CP - Earnings call transcript Q1 2020 | Canadian Pacific Railway Limited

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Operator

Good afternoon. My name is Christine and I will be your conference operator today. At this time, I would like to welcome everyone to the Canadian Pacific First Quarter 2020 Conference Call. The slides accompanying today’s call are available at www.cpr.ca. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After introduce now AVP, begin [Operator would to the Maeghan to Instructions] I Pensions like Albiston, and Investor conference. Relations

Maeghan Albiston

today. and you, for Thank afternoon, everyone Good joining Christine. us thanks

our Our sincere apologies now difficulties, We the and delayed behind technical us, into few those appreciate earnings your understanding. start a patience release ran but call. and for to are so we

differ that materially. the actual that are release This described on are outlined Before Slide X risks, we with which U.S. this you measures actual in in filed begin, results MD&A regulators. information Canadian on non-GAAP forward-looking results and press that’s remind other Slide may I the contains also presentation and and presentation X. and The influence uncertainties factors want contains could to that

the our will today would With Velani, formal and as John me appreciate here Officer. can to possible get followed our your one. could Keith be if many remarks question so by of CFO; to analysts we limit is The and Nadeem as Marketing In time Chief and interest Brooks, that today we you CEO; President Creel, Q&A.

It’s introduce to my Keith Mr. now Creel. pleasure

Keith Creel

me us certainly let thanking and Maeghan what have unprecedented joined by Thanks, that today times. all start are during

was week serve. want thank of facing. to essential something today. in that day true exactly A In thank you to healthcare that professionals family that’s someone risking am sacrifices picture times this to you. day worth our is any our livelihoods. are of Thank and sacrifices bigger thousand and we tell that’s the us the out results, endure a is last during for we out and that also trackside provide community and which that in the said, CP you to as strong providers these ensuring say day the I crisis. sacrificing the our and family, enabled well-being thank to our recognize picture fact which our CP extraordinary for heroes before critical extraordinary and in but in are better we of XX,XXX day health work we taken I their of CP the only want said, in our dedication for efforts their Ontario words, one why the Americans and results, the can this they all I first of deck lives railroaders are have society. by to are continue and at right With leader professional other It than to would erected ongoing are I shared continue and doing all services the that not and now as lives you we that’s body say frontline I to extremely that COVID-XX a require and review will that human protect for and a proud being, for alike Canadians responders, battle

which I a speak X%. volume, PSR this negative highlight am be is my going to other in short CP results, capable am model for our to themselves, by truly to what comments. experienced where time grew comments more my Shifting of. them to spend In railroads our I speaking going to quarter RTMs

are the there It’s ability will built that said, quarter, produced now a given For to proven expecting a through single-digits team our is ahead a as adapt to these by we buffer enabling down That guiding quarter, updated the RTMs in sub-XX earnings In environment. and volume changing OR flat the are we grow we our cost to recognizing rapidly the results first be heading year. that to the resources us model same operating first produced earnings. and felt guidance, model in for time a the we respect that headwinds just in its that’s Rest to mid assured our to history, we resilient first comfortable the challenging be XX%. CP’s it times facing.

we based Not the only storm, resilient company. out power I am the this weather can we this operating on the the stronger of a more side team other convicted strength of on and come model, will

ample team and We are is a tested. times balance entering turbulent management battle strong these with liquidity. sheet The

ready to are weather We the storm.

not panicked. are We

distracted. We not are

We are prepared.

the like there and strong I are a engaged companies I never employees. We of more uniqueness are as confident where companies challenging all leader the team’s are at potential teams CP unique team recognize our environment going rest. we this, me, ahead. from ability is our certainly There will a investors, this We brightest agile. a more facing. culture be a to of apart no our said this to in and have That times customers and for our in our shine opportunity where been know and and times our but of succeed for and spite set it’s playbook certainly is and the discipline the story uniqueness To our

to do we in continue That’s my customers. our support To for and in challenges continue to what we network, our grow going turn invest opportunities. with invest into people we to leaderships I continue wrap and to companies strong do and ways At closer will up, look to leave comments to strong what are this. you we our our CP,

stronger will create at we success We unique and grow our will own CP.

Nadeem numbers cover well turn customer With opportunities. our it to as of as to that John and our am I the balance to said, going over

John Brooks

Keith and good everyone. you, afternoon Thank Alright.

RTMs, X%, a this to Pricing $X Keith was record FX changed lower positive closely while in short quarter a QX volumes amount customers as to to targeted the of has of during times. range our stable was revenues up as as of total ensure we mix with were remains challenging moved So, and X%. billion. while said, these flat. up was were XX% we fuel coal team our operating landing Keith up team work my in assured lot and time. stay aligned said, potash. Rest is continuing Obviously, a

quarter a our the will I outlook for on briefly by lines business. for highlight speak metric to quarter, grain I and approximately currency-adjusted major tonnage on the up with in grain tons. of all-time team products results our at first basis. and revenues Canadian Starting QX delivering X.X for our up want start provide volumes performance and will grain, to X% some now I our XX%. the million congratulating record were color with grain customers CP grain an

capacity and our train grain train model investment the starts hopper is grain fleet load enabling customers new on Our to existing per is operating ability foot car. more covered X,XXX giving

enabled and grain capacity cars metric of sustainability the additional grain movement the of high delivering tons In greater an QX. into CP in productivity, are XXX,XXX partners fact, our supply grain reliability and alone our chain.

remain look ahead, grain spot. I As a will bright

grain I market Canadian ongoing Our in with expect momentum. share demand Vancouver is Thunder and XX% Bay strong both and approaching

On front, were volumes XX% down revenues the potash and decreased X%.

we our year solid projections For delivered remained strong tonnage XXXX. QX look despite for challenges to I market and full partners potash, export as QX and ahead for a

due American spring application seasons during we in On poor to see domestic as application North cold replenish the the season. upside markets with the flooding looks wet to the consecutive side, and industry weather, nutrients

outlook optimistic bottom for both remain line, about export demand domestic the So and potash. I

up volumes distribution to demand revenues our wholesale nitrogen sulfur, network. phosphates story, and fertilizer and fertilizers retail from outlets and our In are we Similar were for seeing potash and XX%. domestic our across strong

a volumes across over this with XX% many making up overall, forward. revenue our while of our coal with commodities of growth and and level grain, portfolio XX% The our expect of chemicals of to sector provide bulk growth fertilizer energy, XX%, So plastics volumes. book, looking record I crude-by-rail grew in area resiliency our saw and

are Now production markets. looking these COVID-XX demand Russia of Arabia in slowing the the dispute. oversupply see and the decline from we steep volumes demand all across from resulting rapidly given commodities and Saudi impact pressures forward, Crude

until As back recent seen recovery with in have days volatility, North expecting are ramp globally to starts low the demand up. all in America environment the we and we

a structured contracts protection reminder, these. to times our As provide like we have in

contracts to associated these are damages of multiyear have and liquidated volume them and crude offset declines. of commitments All some with help our minimum

up Moving MMC, in demand, and pulp to the improved these in forest sand steel lines growth we The X%, while by of to XX%. strong shipments volumes on products, largely driven were frac were business Bakken.

forward, across sectors. continue seeing Looking will to the segments such industrial pulp be although are as many we strong, of softening

outlook closures. given due for and already while temporary up expected are an automotive, outstanding remains declined challenged energy volumes remain this the the the to. business to the I volumes on have The markets pressures XX% frac uncertain X%, given sector. near-term were outcome revenues that In plant on to pressures Additionally, our down spoken automotive were sand have

we do start they staying back to to things automakers our assess to startup positives forward close When sector. are ramp in are look up, some However, to this there as timing. possible

entered a Auto long Vancouver July join in at Compound. as we a partner Fiat starting Recently, forward into as they X-year contract new have with Chrysler our will term

Additionally, our and lanes Minneapolis. into Chicago where expand this is Calgary, agreement partnership, with FCA will CP new earning

challenges to Chrysler new service developments this offset our across industry strong to leverage the the later as network business we and this industry, our the of startup continue auto expect year, So declines we despite help and Glovis model.

quarter up were in a result and intermodal double-digit international. the growth another side, on XX% domestic Finally, of record volumes in as quarterly

chain fill essential for intermodal Tire, In closed On Ming for in and quarter customers goods critical North front, with to Yang QX the the we America on-boarded Loblaw, closely the a such have in CP are needs is successfully with and as record key partner and of we the others Canadian revenue. consumers. for domestic March Nestle international, working the supply we

are So, been as while have and move impacted partners this volumes continue we than QX, sailings so and this space. far variability we in to others seeing less in our expect through blank

resources as has with we the to let changed, close ensure and lockstep. in rapidly have aligned me quickly our closely by our and environment So, ops teams that finance been adapt saying,

our an that their and changes be help closely in current proven, sales customers demand when team of we excellent needs, professionals to we We recovery. understand most are can are maybe importantly working have that with into move how customers successful

as will all this and position emerge that us unprecedented to are proven I our times. uncertainty, So lead am through confident although, navigating we these strategy to team’s we surgical from growth continue record

So with Nadeem. pass to I that, over will it

Nadeem Velani

a record is and delivering made of in our some I comment but extremely momentum January, new quarter expectations. and the the by quarter, out afternoon. to of sub-XX the know decreased the you up XX.X%. proud team my best exceed team we in Thanks, ratio performance John XXXX. record the went to outstanding women first managed first is into XXXX the CP the X,XXX at operating and in the industry surprised made points the carried I from I We gone railroaders the of high men of have am and This good basis it the time CP. today. results first Overall, XX% OR And of simply

was share the expense result more versus primarily of as $X increase of the million, partially of of a base. expense the decrease that main asset the casualty $X million versus of QX services, fuel expense Fuel Comp high lapping increased primary higher Depreciation expense down notable X% decrease driver XX%. was price. Some This record the of year. $XX by and QX benefits $XX $XXX offset million stock-based of The an a million X% XX% result was and normally by partially offset volumes XXXX as compensation QX accruals XXXX. The or XXXX a driver an was $XXX a price or was side, decrease decrease expense. compensation result the incentive at efficiency. was a increased adjustment in as items in on and decrease last million, lower of higher Purchased of million

The commercial a or Moving Interest or of us net line, result flat effective adapt a and taxable quarter. as enabled results EPS income $XX primarily components impacted a the QX lower outstanding below rate. discipline ahead. primarily will paper out Rounding the and that negatively expense $XX grew as in same weeks of interest diluted result XX% higher rate these million Income the enable tax the attention higher months benefit other income. were by XX% XXXX. the statement, to in constructive increased adjusted was discount recovery lower offset expense XX% periodic million of due to in

PSR As noted, model Keith the performs as in the as even is good in powerful challenging better times, times.

been in spite RTMs fact, and record In are real we have time. locomotives of and parking adapting in GTMs resources QX,

how noted our and align in our and in best often capacity, ability that times finance, at the team’s operations are resources our the these. collaborative – look like noted are when and asset proactive teams is to As as becomes evident management, demand marketing very they particularly industry

slide increased first capital We increased quarter. cash down turn cash. to result of XX% the on the Cash on quarter. is operations a next from quarter-over-quarter expenditures Free free in the as

We to to advantage in maintenance necessary to of to in a are stretch position normalizes. material proactively production in and to can reinvest costs these provide Times demand of going additional do to to terms attractive plan $X.X network track billion. capitalize committed the when take continue of allotments. guidance CapEx time to opportunity further and capital be dollars our like remain We

absorbing capital headwinds are a high hopper our We including envelope. pipeline FX we and covered of projects, return higher from in have the the investment

disciplined but best. continue in We of XX.X%, evident commitment ROIC our will conditions, adjusted evaluate in and business to industry an our is to approach investing economic the

Turning find a environment to evolve. the comment next on in The ourselves situation slide continues today. COVID-XX the and we to

in We However, strong I of that in debt of confident two coupon liquidity don’t time. QX majority had we position. record debt. are we financial any enabled QX that highly are navigate debt down a short-term maturing have to low issuances this with well-positioned us From successful pay until uncertain rates our to XXXX. very a the standpoint, We am

$X.X of line is of As fully yesterday, billion revolving our credit un-drawn.

so. should can additional the billion do expanded to Additionally, an need facility be by $X we

with strong As net previously X.Xx remains of to adjusted sheet our EBITDA. within range guided adjusted balance to leverage Xx the mentioned, debt

impact paused the return greater sheet. get is program, on we to share and balance near-term front, been our that customers in our complete. which to On the shareholder volumes. impact how have and wanted temporarily buyback of economic COVID-XX clarity XX% about strength March, the prudent our the protect we In would of We

We also delayed the for dividend our increase reasons. same

are in the we restarting buyback both supportive short-term, unprecedented So, right the economy we We sitting and on these around million given to of have although, about our plan we $XXX believe is the shareholders times conservative this fully America, revisit North approach. in the comfort thing cash, program just once have in and do dividend. the this to been

manage We are uncertain to an these liquidity. position in weather and enviable continue our times proactively to we will

control to volumes the are protects a taking We in when way action that proactive costs us return.

it back to With wrap that, up. Keith I will to turn over things

Keith Creel

questions. and for think color. Nadeem I save that of John our we will Thanks, balance Alright. And the time for the

So, let’s now for it up open Q&A.

Operator

comes from Instructions] Thank you. the line first Chris question of [Operator Your Citi. from Wetherbee

Your line is open.

Chris Wetherbee

given afternoon, to uncertainty there. a and the maybe Good at appreciate I guidance thanks. just Great, giving guidance ask us about guys. I the out stab you that’s wanted

rest the around EPS the like suggest of something that. at maybe about low for more looked of rest you the down guidance then thinking versus RTMs the RTM year little bit declines would for I As the than maybe EPS are guidance it the kind looks the of guidance a or declines double-digit and in XX% year

that’s sort the us to So, great quarters? you leverage? ultimately potential puts of for did first of puts walk earnings if down to some takes takes and RTMs understand to Obviously, offset guys just here a those the the are what what things of can doing and of quarter negative you the more the next the than some try job of through network some kind and want may happens three drive in operating with you of

Keith Creel

I will not any might add level let that color provide of me high couple let cover. comments Chris, a and Nadeem I

understand is unique for a been this has for in themselves. It think think At and numbers X everyone industry. to this I the I story the continues important CP, it speak So, years, last to it’s be.

a have at some So got macro level, uniqueness. we

there strengths business We is base a unique our driven challenging obviously these spite business areas these got have capitalizing. are are mix, in that times, are and our underlying of XX% we revenue of or and both even

in executing marketplaces. are We those

influenced are and we you seeing, the guidance that seeing, that influenced it’s is hearing. are at am all same same our by and tempered the things I So by time,

because has our in quarter. And external, it’s before to that going the suggest major got be space be to what in of But business phased in of it’s I mid-May. certainly be second quarter probably way. the it a XXXX adjust our team, going going to in the to back because industry, third first bit the unique of up. quarter and It’s CP again, ramp control mix, in see normalizes. stronger cost. a because to it’s ability So in demand, stronger of for quarter. overall to going you a start down coming It’s fourth It’s the It’s

are years have we something into started. X We PSR. just isn’t This

been we have adjusting, we DNA, It’s we demand. and So it’s our do. part lockstep in our of costs with our in how controlling tempering what do

So and again, this franchise. strengths do to continue we are going our play in to to

base are We and we through and this we protect mix play match lockstep the our costs strengths to and time can are ourselves adjust in in best we position to going our protect and to at demand to act to strongly. to our our as going asset the storm see business to margins earnings our same that as the

when hearts need and minds And going their is people, firmly things, but and but anxieties, economy strength this in to and strength unknown, And costs, business. commitment. it comes we a their believe we have business the there, their well. as we with is end I day, the is base also having at mix, come only doing the controlling The about this know not our [indiscernible] are people employee is our have one sacrifice, this back. And are past, We talked we this the do unique of listen, all the there. I back, all thing to about I

doing contractually number business business, business they and we back and them for there, to appropriately make when and the above we and much and that to, to in our to that the it’s that giving mean are beyond back how to thing back. sure let So incenting us have much available paying to do two, bounces when know them don’t they right are number going the are they can ready but we return things come one. employees mean them how to that cement work and and are our when bounce And they them they they so to respond it’s ways

So, but want I long the over any missed. that’s of to context is to anything a important. question, to or you turn me you know your specific to in fill colors answer and numbers understand if color think the I it to Nadeem the let relative I

Nadeem Velani

we Chris, say, will you mentioned. be of would decline in that rapid the which pronounced more volumes QX, negative just QX, given positioned that’s just and will and Yes, in be I versus better likely – leverage should see QX kind John operating

I whether But when to certainly how that, going going to to later to a ratio, will kind so earnings matter have volumes. think we we is better are that’s are expectation the proactive headwinds the in restarts, even protect that for with you So, or year-over-year which have fixed the but most we improve part, or May can economy beyond forth. be I year our operating able significant been, depreciation assumes in how for you see position, like that will still be no the to testament going negative we costs are and be think in have drop just the certain June we QX, of as a

Chris Wetherbee

the it. helpful. it. Got very That’s for I appreciate Thanks time.

Nadeem Velani

Chris. Thanks,

Keith Creel

Chris. Thanks,

Operator

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

Your line open. ahead. Please is go

Allison Landry

afternoon. Good Thanks.

have you $X.X then to this just the just the I you of back capital And allocation. needed room, about I do CapEx some if the reiterated scale necessitates? will ask the wanted have spending know But So prioritize the year. delaying billion you we or preserve much to if dividends? any, how of cash, to you would environment if

Keith Creel

come protecting This our are Allison, the and our capital is that’s we spending fluidity a sprint. from I our is I’ll because in and a to this protect marathon, we protect can let a of this the money not protect numbers, tell is back. growth fill approach, The business long-term but it’s This game. and that operating margins and magic, in we’re model. accommodate so surgically sort going Nadeem that strategically, our can you,

safety things. matter, turns those matters, velocity all Asset matters,

one business when the reliable, we can So this the investing we comes plays slip hoppers to that cut make not infrastructure, our am it sure our as need we it strategically in more spaces back, need comes improve in business capacity, protect our to our to plays us track that I not back. fact, to and, our that given make in we’re says, back fluidity investing that we’re efficient, capital. that that margins, and given more

I from think this an standpoint. opportunity about

need, the business We have the have ability, case the we business. we have the in to invest

more grinding, in when We there, back, with the end demand not of do spend rail, day, more put business to an more down it’s that need less more only now that you have surfacing, we down and more most, is take to ties, more and at those the ballast, actually increased. business ability with capital with the what had the capacity the things when comes all

do thing the an which if strength we we to uniquely to to need me do have don’t, am we’re last getting of capital that on envelope, to expenses. the not to So, anywhere That not unless point. to protect necessary, said, right can. financially, back But I we we cut now, going our close company the

So to that, that’s am we this you philosophically add Nadeem, where I that’s if but stand want know to convicted, company. and in fundamentally, I don’t

Nadeem Velani

other you’d to kind John up and a having like the construction several between of productive not short less growth be. of have have last do you’re we the side, his window that as leading in that and add you team just on work industry a as and marketing sales the some so season would I north, And to Yes. years,

don’t create more but us for seeing lot So be does a negative as Keith on highlighted. like we to an the productive efficient opportunity it hand, volumes, and one

even for able going And work and then do it at can this so XXXX more we cost effective, our pull to we look us. an certainly, efficiently do And productive that. be some more forward it’s opportunity if to as from being we’re and From mean, free still in $X plan see revisiting We’ve billion. excess still dividend We on to of the still XX%, about share we cash I and yes, range. a talked flow ratio that. We completing XX% payout plan on our closer position, financial increasing buyback.

So I don’t have risk, the balance think strength million in at our of the any that at of of that financial terms sheet, is fact mentioned $XXX I given that we hand. cash

are how the shareholders We cash to we just term. prudent being in return near in

we’ve XX% done Now, say, that announced we I will December also program XX. of the effectively

So slowing the not way. materially it we’re we’re It’s of in like buyback. ahead pace on down any

Allison Landry

really was guys. you That so helpful, Thank Okay. much.

Nadeem Velani

Allison. Thanks,

Operator

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

Walter Spracklin

single-digit and mid just bulk Sure. volume guidance. John, could your see that a is on to you that segment? is are if growth put perhaps of and well, you bit, Wondering year-over-year this the it to bulk going decompose focus to everyone. doing indicated wanted do so I Good decline simply, well to year little certainly to just afternoon, that continue suggested you balance in in likely expecting

John Brooks

opportunity the is space. there, think Yes, bulk I there Walter, the in out

through potential half the are grain back strong coming I out of toward Canada the has crop the up of certainly set that QX Canadian all Given expectations sees and this crop year. expectation think another way itself, our

Potash So of an one. really job as China the part I has presents book. has to side extent, export think Canpotex opportunity. interesting de-leveraging that good a on their of, done an been some

I itself America I opportunity potash, soft potential at and for And particular, in the not the said, potash back our North you perfect soil the we other some the to is are had is in excited pretty complete, seeing not given look tell I front been of as a there year I quite year-over-year returning of forward. as in likelihood, probably in but think, front. expectations that a are we in little an those think, certainly has to you know got I them there. team – been that make some see it up with terms coal, it’s there half has on space think last there it’s space, that now, Now, our beyond We is we fertilizers, see, depressed we about right challenges and compares we’ll that what think in nutrients the stands, Teck, but some what decline presents through there can of QX. as movements, we and do,

counting one not out I’m Walter. that So either,

Walter Spracklin

one. much. my That’s very Okay. Thanks

Keith Creel

Thanks, Walter.

Operator

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

Steve Hansen

sounds about of can of to now, it like contract this give ‘XX understand first Thanks. if just if yes. are out couple magnitude, in see described wins really And strategy the thanks guys, is land at contract for what a trying sounds as us roll part. perhaps, broader I laid back, that strategy sense Day. new am you the five-year part, Investor solid to some the the curious relates a we a broader is second sort time. you Hey extension of this Oh, in, I’m It of new and FCA. wondering, inning out? just believe this years opportunity I just with you like your late win just way as curious – you it you it. I’m

John Brooks

think is strategy. of absolutely nailed the broader it, Steve. I part you It

long sense Compound be too run much Vancouver it clear that pretty And confident of were that just We one. terminal. was we from Glovis Pacific. were could in you got be almost to day in number. we going to expect going and million $XX think But are that that million. to FCA type a add marketplace. terms It of that you and forward That full we’ve contract, makes certainly, bringing think, partners home that I don’t Auto – customers I $XX Canadian to term to on doubles at

half a clear chunk growth in So makes are the of we into layer of is the sector the We’ve we about. our unique network move the second development. Pacific’s franchise in auto significant been industry. business that Canadian comment pretty strategy it other My around there as is what excited pretty so that the into year is that

If you go convert across is types our we opportunities our unmatched. network, those take into the with and ability holdings of the to have these partners land

in you business the Those Vancouver, able things in our auto auto for in space. it development But saw revenue, We got record so space an not business. for just we’re all-time set sector. we’ve up enabled It’s transload Chicagoland. our And exciting some for XX%. our what we’ve transload do in and been the transload to it’s under QX the volumes

the surface there. We’re scratching just

redundant. And, again, We the of those our up unmatchable opening have land, look the that’s data for of created strength be to and growth map put new them in of the it’s opportunities what frankly, model, on few have has and a become there’s our like years going consider property. opportunities Montreal understanding it what for team, facility vacant this in replicate service terminals existing I with we have coming and here and that sat a that combining an Steve, in the lot strength network, across the it existing marketing to the places just, that think opportunity months again, got utilizing

Keith Creel

I could, a little add bit to if add comment that. Let Steve, that. me, a to Steve, me I’ll let comment of

said just then you on CMQ take property, So, enhances that, everything you it. add it that John

as completely that Coast X. we we Coast sense we before. that of May X. East us something access East transaction strategically, should We approval didn’t – now have take we railroad for made approach of June the STB the tons an to reach got give anticipate to That we’ve control us, Now hear approval, and

Now where we to the route our competition. into Labrador we’ve facilities and than truck-like miles Midwest got better capacity the on truck, Coast and XXX reliable. feeding Montreal, a East from competitive those Toronto, shorter have truck-like that’s That’s it’s than

a that of XX has You us railroad needle million it’s line differentiator taking XX a powerful $XXX within million and see plus that add of top $XX That’s powerful, and that We’ve to that months. grow. we’re that $XX sight CP-like the potential revenue a with to on allows taken move. we unique million That’s revenue a and making margins. over

Steve Hansen

Thanks guys. helpful. Very

Operator

go of next Barclays. Brandon comes line ahead. the question Oglenski from Your from Please

Brandon Oglenski

thanks. and bit I you of up in the Auto energy pretty you in pretty afternoon, talk has autos what the a now your sand negative to I we on book changed, the did I right mean frac Hey, here. question are position share everyone. business. can of mention forecast? makes when difficult a a Compound, little the us appreciate think about so mean, about and I crude big Good side John, though, think

more XXXX? through these So what’s maybe segments challenged of some the outlook for

John Brooks

for like in Yes, Brandon. those sure. and energy industrial Certainly, not insulated of some markets we’re

built not zero. As our can crude-by-rail you set we move stated, we’re But a guidance, indoor is this to and record in given XX,XXX volatility the carloads. it’s over seeing. That volumes – for frankly QX, the inconceivable,

but sure. that as pressures certainly in past like also. couple the away movements. products, diversifying business, You related and seen the for the the intermodal industrial sand a of from markets just Texas pressures The quarter those sector But you’re some seeing and – putting type of Bakken. those the We’ve pressure nice a diluents, products. seeing the we’re the a good the energy certainly that The with, markets the we’ve double-digits a on steel are markets, book in is we’ve those into downstream pressures talked our on markets, LPG scrap non-essential are of domestic those the again, around I certainly lot volumes certainly, distillants, crude-by-rail done job think, about to of down fuel equal frac obviously, not

seeing others And think we’ve our international space. to outperforming their are partnered carriers with so maybe date international blank sailings, in the I continue. are, to I said, far of are in And – that’s We’re leased the that as marketplace. going now, the competitors as some

So that’s tailwind. of a us given bit little a

equally grow. provide is picking the right partners approach Let and me around of important business over I’ve on want good, or picking the downmarkets. past we this the a comment of surgical the tailwind maybe right more partners partners in power in about, and one more talked to couple And and the this. in just lot the close upmarkets lot look a the of years, your certainly but how

space, the resilient, auto it’s vehicles the Our that food the want are that the consumers space grocery partners in In customers to are the buy. go consumers to. to stores want

going read the this outperform the back going comes and there’s is amount the pressure products, all of with the on of fact you in news, to heap there partners. months. no can we’re coming going then back, them the the ton I we biofuels a when those partners, to down of fair a and look, top to and have But the doubt ethanols solace thing think of be right So, go do these that to over take the in the they’re right I

Brandon Oglenski

Appreciate thorough you. response. Thank the

John Brooks

Yes.

Operator

ahead. Markets. comes Chamoun question from from Capital the of go Your Fadi next line Please BMO

Fadi Chamoun

Yes, question. hi, taking for you thank my

you as minimum What the into for roll also XXXX volume crude-by-rail, how if the from you. rest a does penalties John, or some more commitment XXXX are So damages Thank indication that of of bit of can liquidated volume can year? you should And, about not, a that we a volume And into expecting have kind this in on first kind you was well? – business? the if kind of quarter? the little dig the think what in give the us you into and

John Brooks

Yes.

I over of not I, said, to, So, And goes just with crude-by-rail what being honest XX,XXX Fadi, inconceivable it’s were to we really hard QX. tell it. loads as we think see I that you in as it’s

here. it seeing ramp through QX We’re down

did total that in – XX,XXX give think you I probably things don’t if to don’t XX,XXX I the carloads and XX,XXX we the order to could carloads in QX end we know, of carloads magnitude. year improve,

to terms QX terms in a you’ve forward good you, to I damages. what think look liquidated seen in I as you’ve think the in guide of of revenues, that’s seen other of you what in expect pretty for year, QX, this balance

but most extend you I’d crude-by-rail contracts of Fadi, XXXX, I’m look, and around all into to sure XXXX. into If – pretty that saying those exactly have confident look

similar expect types would of you So of out ‘XX. performance move clauses as we

Fadi Chamoun

Great, thank you.

Operator

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

Tom Wadewitz

explicit it’s want Western guess, is I we for sensitivity pressure do been or you the you kind because of that pretty straightforward. the from just don’t afternoon. with the subject to in John, could is oil book But How Calgary about just XX% exposure to guess the and you to negative while? last know, topic, say, how good markets. volumes do it crude-by-rail your is Is on helpful. energy, think prices that of the comments say the Yes, that question Western think kind broader energy with have same to direct of sticking it’s Calgary, the can, a Edmonton economy, of, if to I trickier I how kind kind of broad economy impacts how Canada low much little fairly about on a in really

John Brooks

it, let’s So, bulk, I If feel at maybe I about percent so XX-plus have quite look our back of that. book it. talked it. mean, about good is let’s non-energy and I into Actually

space again got like to as through going go and when space in bounces the in everybody we’ve space. and we’re in domestic look it the continue I the had our along automotive about at ride to in business intermodal and the XX% XX% have we business path doubt the that you You’ve and automotive we’ve and intermodal growth back. else international success of talked growing no that the

this, Our check book – is crude-by-rail but fact X% roughly. on and me Maeghan can

that, of now, all our to be there fuel ECP people I positioned about business, talk we’ve impacted I continue will plastics flying to guess products the that those do is to look types going as a in that I in we’re The moving recovery. export doubt, which our are refined right in and we pressure consumer and have yes, start those you to pretty IPL So no about think above and tail beyond jet in good is, successful think, don’t diesel is another rough of a I news those probably products when in link to X% know, crude space does But is be take make space and a experience. magnitude. we franchise as think guess, those that diesels anybody’s that terminals – demands built, for Suncor going X%, maybe order X% winner look that it’s closely And, again. forward. with the facility,

are helpful. term, related we take those those to think, with I expect space, types in bounce to to in going along And would quickly energy of I the the recovery near we think pretty that’s but So, that hit areas. products in hope that back

Keith Creel

to to American less North Edmonton. consumers, U.S. I’ll Calgary and to say, feedstocks it’s Alberta, economy Canadian tied localized relevant demand and opposed and or just to, as broader say much And Tom, Alberta very

Tom Wadewitz

Okay.

we a ought more and products as back the economy comes like sounds back it crude-by-rail separately. and of just bit about think So kind think it the to kind of come about

John Brooks

look I Yes. at way Tom, right think that’s the to it.

Tom Wadewitz

Thank okay. it. Appreciate Right, you.

John Brooks

Yes.

Operator

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

Konark Gupta

the to and normal just to I said, XXXX. – as anticipate from good afternoon. Thanks early have start Keith, you on returning question conditions one you

current So in gradually of what Thank downturn economy in you margins recovery considering understand months? reopen parts protect you. some to next and the just actions you could few to the for taken then far the trying market so plan have how do

Keith Creel

adjusting again, we on demand, basis, be Listen, as to something a on be adjusting daily a and taking our as equipment. do assets people, and it locomotives, it weekly be far is it actions

to is at if and generally pretty The first month business is here, strength proof ton-miles terms numbers, if measure April quarter the revenue I’ll is, give couple are of it they you business RTMs, date and of what but aligned. just look we I and GTMs a similarly down in points

They and our the If look number, our RTMs down XX%, is unique itself, and are our down, similar industry I positive. date up. see to that but at April are at which of are rough I in in crew month our costs numbers, are to teams you If year-to-date, look again maybe numbers. overall, compared volumes So

cost date, XX%. GTMs, looking I’m more starts than double-digits. than are they down crude for more If month Our down our starts at to train are double-digits. Train

almost down Our yard crew XX%. are starts

Our train X.X%. is up speed

using it later. does. to recipe. in day make continue So day take day top finger if you DNA the to on out, and the in no measures you numbers you macro sure There control, to to that be actions. the That’s the be how what us put pulse we’ll in in of margins, to the right today, It’s of month, the actions I it your adjust is the lead mix how we use to measures start die the live of it day company. our we That’s out, keeping and and right your be And we lead economy the secret the it’ll and resources. that’s by next our this on all ultimately, to those can’t margins. protect protect staying operation business, use us that

in position and ourselves margins and to that responsive facing a we’re benefited our uniquely what protect team an industry. that’s that’s to operating business that’s allows to this time beneficial way mix this us knows bounce us. And today of what it we’re by protect what us that model economy allows unique allows to the uniquely respond us to rewarding to to gives impressive it by and to unique our micro for how very earnings We’re in troubled and a shareholders. our And out and use

Operator

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

Scott Group

thanks. afternoon Good guys. Hey,

any So quarter, that, commentary gave a you thoughts first you quarter, the on have thoughts in great. it’s Thank think can us some about and that now, on to do you. how in And the current you about to right softer think RTMs be stable how if quarter just environment? think margins. typically separately, that’d Maybe continue then tougher, second pricing on but volume

Nadeem Velani

guidance times say. be been and that again you on we’ve year So, ourselves year-over-year to the and the – are I would volumes That’ll I of as we’re industry I U.S. did Canadian continue we terms RTMs, Scott. the QX for that It yet we numbers. just – I beyond not in one. say I we’ll to it sub-XX, cocky fully is and expect the lead weekly that, where And, I tough it’s the are railroads the to from going the see you And going to for think point separated you expect well. year. leading go give to to Yes, to I’m here. operating QX, going railroads gave to relative We unprecedented we not industry. relative this ratio that in get

Scott Group

pricing any environment? And the thoughts on fine. That’s

John Brooks

not drive give my to to plus team any is, sort the capacity and as in of but up and – numbers, to apt instate pressure the approach there and our the is space across that domestic Canada on truckers expectation there, cross as inflation set is There continue that is less stated in inflation that industry doubt go loosens plus. a approach. little some going and we’ve – I’m is certainly are maybe to border no but puts maybe it we’re pressure doesn’t change

Scott Group

Okay, thank you guys.

John Brooks

Yes.

Operator

Please from Your next line question Clarke comes of go ahead. Seldon Bank. Deutsche from the

Seldon Clarke

for Thanks question. guys. Hey, the

declines that what for scenario to in sort – decline RTM just last of downside extends single-digit sort way, think declines the mid the on your the I should you year, we about ask decline if a for of but mid-single-digit the scenario question, and or of had worst guys could considering up are the different maybe general how in it following year? what you Just quarter cadence

Nadeem Velani

economy ramp government the we’ll to I call you timeframe. some secondary false America slowly been you start the the to be think say from from of are up listen to of to that And That all COVID-XX. impacts that, take decline and and a get then to a starting QX bottom back. waves can assumes will QX economy QX in gradually don’t point improve view of volume step and have a expect and then beyond spoke Yes, that mid-May of little timeframe bit earlier should I deeper QX we and if responses you have and, North much a to in see beyond, type it, what starting declines the in

seeing guidance entities we So building some today, that macroeconomic worst would not of kind the what the our be are based on on volume government we’re view, how the the environment. restart know will phase of and be by a certainly whole of to currently around we that based given current guidance. into other our that But scenario economy, QX

Seldon Clarke

time. the appreciate I Great. Thanks, guys.

Nadeem Velani

Okay, you’re welcome.

Operator

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

Brian Ossenbeck

us Hi, inflation. taking can Nadeem, we’re – color you for some give cost expecting thanks on the question.

actually gave context You driven you. available? get hours Any operational D&A on obviously bit to what cost you’re commentary are more down be CapEx the like with up. starts, a a some little more opportunities bit but inflation on block there that’s and you see program buying train starts, that Is Crew the little doing helpful. Thank would do more variable the how while earlier side? doing and by on going

Nadeem Velani

the Overall I and decline. mean, own story. is some is you will also of we expense a has see I do One steel steel mean, of its energy Outside Yes, currency. price. thing obviously at a side that, opportunities fuel on cost battle from

I of lot X.X%. I our we a denominated that a given dollar the depreciation expenses think that increase But So of of dollar. bit will been mean, see U.S. a overall, in X%, has Canadian inflation

You’re looking that end back to high in levels. level of some closer had agreements probably some put of growth. to RTM labor years types We X.X% several our

payout necessarily, So given we’ll based guidance increase you. XXXX and we’ve not the see that, in on an

like we and RTMs well. usually to those [indiscernible] that are our hopeful We’re growing means have

increasing it’s improve starts, to. I’d around density weights, the and health of but train focused train point safety right the So focus from areas now, point really of consolidating on the around and your really view? what’s Are train are is employees. kind of key a – your there our the and length opportunities those of increasing moving procurement Absolutely,

Brian Ossenbeck

it. the Appreciate for thanks Okay, context.

Nadeem Velani

Thanks, Brian.

Operator

Bank Please Your from Ken next line America. Hoexter of of go the from comes question ahead.

Ken Hoexter

Great something could of the afternoon. on in a about that thoughts rapid given Hey, first employees, allocation you expectation back your little on bit try before. feel you Keith, resource quarter. Is job the back the second good anticipate? maybe your those for comes on the the pain furloughing in talk talk your – a you in comes be as but to ramp from up quarter, back and when faster when economy that as then stay if away prepared bounce half, strong

Keith Creel

lightly. decisions can [indiscernible] I don’t we tell away one, what my our from. business, me to afford this, transparency. No, employees Ken, we it’s Again but understand point, we those not are I believe facing. number stay it’s let in in believe to and take anything – communicating you letting

a So made beginning. very We so we’re from we’ve recognize adjustments here, We’ve in news. been understand it’s we storm. transparent not the always new and

certainly day, as exactly the we employees, we’re need can understand that’s the of that greater that’s Our end to long at and what best respect and And that, we doing. do do, the the communicate

the that’s doing quickly protect adjustments with, we’re we’re a Running down we’ve I an around big reductions unique can. to we what time, owe we to big at now same impact, we but health response the XX,XXX of those as we XXX, the I got And company. make that them back other number. sure And appropriate employees magnitude, to, Now, as want numbers the of making order is look XXX tweak we’re as with our That’s Trades-wise, next down. adjustments. at our now, the of as employees. a week, or

to them again, the Running Typically own we give they XX how back times. would and day they make proactively, that extended that they to done we’ve union with and what progressively less than is ensure to in to understand that so us, that normally bounce we’re standard agreements, on these to XX our our can otherwise. So come our much beyond make benefits, many committed employees, the We they stepped they’ve sure cases, for we what call forth employees turn doing our that them. mean in employees especially in ensure Trades get in have continue benefits And to have back. they’re back, working with response, and commitment in insurance, employees their going sure given above unemployment insurance gives to they our to to us sooner come leaders, have hours back us or things ourselves

we continue and that our So lightly, not what to we it’s lockstep compelled do. decision make feel have we with and continue take we’ll to situation. what situation to done, a and That’s but that’s obligated we a give again demand. sure take It’s or adjust

it’s these as tough I And shocking. changes fact, tweaks It’s our it’s expected. think these base. are it by overall as respected or employment in certain, So not is,

Ken Hoexter

else they engineers delay on in when in step done. those right lose right? them no I any right or back, So, don’t Keith, of has call conductors, to so back They licensing you when timeframe back in go anything that reinvestment, any understand, and furlough, can just or there you come is be and

Keith Creel

XX freight for hours, the ready That’s back on property correct. to them customers. we should have pull our

Ken Hoexter

time. Alright, Thanks the great. for

Operator

from Goldman Your next of line Please Sachs. ahead. Alliger question from the comes Jordan go

Jordan Alliger

the I Yes, hi. a a about with sort – you of little and revenue volumes year? yields X% lot it mix there’s for or volumes, looking How can a about first Can know talk balance you. were up you in all or of effects of consideration? you puts you’re talk that into bit you but as Thank take the takes per quarter. think that Obviously ton-mile do X% various with the the the at little

John Brooks

I’d All faced positive what see you crude continue Well, but and move we see say, what slightly similar rate I to and slightly long-haul positive. will similarly maybe you along in QX. those potash into as volumes. sort QX we see other and run of mix QX depending think probably the Again, you QX, in coal we that saw on QX positive are revenues

Jordan Alliger

you. Thank

John Brooks

Yes.

Operator

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

Jon Chappell

you maybe the and shift on-boarding second necessary both there’s has on quarter? any of whether new about bit year, in they’ve wait the back your right of there the customers partnering with and afternoon. on the optimism, Thank you. going commentary that to this part kind other this any these their you’re there’s more the customers, from lateral as customer’s transparency see equipment half of and the and Good John, little we’ll any been bringing end way maybe a or until commitments and signs year on of to talked economy mentioned meet into the the of,

John Brooks

Yes.

imagine, we’re those has of you operating right customers close try focus can get end assets, the our to weeks around So, and Nadeem’s Certainly, discussions team differently in I been is cube have This customers those dynamic, trying working it’s assets in that terms are past figuring have front lockstep. those it’s control about on this communicating magic in But dynamic that eight pretty look, honestly, with as to day-to-day, maybe it’s staying think and future that over what as of their understand this the demands possible. those, been Rubik the think are. the customer said, critical energy their our and team six, to as as really and space right-sizing no thinking there out. is, Keith in I

I the as in relationships create and the believe take and think their right then prepared that to positive that the as of add again, partners right resources we up. model, and with and business needed so is, downtime you give be can continue ramp the back we volumes create, the to and to run perfect level transparency trying the

Jon Chappell

Thank you.

Operator

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

David Vernon

for time. thanks the Hi,

the just couple little in bit talk more commodities. a John, So, of of kind a

it’s to rate situation consider? maybe – at to the before outside severe is a lot seen you if looking resilient. there you I’m changes bulk you maybe any you on of approach pretty the outlook, enough export Canadian down I’m When of the whether the Teck cuts going Canadian and road. government the could quicker was even some little obviously to regulated you’ve help hearing pricing coal think mentioned interest talk about be that side risk grain. whether a economic coming the like done do economy to policy that think wondering but just sort You you what haven’t maybe see recover from to I the maybe bit products

John Brooks

formal has in range slightly modeling think – Teck That’s our down. Teck, any on the I so, million right now. just XXXX number. Yes, for It’s we’re XX not metric I’ll guidance. provided ton

hard As and I we there earlier, challenges terms opportunity said sort to up What, saw forward. the think to chain stimulus. speculate actually is we some as it’s and with do of QX And into some recovery supply build QX. some in we in move of

in the a U.S. obviously think been I has done. lot there

anything could the government Canadian done Canada, but only – I’m not can to be speculate help. in going I that think

right working I get understand them shift can understand think to thing, what can with help to thing moving back team the a we on for opportunities it’s what one assets do the means you, got do understanding, recover, number team And on to up we aggressively positioned to our to working we work we we and recovery. means, that to in positioned to we if now emerging, shift marketplace my tell customers them with right can right-size our what understand laser discussion. is them way That can my there’s quicker. them I this that can to, the shift. and in these I’ve leverage type do lead with that with It’s it’s them that recovery. franchise it they’re how truck. with a advantaged are them And ramp as of to was this a does focused frankly, now their as was

David Vernon

you. thank Alright,

Operator

comes the is ahead. of from Please Please line go Bascome Majors ahead. Your question Majors, your line from Susquehanna. open. go Bascome last

Bascome Majors

just payment taking you’re have impacted the can comment terms you for heard beyond credit if risk, what’s customers by today? and assessing any customers generally question. happening maybe how where guys both Thanks. Nadeem, been have markets within on thanks energy from and and disproportionately requests relaxing Yes, you my see may

Nadeem Velani

Sure.

is we this environment. expect which in some So kind have yes, I would you – mean had of requests,

of credit manages the the that that’s and terms service team forth our in risk. our to an payment with associated our terms think right ways does setting excellent job customers I so right on-boarding with facility customer the Winnipeg

ongoing taking Now and we to we’re as payments sure undue evolve, risk. do on on not basis monitor make an things

we where on customers. with in are, point eye So at an that, through are how of I’m how comfortable comfortable, are managing and this terms we we we communicating are keeping

So that There I don’t customers see help be need. to a material risk even are in could opportunities whatsoever.

directly relationship doing what’s previous that I customers. and and around I is was questions, think help well had our which think government that does support just government their us to one customers the with doing, Vernon think credit of David support things as I the the to and some

are we So think and we I that managing watching are something it’s closely.

Bascome Majors

you. Thank

Nadeem Velani

Thanks, Bascome.

Operator

I are back time and the We turn Mr. will to Keith of over call out Creel.

Keith Creel

Well, Okay. these time for unprecedented I with where started, during us to with today thanking let finish taking me spend times.

are we a We the say this, me are for at Let we in are bumpy ride, we CP, understand in realists. storm.

fueling only not the very years a this by same industry benefited certainly insights didn’t guidance. confidence the think we’ve with result put today, on want and the that that, we our just most for through intend storm, business this got thank our unique transparency into we leading and start us, our investors denying before after, trust responsibility got in in all and to the they We to provide Thank first reward the to opportunities you soon. unique for a but I that stay best everyone been time, that for initiatives we the confidence. many and not unique the but you. look quarter. can. this, best, healthy next wish talk our mix. unique self-help we We forward are to that results at after We’ve it’s mix, We with quarter and our the to sharing want working will We’ve

Operator

conference today’s call. concludes This

now disconnect. may You

Canadian Pacific Railway Limited (CP) 21 Apr 202020 Q1 Earnings call transcript