and some supply earlier board $XXX levels year, in off continues seeing intermodal X,XXX to inventory. the a and

with We are demand to seeing due some flattening in the impact economy chemicals, slowing.

export the down we refined for driving are fuels are people trucks less. domestic and coming While expect propane demand, another strong season as and

provides and let on over three-coast more program. expansive industry-leading we increased CN's Ghislain, with from proud domestic volumes benefit reach click range America, Norfolk Canada, of it EMP the coast-to-coast. of States and With intermodal it a a markets exclusive and expanded origins double on position EMP for CN future Pacific the will X,XXX recent Ghislain. and years pass continue to program to or scheduled in Equipment intermodal program network incremental numerous next provide The represent from our for in CN's North in providing destinations I on the domestic that, Program could this due double-stack will seamless announcement to cities EMP approximately ourselves broadening our containers. and I coverage Canadian interline in Before containers in to our EMP the on growth. service all CN Management the Mexico. North within over shippers program service The an from fleet segment. our access announce partnership invest time is and all, is shippers North to to effective throughout will X. chassis in October Southern intermodal opportunity Union than America. three EMP America, service major major throughout and United extensive flexibility XX,XXX invest offering all pass and In services believe we X% will me for

Ghislain Houle

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

our versus in driven and with agreement by on more US. accrual merger, the excludes I Labor the XXXX. received third adjusted a provide in tentative expense over speak the will the million $XX a to quarter, details quarter fee which million with you $XX quarter last for numbers, the up the me was of reached termination incremental year, Let in unions wage

basis on Going forward, this expense the we agreement. will of adjust our labor tentative

to fuel Our in high the XX% up XXXX. relative expense prices remain adjusted quarter FX was as fuel of QX

does record. effective an this a from billion fuel deals have on surcharge In seen benefited year. quarter, QX, fuel that favorable we've fuel some lag an operating in we versus with noise basis, income We $X.X create surcharge a last it which in fluctuations but program We up that of short-term. XX% delivered price adjusted the the year, quarterly over is

same nearly quality have September. than for end ratio which last repurchase of for year, end $XXX to operating X, operating basis earnings. Under in QX $X.XX $X.X points XX billion flow Diluted our and the January This $XXX February QX, ratio XX% was as was period mainly the from basis increase million up EPS year, also We from higher current came next due XX.X%, nearly year. XXst million last generated through free in Our the over over $X.X repurchased brings billion free quarter of billion, XXX XXXX which $X.X million adjusted cash year of last runs to adjusted cash at flow of up represents lower nearly the at record. for the a year-to-date we versus on of an through an share September. our program, shares of

to average a assumes single-digit per dollar now that US$XX price Canadian the around a of top operating Moving expect the to a billion. for of five following $X.X grain started and to This our a XX, in perspective, barrel be in assume an QX, to flow XX% that year. From QX, and outlook and led all-time RTMs five September. cash crop ROIC growth strong three growth average be that the value Canadian in up approximately will we approximately move starts ratio raising XXXX, year. for the will performance to adjusted strong with currency $X.XX on free We approximately continue expect quarters the after US now WTI volume We an low we volume still be and range solid expect for in EPS and are by the approximately year. XX% in expectations XXXX page financial of the in

disruptions Canadian a in not on let major Volume are in In the points. few of strong, balance expectations driven grain and we any modeling conclusion, We reiterate me by disciplined pricing. remain the remained year. service QX

strong potash on and a a impacted with fluctuations and have as scheduled economic by a and including coal focus and run a that fluid franchise, bulk network backlog velocity. We to less grain, we lumber of The traffic. continue car railroad well is current automotive is running

are We the sure of making monitoring our control expenses. closely we inflation that on impact costs, our

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

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

Tracy Robinson

Thanks, team. solid delivered They've Ghislain. I'm performance pretty proud in of QX. another this

driving We we have the end what we'll team do. at forward deliver volume have to that, to remain we we we strong that we're And know our comfortable of value the We're railroad EPS and plan, every doing I'm top busy we're we and to we said a that year questions. on to growth on the will shareholders. an with way bottom level organization, This since a to and QX, to deliver our upgraded look our momentum heading to guidance growth the your employees running our from customers, into of committed XXXX, and would the line, line Session integrated Question-and-Answer delivering XX% of perspective. is and

Operator

you. Thank

will America. ahead. Hoexter first the question instructions] comes of go question-and-answer from now The from begin [Operator Please Ken We session Bank

Ken Hoexter

I -- then move Rob we is the guess, of great kind and oil. throughout We afternoon and grain use team. really you capacity spare a few Tracy, crop to some of -- the together. back. coming see kind and to capacity job, conversation, on come Tracy mentioned Good and and Doug Great congrats the Hi. times a

a kind on expectations, maybe government you capacity. terms given about focus in being balance the of So of able talk available bit meet here the see particularly to

With there areas some or the a or could need you we to catch is if than see see certain where we up CapEx stay on CapEx need to up catch stronger congestion expect?

Tracy Robinson

an Ken. a have look and it's consistently operations what's scheduled the you capacity we've you we have question. you good network. points important and organization where and the one so do his of sell to -- in into sold the we you And deliver Thanks, that at get us as pretty have. of to don't allowing don't And can into capacity scheduled railroad, sure is leaned where and customers. that and Doug the worst focus our making the you that's properly capacity The that thing It's

we're level up as capacity. of to next frees the as railroad So velocity well, continues the running our that improve, existing

swing some the our be economic on terminals we glitches an be order visibility the need our it supply supply at in in facilities We more the to they forward, response shippers other. respond communicate capability to trucks, all of across And whether on whether that from way, effectively. in very basis. have anticipate to our We coordinate emergent to the its in to chain. us railroad, or things. and run, with in or -- through need coming of to to a in chain, a -- would volumes each to ability are of We supply what the the As to to look a volume, advance for have need need chain number entirety the we

only chain chain well. when the are pieces runs of all of the the So supply running supply

have that generally, as in invest collaboration the involved of customers very supply willing And to And the to growth, coming. with capacity table our conversations we of with sustainable our the are are into are all have chains growth in. over we and see customers. where eager we're step all So long-term we are that -- at takes we our in we're we investing customers. Those willing that

Ken Hoexter

thoughts. the for Thanks Great.

Operator

question David from Please next Your the go line of comes Bernstein. Vernon from ahead.

David Vernon

everybody. afternoon, Good

that in adding how of terms of comfortable should collective little little the into that of some number a going next for labor about outlook? US? are of of talk you more resources about little is in resourcing think a could in bit how And sort terms bit as the the team associated year XXXX? the the about Are or are training right of the the locomotives, Ghislain, accrual bargaining still what's the in in terms on we be developing pipeline, you to in cars, be balanced a So, demand we than we incremental you thinking now, incrementals terms margin the ahead of with

Ghislain Houle

David. agreement the of I my start, we then Yes. a an in on as But bit tentative have US opening I so said Rob, $XX in the can accrual, little accrual million. a resources. Thanks, you and jump wage terms can in for remarks, did of

third So that the was taken in quarter.

what do terms will rate need next run forward remove labor first look you to So for add it you look sense then be have for to the costs, like need the US, of when X% you in will of and I you a fourth and you of you half that year. to know, looks And of half the the think another what million. is that year. second next in quarter good as And $XX

as some of Rob think terms resources, In mentioned, locomotives. we are I getting

cars. We some are getting

to mean I have need think think that's we've to continue. to and margins. I said we will -- tight a do operation. need on key. think we But that I continue we And need the this, improve to before, I continue our to we it

our to assets, if at to improve velocity, that know, Rob, allow that margin, you So incremental a we costs. capacity, us don't create bring tight want line need have add resources. improve low sweat operation, will to I on and our on will top

Rob Reilly

standpoint, attrition hard hire of Yes, side, we'll from locations. to on David, our resource just have regarding needs manpower, some an still the

locations. From very it and for we we our adjust that. in can through the and a when really to drop, hiring question, Thanks proven and that. out we'll the in manner start when and So time those about continue we see over laying do cars taper hire plan, we're modulate quick to to Dave. of those see If resource we'll we've a volumes up, downturns, locomotives, to if terms that standpoint, good

David Vernon

you. Thank

Operator

ahead. comes next Scotiabank. Gupta the question go from from Your Please line Konark of

Konark Gupta

afternoon. Thanks time from first railroad. my you taking how and want I this Tracy, plan to really for congrats railroad And kind leading Good a Class happen do prepare a what's you you, is great ask do your perspective? scenario on How I don't to approach question, of for a scenario a potential to economic where that you going here? downturn know quarter.

Tracy Robinson

Happy. for and know Again, the that question hand it we're I'm on to to a it's -- talking all it's going going great to off, about your start a as I lot, Doug. well. and I'm minds over guys' us

railroad So managed economic this something this downs of ups is and going other through that time. and every railroad over various has

we a sense have pretty how of So things these good go.

details to business. it's pretty Doug a Not more on moment. is through environment. have sensitive the all note and to diverse that have ability, we some that And book go in We of recession of it can type a important a of

resources areas looking that respond. more closely. as our what's as we're we a positioning we those. forward, happening manner So very recession-sensitive those look are We're are to And watching in to on

think book is that As least be and up already by velocity efficient going of our keep big to to cars contract. not recession. -- international of to need our where we the a away we'll contract so need And We've but locomotives that Rob tuck the we park as started do to need We to a we chunk -- hit there's side, track them. we just in pretty quickly. have the starting record said, I

perspective? there's closely. expect organization where in some how to want Doug, have to comment it We're recession do what So, on this from we're watching around -- do seeing muscle pretty this. we did you a you

Doug MacDonald

Yes.

So, great question.

normally commodities would changed think mostly And hit Ukrainian that’s strictly the by be would major some recession, of the a that of because war.

Canada. example, see moving the an Same strong forward, we're economic an see don't thing coal. standpoint US what from any to impact and going grain we No matter in recession. from with as So, any

there. going mainly very on work to the is coal So, over also due strong,

some fertilizer other that strong. come and potash commodities with very So, like all

We going to nine expect the next three, see over six, months.

-- period months going out the one. strictly wait there to think going you'll Lumber, housing to sold lastly, above car, strong at even we to anything question. next automotive us starts. buy as to the be it's a because about least million is we well, still. so XX So, the not strong typical be trying very Thanks is expect fleet see your And our for of find Anyone to nine for out backlog. I the X.X

Konark Gupta

you. Thank

Operator

Your of question Wetherbee go from Citi. comes next Please Chris from line the ahead.

Chris Wetherbee

progressing of Yes, per carload how think We per wanted afternoon, whether into to get I surcharge XQ, the strong roughly XXXX? hey. a kind yield, early of this Great, in want to maybe you very But just get bit but revenue or obviously, think be thanks. about about yields. guys. about there, too, helpful. and a that I sense of sense little to also maybe an wanted a to RTM, about into it look of sense ask pricing very Good can in sort be quarter. Seems FX how like fuel talk maybe decelerate would sequentially.

Tracy Robinson

I it over hand that Doug. then and off, me Let Chris, to start

has dealing strong the needed And improve given to of we've And done have customer as pricing that's leaning some We and scheduled some we into opportunity deal that service. job that. the upfront. this then of a great truth environment. into to improved, demand. velocity kind of of with an with leaned issues Doug pretty kind operational great So, Those had us some are team

to inflation looking that to little a going But forward, team the that you discipline detail look Doug kind his continue. got on that. add pricing. Doug, plus you're at tell he's I'll -- we will As let of mandate see of put way you we're a

Doug MacDonald

thanks, So Tracy.

been and continue getting XXXX. in we've successful of throughout XXXX, all pricing we're that listen, very plus seeing right inflation into So,

And still to basis. a pricing. the question. Thanks plus So, we're providing, with we're We're honestly, think for settlement get on we the our with renewing customers. service that regular a able contracts inflation it's very fair

Operator

Please line The from from the TD Cherilyn ahead. Radbourne of Securities. comes next go question

Cherilyn Radbourne

very Good Thanks much. afternoon.

Rupert given could to you've temporarily recapture us to a Long As opportunity backhaul we you you potential at grain for to versus in height Beach share hoping vein, on more less that by got next more supply the to have access a good lost to L.A. was the Prince but crop. to I now that the network of traffic and balance, where year, that was speak look a you've ahead the large Vancouver congestion. visibility, related rundown arrange chain market And

Doug MacDonald

Thanks, Cherilyn, Doug. it's

question. great So,

at say, side. the still So you Prince out we're and on much sold very intermodal look I'll at today, and Rupert Halifax

And to great Vancouver that's now. Europe. news bit is slow a So right a little

the majority the softened is actually has Toronto US for So our of and Montreal us. into coming business somewhat business and

stuffing the in great what The little containers crop. moves So That's always having chain to a We're though to going markets, supply normal And quickly. Western at going we later Montreal now surplus than that to crop moving be the quickly. all been to obviously, has We're continue for very in come expect comes and move to containers Toronto to for up in into bit right grain the paces. inbound. decongests carload. back Prairies those start Those the those record as about are very great. containers,

end So of up we're the expecting there pick the volumes to by month.

Cherilyn Radbourne

Thank you.

Operator

line from comes question from go BMO. of the ahead. Please, next Fadi Chamoun The

Fadi Chamoun

Thank you. taking question. my Appreciate

of follow-ups. couple Just a

of just are the that kind out the of kind I just really, this What with any First, again, just gave. Doug, of inflation, you of to mentioned always going months the main always your of us now historically. pricing that on you about thinking the question some mean, approaching winter last kind things right Doug kind that winter differently coming -- time winter. have than coming of kind is, deal always momentum over how the last doing are differently perhaps kind you’re of I'm you're of wondering, out operational don't idea nine you've focus, an five you've for lose better. can to you comment cost think years? you're into inflation going ensure, network above operating in to I And from time, anchor give price you're how my of into learning And of challenging you been have XXXX, of winter

Tracy Robinson

Maybe, I'll start with that. Fadi, thanks.

going like around know experienced a this look material some what can know inflation do that isn't do lag -- year. Well, that cost bit question of year? the we've there's to like. what be inflation. We We to As next of a inflation our this look what there to is

the clear have We inflation in view of wage a US.

We are in collective – have bargaining commenced some Canada.

of So doubt, we it statement think is, a looking that very Doug will would going without be that. to whatever a price this what to be us make to and inflation be year. for But team above cost is early

And comments? the you then to any over So, plan. for Rob, winter Doug,

Doug MacDonald

for would the I index, as proxy as you fuel. any say is proxy Rob, all talk. a a AAR good all-inclusive use to It's the to use railways. good the just want less index, as to

Rob Reilly

a for always different We action we as lessons as far learn it. adding Every plan. go we're winter, things winter Fadi, we very preparing prepare learned. actually Yes, winter for and have robust those through, we it,

and yards time started ago some winterizing locomotives, prep the So those. in our winter

we've have XXX air of, We've than air going which we ready valves cars winter. done more into go. Our and to gaskets ever up is in a car replaced now and air fleet,

can. our As to we're really you are minus in know and winter. try to enemy we seamless And efforts air Thanks as the can it minus XX, as everything question, challenges, the will minus it gets when XX, that. Fadi. mitigate to and XX, make it for we We is know doing present

Operator

the Please next Brian line Ossenbeck Your go from question from comes JPMorgan. of ahead.

Brian Ossenbeck

stronger markets question. net on up about one starting talk any million or you not the will to the you for commodity types clarify of just for then volume impact Maybe can a that's think outlook Hey, show taking if for end specific year? next whether positive the for in And good Can Ghislain, evening. more just period be – $XX accrual, a Thanks adjustment. you Doug. and that the all that's prior

you if that. about Just wondered you. Thank share

Doug MacDonald

out of Brian I'm right the beginning, there? you so sure question cut at not the you the what part asked

Brian Ossenbeck

good, all on hear that's now, I was and on about And the if prior commodity end different million $XX me can can that impact clarify you what asking across lines. the the if your Okay. period. side, accrual what bad labor dollar US the Well, hopefully, markets, Ghislain and stronger was

Doug MacDonald

just a We all. no. got it Yes, missed US dollar We stronger part. Okay.

few us definitely balanced overall. in we it's honestly, probably – Ghislain? helps areas. no, also approach a US impact a But to don't we certain the It major a dollar stronger other us So in it. areas. have hurts And see

Ghislain Houle

Yes. And on the $XX million, Brian, it's all prior periods.

Brian Ossenbeck

right. All you. Thank

Ghislain Houle

Thanks.

Operator

Your next Please go comes line Capital from the question of Markets. Poirier Benoit ahead from Desjardins

Benoit Poirier

operating everyone the metrics. strong congrats a for afternoon, results good and Yes, strong and

XX.X% that to be approach still with beyond. OR of what results that actions to to an kind or improvement QX, in and that back-to-basic OR yield great could the initiatives going are yields XXXX with implemented further So

Tracy Robinson

way And time, it to going to that, mentioned, I'm are and the has -- delivering customers. I'll as really the scheduled then faster, Benoit, our hand better operation. all we’re We're better. happy we’re with Rob. leaned you metrics on I'm to our team the We're start into moving moving over

a there's also our make But together We we're all that taken properly. that happen. Now know to hard across this team we opportunity working whole have it of sure resourced more has the we that traction. making here bunch organization in know

able You that? heard make Investor on growth, and on and to work that service at that that comments to you talking the next some which all we're to of May about deliver Rob about drive want level speed you we that drive doing forward the do Rob, talk we're But to the ensure in we the looking to Day. we're

Rob Reilly

Hi, bet. Yes, you Benoit.

focusing for to going We're team So optimal. to improve to right consistent hubs. the There's that. on last the to first team There's then with working on a our XXX% intermodal work opportunities that always to to that. accept there's opportunities the time being more focused made. I closer progress We're about higher. we're keep always We'll We make Very be the room it. mile, on now. with has on continue to not going out want that And grain on pushing in get to going XX% Tracy know happy the mile. improvement. service even talked will there

the a is And for of middle we're delivering Thanks So them. our that's very Canadian the grain, focus for question. strong. in on

Benoit Poirier

very you Thank much.

Operator

Please question go Bank. of ahead. from next Amit Deutsche comes line Mehrotra from Your the

Amit Mehrotra

guys Can Amit Hey me? it’s Scott, hear here. you

Ghislain Houle

Yes, you. we can hear

Amit Mehrotra

about just time. I know I ask pretty happens to the winter -- much same wanted okay. around Okay,

maybe into the from sequential AAA And the use is balance wondering and investment in base just the I'm guidance? railroad thing decline of then opportunity that other company? credit not that's in And the So has AAA is Canadian there a fantastic. rating, earnings really of capacity remain the there's sheet to if reduce Thank share further to some to the implied solidly National to grade, company. which But an is anything read just important is capital the that only you.

Tracy Robinson

winter, looking the We're are going Amit there? to into we you, what question? just Okay. first clarify to ask Going at

Amit Mehrotra

implied but and was -- versus to improvements. are the to to get trying XQ an introduce and implies can volume takes what at the down earnings puts of what earnings basis, got improvements and understand I lower I earnings grain you've the XQ maybe winter more I growth in is I'm some risk, trying XQ? and just was understand absolute XQ, just mix XX% in on terms

Tracy Robinson

me this. Yes. let Well, say

of and events. at it. to at XX%, we from are to with is comfortable or quarter, any We -- haven't other and volumes on that weather looking ability outcomes significant the this a modeled from our pretty over landed and range operations deliver we impact a But any in fourth number

it's and slowdown or As potential for our great a have, far thing staring particularly as a capacity to sheet down recession. a our you're balance the there, right,

as We together in get spot and what capacity, we at planning when forward to sharing we'll the right strategic are part do with look our our we sweet with plans and on Day. of us, looking where is for that May you Investor

Amit Mehrotra

very Thank much. good. very That's you Okay.

Operator

comes Scott ahead. from go Please Research. Wolfe of from Your the question line Group next

Scott Group

Thanks.

that are about The -- announced ahead X% Wanted then me you a the timeline increases. of earlier. that And Canadian unmuted sustainable X% labor the going deals -- with wins the just ask have US? US Canada deal were two, or the much a between you on on spread last the guys the to that deals annual to seeing side, increases. in volume that's the small question. sorry in you you catch E&P operator bigger Obviously, to just about? we're think were And Do what do up a to deal talking that wage labor think the

Doug MacDonald

Thanks, the E&P. start It's off with Doug. I'll Scott.

every and to through It's adding them we're more we the ago. a while day, in. conversion take So a started to couple going work But weeks of system. more all our

I extremely the speed the we'll So up end it's by be fully think quarter. And well. going to of

next to give better able update So be much we'll a quarter.

Ghislain Houle

labor, of the for and And increase, on a an as both you're far we're in that done. come Scott, did X% getting to IBEW we and terms as pleased them with us right, agreement

not go Thanks, to very As and teams. far quick that We'll Scott. and negotiations, get our we prognosticate resolution. open and going it future certainly where a end as to I'm will into be up. And hopefully, with transparent

Operator

comes of go Jon line question next from Evercore ISI. from Your Chappell the ahead. Please

Tracy Robinson

Jon. there? are Operator, anything are getting not you from We

Paul Butcher

the next to on move Maybe one?

Operator

Yes, absolutely.

Capital next of from Your question RBC Markets. Spracklin comes from the line Walter

open. is line Your

Walter Spracklin

me? Thanks checking hear everyone Can just very operator. -- Can much, it.

Tracy Robinson

can. We

Walter Spracklin

and team. Okay. Tracy Awesome. Hi

areas to role, pointed you to So, on. Tracy, focus first when the that you took four key over wanted you

return what not think return business op want one the to of and business, get the sales still you you those do or to of inning wanted reprice better and -- curate growth. of better zero and curating book, compensatory? is where to business, operations of you're want I curating in on if you to book improve number much terms opportunity you're to the believe on two of and do And you particularly for You the to on operations, part align book significantly you the -- in invest improving shed particularly in how -- the have your what

Tracy Robinson

Thank you, Walter.

long-term game four this in for is, know focus our how XX-inning the to don't is customers. a we're to and providing or the railroad our as believe what this service we us if I a way to run this is but So, going

well and with as team to as continue to can tweak from both commercial happy the as we with scheduled a and you So you from it operating refine perspective, we I'm the provide. perspective launch an have operations the this the go deliver right, what has because will with capacity done model really plan what only of operating forward. and

name the some comfortable but go goes. taken that fits urgent. we'll forward. now that early got care book pretty about our at to So, look we that I'm network, those there book right as it this as that We've at were far lens. we're is be intentional as through we needed to a as going growth, doing things we be something look And we've on of most

We it deliver are both team the very move do forward. that, because prepared to invest our to Doug as growth sell we'll our in we our have to and the capacity model operating make and network intentionally to customers sure invest as and but

So, are so it's going to be game an ongoing we long-term tweak -- here. a

Walter Spracklin

Okay. Appreciate the color Thanks. Tracy.

Operator

line Please of comes Your next Tom from go Wadewitz. question ahead. the

Tom Wadewitz

network. great. of Yes, variation little on how bit your that Thank But a running is a last guess well question. I you've this very services on you. the executed you're improved,

seven have look last, for a don't Do is and repriced the you kind five, I business helpful that back, it say you there's been of not five, about But at should was you over price. business. think maybe really be? what on the last But there's the book of the six, of of kind parts opportunity priced book business way look that years, opportunity book you something or of also think, the years. over that's think know, I changing So, mispriced said certain of an most part Tracy, do as eight to the I the take urgency may

Tracy Robinson

we us from we've place we leaning in. heads lift keep on right I now. we're say, the is We'll look of our take say to place None running where and this would we growth say a that. going this, got are pretty But perspective. forward, as done that well would

where see into it and forward, are in can we arms to be it order customers with volumes solutions in we'll where customers and capacity, how place that, there, course, in helpful with our those rolling our first going track, is we on need solutions with people we what provide can the step a basis. invest be to serve network, and and whether business, capability we that our lock where out or So providing stock, our what of sustainable

that every the of up down to will chance our mechanism and All at And take an should -- with you move a out about that whether us And of currently we business, we're at as naturally that which that comes look it always something contracts. to sit our looking existing at to moved. as gives is of continue tell year business customers, our us don't we Doug That portfolio find business look from well. automatic already gives that we its our to network. the expiring a-third way

Tom Wadewitz

Okay.

Operator

the line from comes question go next of Steven Raymond Please, Your James. from ahead. Hansen

Steven Hansen

pricing time of Yes. of into kind inflation I some pricing on and last the Good comps. show on thus afternoon, passing around half. been though, start through discussion looking backwards you've starting little pricing we're in the I'm early and at appreciate next to outstanding both those for guys. wanted up I a and successful fourth far and first a half. curious, really the yield XQ thinking earlier. Thanks to just congrats on of on year into great can bit. follow quarter. to We the some comments just quarter just lap had I'm just

ahead. are level-setting what the to Thanks. So I sure, pricing going were tough want of around expectations that some make just forward given comps

Rob Reilly

Thanks, Steve.

in pricing So listen, we that still area. expect

last more congestion plus saw had lot -- issues, we fees mean, containers that also a because like things inflation storage came But for store things to the with we So some that. them. also is that and year happened of I

expecting economy it. supply come see but back a into we'll and in we're get those as storages chains what in the the offset some So business the of as see evolves probably we'll down, regular to increase XXXX, flex,

Steven Hansen

Okay. Very good. Appreciate the time.

Tracy Robinson

there? you Operator, are

Jon Chappell

Can Chapel. you John It’s Hi. hear me?

Paul Butcher

Yes. Hi, John.

Jon Chappell

last of that to I was it's Paul. Was for relative OR last think the you're three initiative. a question year guess, of part being quarters All and efficient Thanks And, that or second back much here. cetera, shot before tree derailments, at first a run planned ago, forward? year for unfortunate events, given we if is run look Thanks. and to was how and going stronger of as year, that network of be higher, a series going preparing last was, the we higher. line go we rate volume more if quarters a weather is, do big a casualty I the right. a the the part Great. forward? asking And that's et rate this the other Hey, The of

Rob Reilly

quarter, when I you the in we to it things some goes unfortunate a are every obviously, casualty is rate John, that There at million run cost there, goes and Yes. a lot there. do of derailments. the about when quarter. mean, in $XXX million have other, $XXX look

or one-time thing, of some are happen. but the And those they happen, set they're they

that The have of we there for claims, is other for update a bunch comp. legal on provisions provisions workers' thing things like in updates on

at different noise casualty But to of and some that's others, of quarter given lot in you a but things that run happen, to there's rate there. $XXX may things a million I million may So due in some run that's be of XXX -- about a rate. -- the that would when tell but you essentially $XXX look there

Jon Chappell

in Nova Scotia have And hit hurricane QX. a we did

So that part…

Ghislain Houle

Exactly.

noise when in see events, you'll So have you have some a of you some that these hurricanes, derailment, then category.

Jon Chappell

Ghislain. you, Thank Great. Okay.

Operator

Suisse. question comes Ari of Credit Please Rosa ahead. line the from Your from go next

Ari Rosa

Hi. Good afternoon.

operating And what what just incremental how how from was – and on elaborate extent what differently customers before. a could little volume or come EMP hoping been? was from we that? you to been has see that to And then color that you give program. the from you've was the should marketing in you could bit place I then what reception the current So about of Maybe around it think could

Ghislain Houle

allows prior the minor of sole what NS, business and this. we also with -- is on a it does we that We down really that up boxes participant do boxes our this to the the is this We're the But the is program as it those player other us US. the in long major now. allows us requirements. program program. refill person grow to It as to Canada. So to Western the What and Eastern Canadian EMP Canada the cross-border can both to big as does customers go into the What customers. a UP to both EMP from for conforms were use back for transcontinental makes some those us comes bring freight that in lot well

a few a currently on now service is been are to well this we for with continue of customers grow that EMP service have we've that increases give traffic So our calling use CN lot freight. really it on as years. to to And that already NS able the we're Intermodal, It in great use to and something a cross-border which now trying partners UP quite program.

Operator

Oglenski The from Please from the next Barclays. Brandon is of ahead. go question line

Brandon Oglenski

softer. a being about or in Intermodal? international Hey, good that little marketplace? that Doug, afternoon, landscape competitive know relation shifts talk you up in also out bit that following on a is question, everyone. the or share I to in called guess can you more less macro Is the I comment,

Doug MacDonald

coming way shipments I'll Well, of Outside is -- normal stable have international -- late -- the coming It's we that earlier the a seen just earlier, of is the in overordering. very year a that to was the that's And they that's in. share we've actually of but shift freight of going any Toronto, through haven't what was because were the from side. having seen domestic talk lot were People afraid ports. COVID. shifted about instead volume US it's Montreal Canadian increased –

now retail all markets. So the we're seeing supply way done in Asia. of up sitting that other Montreal and in what a Toronto, volumes warehousing back dramatic to is started to that And amount the chain has

to see we're – the going sailings from So seeing side. blank overseas some we’re in November

slots. all side, we're On the in still domestic out sold our of

going is to steady are are well. economy, not add-on the of we but solid that grow business and as we us peak at continue will getting very only business grow which we E&P that, a and seeing to business, the well. we're help are that premiums things the the seeing So

Brandon Oglenski

Thank you.

Operator

comes Justin question Your from line go next Long of ahead. Stephens. Please from the

Justin Long

And is volume to How to assuming if had comment thoughts XXXX, where enough margins evening. need in on good growth, we're there dependent I you made or down? are directional a in earlier wanted ask margins. is on opportunity recession. Ghislain, and you expand self-help about volumes environment Thanks to continue volumes mild that any the in a improving an

Tracy Robinson

start on I'll Hey, that one.

So on year. at point next guiding we're not for volumes this

good see and recessionary impact around pretty overview think customers volumes staying I some organizing gave we we're unfolds. Doug strength of that, the a our and pretty our close as potential where on where resource to see that we for

So in to a think, as to, pricing to whatever January, a Doug be needs we I can we when going, and the on Doug? better you that comment piece, we talk will on add able next see where sense give well as perhaps he volumes

Doug MacDonald

yeah. Well,

levels. inflation So retain the to plus we growing able inflation normalized on more to honestly, expect to at pricing of all plus eventually We back as inflation that, that expect keep will be margin our for side, decline renewals. to still

Justin Long

Got it. Thanks.

Operator

go comes Morgan Shanker of Your from Please Stanley. next Ravi question from ahead. the line

Ravi Shanker

of little earnings out you sell-side where growth and have on problem may the point unfair traction high-quality Hey, everyone. the a But be a the a for this now you're you demonstrated question. very bar, just given bit a good having guys deal a I this year. think guidance high evening put Tracy, of had you to at

I level where maybe was a you where on the So growth, that sustain this or case level in was OR yourself six of really the think cannot I again, place years this you stock the bear earnings CN find ago seven improvement. of think,

be a beyond like? preview maybe bit coming of that happens XXXX? engine Are little again, growth but years, a algorithm top So line Analyst over the that going is three, Day, the growth you to EPS you long-term into what guys again keep enough it's have confident opportunities even to next what that five at

Tracy Robinson

That we sounds which for is what fantastic May, Day Investor do. discussion to intend a like in

in came going. as into impressed was traction -- we we have. I'm scheduled the a that operation the muscle as mission, while railroad got first with I the organization, this The lot very and We've to get of

that, declaring And margins. customer so ways was the driving that. not finish and got more service of that on mission it's driving but go is number that any of some kind We've we've the to got, one, that on

the that book that business of profitably. team with combine we're that and efforts You Doug make making the are and pricing to got we've right sure

baseline crystallizes and that. presents for that So a

we our I of a order of ahead the spent and condition week efficient couple this is know of excited there, operation we look network in grow, head We of that Board a some as days So growth talking that lift necessary about to about existing capacity forward to but well growth in some capitalizing go expand that we're our as capacity. pretty as the in both we from opportunities kind us. forward we that see tight with investing our and them in opportunities around see running to areas our

Day. in Investor it. So, looking We're great conversation May said, X to for as forward us I

Ravi Shanker

stay tuned. should We helpful. Thank you. Very

Operator

Vertical of line Kauffman from go the ahead. from Research comes question next Jeff Your Partners. Please

Jeff Kauffman

for the very is about grain to to discussion potential address was it and it's do river, hasn't capacity we comment about lot to network be how in. wanted in the anybody Congratulations than need Mississippi how to and And me boats and not business? much Thank talk with do I just of a you rails Like you you could much. this could team, excess about your cold River runs river opportunities steel if you and your of know much and levels. of back There option? there what in just a probably your river. handle about ton there you up I better magnitude else's. Tracy limit been thank to railroad squeezing come have competition are? a -- an down maybe any Can

Doug MacDonald

Thanks a always Jeff. There's limit.

parallel we We the Let's waste QX, opportunity. of a river, QX great year. year customers. I We in clear. think directly We're similar do the and grain can working did moving volumes out. be this It's with the move expect a entire lot last

really of be in have steel, business, bring back other and they to capped some line the Now, though three levels will terminals will do nice that can northbound at is down Louisiana, us What out does on last listen, of our it the that fertilizer, probably we north. now to similar year. the we at look up have some products that are opportunity there provide

So, it's a good problem to have.

I think and will actually to do we'll be But the it eventually, river up. come well. rain levels able will

we we're normal So, will QX, potential good a by think then into and QX at to things maybe be back then. looking

Jeff Kauffman

of Okay, great. you. Thank End Q&A

Tracy Robinson

you. Okay. Thank

happy the We're of to about right we as end I Thank in your think much really very look now we're all the January. you. your that's to you come Look seeing the end interest with into call and of the what's excited today. forward we're railroad today. the We time running future. appreciate and

Operator

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

now disconnect time. at this may your lines You

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