CP - Earnings call transcript Q2 2020 | Canadian Pacific Railway Limited

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Operator

Good morning. My name is Jason, and I will be your conference operator today. At this time, I would like to welcome everyone to Canadian Pacific's Second 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

us and you, you Thank morning, everyone Good for Jason. joining today. thank

Financial U.S. Before we you presentation risks may forward-looking described contains regulators. actual X uncertainties Marketing slide filed and in Executive results could President slide Q&A. today time, Officer; would our to Creel. and and with and It's and the The Velani, Officer. pleasure questions And of you actual CEO; measures, that follow-up materially. be on our non-GAAP Nadeem questions. that John results and in could Vice introduce in that Chief release X. influence to now if Executive to followed Chief Creel, President your afterward here today's on any we'd and you remarks presentation and information MD&A the This Vice Keith Mr. differ will happy I with formal interest which begin, be to by want remind press The and other one limit the me Brooks, is for factors appreciate department are my outlined contains Keith Relations Investor President follow-up also Canadian are With

Keith Creel

Calgary. in day Beautiful morning. Good Maeghan. Thanks,

our my up unique of by that for ensuring that applauding continue continue supplies of to pride, Rest and amount can culture throughout continued are start day. employees these for the our lightly. our I'd they to to each shareholders. that U.S. you CP are And leader and men assured that These communities with and we it's their heroes during dependent produced continuing to foremost, commitment employees and be fuel the us that's it's pride and CP my and I'm it's accountability a to and and as and strength that for make to of are and Let Canada of with serve a performance. of supplying comments tell grateful I North first able these union true and honor upon our family people not XX,XXX be serve this me CP none women every for customers, been at delivered. remiss They performance this their American leaders economy, need. thank our to strong family. tremendous the delivering that a to time the extraordinary especially have take responsibility begin

has spite bottom and from with for So of to on the and rose extremely is consistently remain that that upside of and operating XX%. John performance QX that that ratio operating our you Fuel level markets, to record the the are of. agree we're our new the up the and customers X% number guidance record set the record second This weights PSR performance respectively. our testament will this grain again we've end. on up the efficiency, all for And that. record nimble. They adjusted best quarter In across board. QX can lockstep lengths – an the in at and volumes, what I I'm Mark you, the strong challenge both gallons best our throughout all-time works rapid to enabled as per on said which the productivity change that results versus quarter. in team and tell of enabled in beginning records XXXX a And color demand provides you, us would proud They he a an a to X% today's Train downside. model company levels is strong all-time Locomotive the the of and resources GTMs, to as into sure the year. enabled results. potash X.XX the X% operating tell a last operating

rest with doubled day in traffic appreciate to solution team in this more with day that never women, in drive of men well, that but The delivers to the event. doing get day volumes to new this on culture to to time this to know much that in are the updated to team. and release To on also for working press last challenged a a that's today company. learn our times. as It's be best operating the last the on and out. went laurels the We get the out, would strong also not full working is the to we'll the challenged we In executive at and to spend buyback than been when out I key their the out. day leadership You key to get individual to the organization. guided the our order our best company There's for on out women this better and you results full We're these market it's leave the leaders very are also And intend And positive folks leaders we freight closer customers they're the people, And moving assured. the leadership to and have to homes emerge they improve. growth opportunities unique home it and development. protect on entire that, sales develop realize improve, throughout on our John development. stronger. tough not guidance trains we It's time and down tension happening. team, of this keeping company day and as work to enabler of railroad, a note office, we in increasing to And to call, our CP been others. additional especially That's This due I to our on these in about stronger the and come exactly our mine a focus performance resting provided our that We've the and team innovative development fuels transportation to this a challenged ways team on our I investment culture That's of and sustaining legacy we solver pandemic, our constructive the year. that sustainability. get key business, men work, restarting their and for customers the and what's ground. home team continuing improve call to CP leadership, have only our and commitment that's the accountability, how said network, earnings at focused that to day certainly on all the find leaders earnings just that heroes as can the We've potential. people, they special the of can what continue company in through their people potential from that assured we for dividend. that's the its our we've each date, problem gets not moving through those livelihood Collectively realize been made so with let a in the those continue working marketing and performance. following day we the day are training them customer and

stronger. We're defense and to through on getting We're fair the these close we're better the stronger developing getting offense is say, customer. our challenging railroaders. turbulent the So team on to been becoming It's not we've times. leaders

that color to a going over now to turn said, with to it on So more the I'm bit provide John markets.

John Brooks

you, Keith and morning, everyone. Thank All good right.

down total our I'll to our you was $X.X billion. color quarter basis. quarter briefly and FX was performance major second highlight some X% to revenues lines speak RTMs were on down XX%. while results fuel on up currency-adjusted were business. guys of X%. I'll So the X%, provide a down this

Revenues once grain. who testament covered crews, we Keith's starting crop expansions train benefit echoing metric the have our proof another to CP by are and also the high-efficiency delivering team with our on up X% I in year So and is with the for investment were the our quarter. congratulating X%. CP developments customers start Volumes while again, The grain on comments X.X want and leveraging tons and all tonnage existing XXX,XXX train of metric XXXX of tons. Canadian quarter unique of capacity. marked franchise consecutive beat the through million tons customers the record This our a grain network at for hundreds are our by the XXXX-foot The this dollars record in QX moved results for third investing enable to grain. record previous grain incremental all-time X.X and up starts millions and to new grain million partnerships hopper product. Canadian of

exclusive announcements about to capable South high-throughput three Vancouver and along capacity. Manitoba on to pleased at terminal export this service enhance undergoing will handling South throughput decision Viterra's at Terminals Vancouver terminal the XXXX-foot Grain to the of pioneer extremely of CP I'm with performance to on this elevators Alliance their the work elevator both And move Grain XXXX-foot expansions recent to Shore support a are at served greenfield a the operation excited and of of on recent more roster be CP. new exclusively will of their model a our with our be We its also by Shore new trains. terminals Port announcement which XX/X Paterson the

crop be than the be Carryout to we be million is are to ahead, tons. and crop expect and to is XXXX expecting from maturing looking this of it grain greater average the well remainder the year. expected busy our to close metric customers XX Now

in were potash front volumes we the potash X%. in revenues and materialized expected strength the The up quarter. On

lengths On their and Portland terminal cars supported execution increasing the strong the record XXX in export including side team train to QX. Canpotex with continued performance a to collaboration

to side, application in due remains I seasons domestic The the for shippers. spring potash excellent remains On the double-digit comps poor our delivered high had and as back outlook growth after favorable. expect conditions we half demand service and weather are positive strong consecutive and for

franchise year-to-date of into commodities that see continue of the to momentum than that the we've up book. the We of agricultural our XX% year. continue our back resiliency make -- to across half continue I greater to expect strong seen

Revenues limited mines ongoing a port expansion down of the declined capacity at coal. volumes to production were result to down as volumes coal challenges on at the XX%, softer the quarter. the Moving and Neptune to COVID, Canadian while were XX% related due demand on terminal.

the through energy damages. you We to expect be approximately a carloads, is contracts of XXXX the and volumes year-over-year. portfolio to than September. of driven The what significant plastics lower These volumes is exactly QX down inherent The expected about them fell tonnage designed decline volume volumes. from revenue saw and to and difference XX%. protected to did revenue X%, shut end Neptune while XXXX declined we be between crude-by-rail crude through CP told do. liquidated in XX% They Crude volatility X,XXX down chemicals by

volumes the crude volatility the Construction unit minimal the underway in recovery in the expect well is by completion year. by our half diluent Alberta. assumes through Hardisty, in we guidance strengthens XXXX. CP exclusively The on only continued stability located crude of offered midyear conviction and back the market Our

the all manufacturing This expected XX% are and aggregates in partners' outpaced down was was crude to as restocking Automotive other sectors a due shut-in production. pandemic declined Steel as shutdown. the Now were vehicle decliner quarter volumes resulting and Revenues our XX%. in to construction and were all as quarter XX%, driven gradually the certainly big turning while inputs, were sand it market by of American through down industrial the result down restart, declines Since MMC. the a challenged by were revenues expectations. efforts construction and volumes recover have frac QX, reopen. which to sales XX% North

our comes move aboard. customers in Glovis lot We beginning Vancouver into a two have new as X. auto beginning QX, compounds our Calgary momentum and of now and FCA as welcome September positive at space auto we board on we welcome July right We X

optionality purpose-built Through execution we CP to our launched unique have provide local for our We more market our playbook, and of strategic continue compounds across network to new land utilize four partners. our the automotive unmatched giving customers holdings compounds access.

Quarterly to on result moving intermodal. were consumer X% North softer down volumes America. across as of Finally, a overall demand

has of in trough movement the in On June, refrigerator point product. temperature-controlled week RTMs we've from in front, the our since From a and performed domestic seen our demand intermodal our our returned XX% to well increase TempPro essential the in levels. last to we goods quarter pre-pandemic

leading On the we XX% the a our in retail our had retail performances quarter we've partners as business, strong nearly with RTMs our side trough. from of surge since through move

the the helped On franchise, not did We of year-over-year. to us stay expected international close which it volume see blank remained sailings flat resilient.

new the access to throughout This a capacity New West Saint This looking a the undergoing Brunswick of that be project Now competitive is existing forward, with Port excited million of partnerships route John. extremely Canadian about fastest our our with CMQ a to ports shortest am through Port service the the partners offers business port Eastern low-cost Atlantic The Saint of and through combined CP's compelling customers that World, DP our option. region. jewel offers project. I potential modernization Eastern crown the John new the to has strong over $XXX and

close me the building on pleased and our company that broad-based our adapted, sales outlets customers. saying marketing has out marketing opportunities has we as network, blitzing cold to pipeline and We've That's this sales the team I'm said, in years laurels. a Keith let calling, the relationships team have on we finding for and by the PSR had our sales strong been So of territories resting team new have how come. culture and the and team. for not with

challenges last weeks but our comps, improve. relates the as environment several next year, to given volume performance the look, industry-leading to present strong continues So will it

approach Nadeem. forward, our to that, With playbooks, we with over look picking the our outperform pass to enabling we As disciplined will partners, our continue executing it to us industry. I'll

Nadeem Velani

good Great. Thanks, morning. and John

as Keith this once As operating railroaders has again challenge, challenging our industry-leading mentioned, results. demonstrated to John been the rose by team quarter, a this of and but

high OR, in a with new I've Overall, industry commitment people in ratio again. exceed to decreased As managed operating points the with surprised this and ratio to and peer. milestone. report an on gives a mid-XXs XX% to XX%, a expectations this is QX, and is our annual operating quarter a can When down to gap to OR with the high with team been of it my confidence eventually significant second you XX years basis I widen out exceptional continue for sub-XX which but record. me CP significantly, quarter, went a level a Canadian basis a this volumes quarter achieving XXX once the our

million wasn't seeing and weighed gains definitely lower from comp material a side, The few headcount $XX an decrease The employees significant operating annual a expense more on Stock-based be were as but furloughed the to efficiency Comp the expense. down on approximately $XX basis of an Moving of starts notable weights. was million items the we crew last benefits primary or control headwind, expense lower on increased cost XX% to you're and the basis. at versus truly year. train XX% on and results structural. speaking I'll is on FX-adjusted drivers

with which program expect fuel in we role. QX replicate big benefit played We the based in incentive deal lag as best-ever fuel QX. $X continue also a and million to A $XXX paid as on Lower in expense decrease record $XX second This do year-to-date. Fuel quarterly the our year-over-year. from result QX, the strong to well fuel quarter a million also surcharge results our as a in of headwind to accrue decreased our continue volume efficiency. marked a million, not compensation a of price XX% pension efficiency

XX% reduced gas increase fuel locomotives, million The quarter carbon. casualty a a Optimizer volume costs despite continue to model the in and a testament effectively approximately by million what the a $XXX over average. to the modernizing is PSR $XX Depreciation Foran This XXXX results. I adapted an to million controlled Class base. the environment. $XX year-over-year. and asset from the services Our does X% land management a higher true result grain This tons our was team headwind greenhouse metric lapping current avoiding X,XXX-foot CP of in on than team the higher locomotive expense XX sale and million, Mark efficiency these a fuel XXXX, relatively operating drive team million, closely achieve accident. my as asset Since and flat $XXX and its with Mike is. Redd of work to railroad finance and investment by has better John's of in Trip not happen team XX%, intensity Purchased team spend was

related recovery components expense was were a discount foreign tax due of recovery of million Alberta corporate out line, periodic in tax impacted now rate. XX%, X% primarily dollar XX%, income a an diluted by net result statement, year. or for or Rounding declined of other driven lower million to the a XXXX, below rate negatively the up primarily expense rate. debt. the approximately in benefit quarter. as $XX expect to the QX increased Interest XX.X% Income tax exchange adjusted effective We U.S. changes the Moving $XX EPS on X%, in

the on operations the free on from XX% statement, cash quarter. to cash increased Moving

in as the forward. adapt We change moves are continuing volumes economy and to real-time

stretching capital greater efficiency. through dollars our out We are

fact, for we experienced engineering as highs all-time by measured time In efficiency block availability.

XXXX. run six and were not compared access only days Year-to-date, complete they had This efficiently XX%. days the has capital our our to zero teams able shows are days block where crews able to efficiency zero XX QX engineering work schedule. as our trains were track on quarter to engineering This block which could in their improved

collaboratively the return billion company. and XX.X%. for committed capital for capital achieve teams We the significant engineering managing remain spend efficiencies. envelope our capital year enable operating we huge deployment of capital $X.X by of to So credit are invested the teams working continue to capital to it's us evidenced and a to benefit to are of the Rest long-term adjusted the as discipline assured, maintain on the our on who

final a perspective. to strength position As liquidity we in be a of continue from a note,

XXth, our $X.X billion outstanding. undrawn June of we commercial was As paper and revolver no had

in XX% managing with path a adjusted of and rate announced by XX%. on dividend to XXXX, an proactively increase are the confident dividend growth our we feel XX% to of have approximately our payout Since led the ratio yesterday in industry to growth We XX%. liquidity decision annual compound we which

returns continue XX% have is remain the restarted We'll which to balance shareholder disciplined buyback our and We and the program opportunistic will about complete. buyback. on

to be of strong turn any performance confident wrap the the that year our The better our fourth As quarter. growth confidence clarity our and back year it proof point invested to With have I'll that capital. I up. to PSR Keith spoke in and increased the our for the environment this is year. works I'm given to year-to-date half things back in model think consecutive train XXXX guidance us any can't over increase and will truly our Keith accident ratio, on of EPS the than on one it leading industry in growth to that performance EPS return

Keith Creel

time open Nadeem over And John up into questions you, turn it I discussion. save the to balance of our think and we'll color. go Thank Okay. the operator the to for the and for

Operator

Chappell comes from Evercore of the [Operator first line ISI. Instructions] Jon Your from question

open. line is Your

Jon Chappell

everyone. good and morning, you Thank

John Brooks

morning. Good

Jon Chappell

the some are wanted Clearly auto feel the much on low. event commentary about I business inventories of blank speak not lower in you plants America the seems of on XQ of those half of sailings do reversing. auto kind and about second John, of much a North if customers the are segments? intermodal potentially side. very you ask the The how And are to to entire to cranking. only? your the And the the duration how be When you year of they both made restocking

John Brooks

Yes.

uncertainty. continuing of comments Look navigate like Jon. everybody So else, a couple this maybe on that, to we're

the you of answer based manufacturers, of estimating the sort on next So months, all pandemic guessing over six it's retailers, the the that. know looks if like what auto and we're this

is and seen definitely stabilize have we of we sort QX. tailwind this forget, nice we that and right we're I probably move seeing ramp-up. to And initial the recovery see areas said, continue. us. our those we half pace then as see that auto now, QX think surge a join be being gentle we're to that to that our as don't to are Certainly, to space which going is doesn't continue that in quarter, or bump significant Glovis But through into back going an auto the going franchise probably for expectation a maintain see Now of

Jon Chappell

the Okay. That’s great. feedback. Thank you for

Operator

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

Your line open. is

Tom Wadewitz

in train to expect volumes volumes carload? lengths? unit the and back achieve keep if up already changes leverage How in you've kind performance congratulations on did morning operating training perhaps would to scheduled quarter order that see offer you Wanted versus well think in expanding how the in in Any Good that about strong on expanded Do think quarter. some with so length to a increase thoughts X% could that coming we about really Yes. thoughts going that train the come and number you do about Keith you made that given the just train operating you as length? given back? of leverage you

Keith Creel

our opportunity you it. challenged a adjust you consolidate, synergies. obviously take get were you team. with And with a demanding company. They least and which person, was my it and as an level tweak to in me a I've some pretty let I'm confidence lot listen, in start Well, Mark high fact probably company, and pretty at a that built do for got the demand got of plan, known expectations realize of and these different pretty our and and

weights. help did train help So train did with with lengths. That that

through change. go and but business as we through monumental X%, these won't those see challenges. of or mean, X% So change. comes you some as processes, going adjust become might you to I We aren't go the a the things, we but these back, see smarter you'll expectations

that to in getting changes say full things a that moved last operational of is the offset And to potash for or we tonnage We a the XXXX, that to when speak differently. the we car pandemic, DP, running XXX moved This will impact step. taken that Portland. to potash. the year trains We some maybe were down. we Vancouver. with of trains to prior We've trains moved we specifically it I'll running lot even running XXX a of next lot were and car Portland. degradation Canpotex. today. we're model I XXX XXX running And Vancouver We're the of made time partnership in upside Some flipped We've car car trains to

So into better DNA. This leaders those could improve. a smarter see record, ourselves where we've of maintain what pinch is year. network. challenge in doing. just new see look and to little better get the every We woven a changes we're to not lot PSR. incremental you one eight are, become that's This sustain from our because understand years but as our fundamental I into a rest detail. we time, attack we our the you those to degradation And me tweaking, issues more and track to continual at continue made productivity points we We railroaders, get know and and isn't process We're improvement. gains It's us. gives into we've of going assured you're just confidence that much the story. might But

Operator

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

open. is Your line

Steve Hansen

Yes, guys. good morning

for question the outlook. John maybe quick potash on you a Just

the double-digits described through half you back think year. I

contracts of easier. I'm curious end the start do have getting exporters through Some right when visibility comps any the if signed just really larger of the you year through have October. the

flow to Thanks. cadence how would Just any that will sort that of great. around continue context be to as

John Brooks

Yes, Steve.

to back think to September, take start saw you last year, we little in you saw decline falloff. August. pretty of a dramatic And bit if So a then place

October. we're confident to September certainly hit a I'm as we spike pretty big see going and So

Canpotex, Now on discussions remain think I very marketplace. with bullish the they

of -- new back off like as opened through extensions, cover with think, those areas work they've markets the I right, half worked there resilient strengthened are will You're other through have They've they've some very into negotiations But such up they and the been that relationships year. China. contract as India. that anything, to

And optimistic the end remain through so they Steve. remain I to year this think that is of going right thing strong quite the

Tom Wadewitz

Appreciate it guys. Great quarter. Thanks.

Operator

Our line Morgan of Shanker from the next Ravi question comes from Stanley.

Your open. line is

Ravi Shanker

offered suspect hands. Keith you everyone. this I and earnings you'd quarter, down morning quarter that ago had have Good both taken a X% Nadeem, I with Thanks. if

So we a just performing OR through XQ if limit something and kind a of guys we challenging as this an year? can say, just of this that context the is quarter, achievable the this, think you we as take or means back mean, well I XXXX step be continues can is did performance early they we downside that in which in cadence as hey, at XQ, do a XX% if recovery of the do here come, and to the look OR of what June, like mid-XXs volume that quarter of to saw the remarkably in next in second half extremely

Nadeem Velani

Well.

I phenomenal quarter. think it a was

mean, This -- This -- when time long over took Keith unique and I I been was think, CEO, I he as nothing it's team mean this is about has it. coming. a This built there this an in wasn't team have just the kind benches the We the behind you is overnight best building, all fix. of people the that industry. with us building team strong know. beyond

the from around outlook to the you say gives. we as so, environment quarter ahead of when over the environment our saw view, milestone is as OR say, take of to And and on, and what collaborative put operating bit But, this on together you have as expenses next a we're we and of in and adjust our very as us, look team and I headwind ever and deliver. we've a our downside this at adjust our overcome finance been. the what what a very leverage, your creates bullish mean, as can can of probably And revenue of markets our new volume two and John is. environment would And adjust -- cost team scenario I obviously asset we'll management I point operating perspective this point quarter upside, we're we the a it new when years can kind a what to on kind -- proactive is, why think a team so the forth saw

I XXXX. continue of have have next Now, now industry we hit the July think we want OR don't improve the We'll But OR a this lot in our certainly do OR. to pandemic year. will the I of mid-XXs that I to right say middle confidence can in best a that year? of in a

continue have to We and to potential in XXXX improve XXXX. the

And -- feel very feel cash revenue free about conversion return about our feel on excellent feel good so good cost our capital. about I invested about story, our our story. story. great I I I

that outlook this I bucket when look company can the I of So what think every of positive. deliver, this is at extremely performance

Operator

the line Your Fadi next from of comes Chamoun question from BMO.

Your open. line is

Fadi Chamoun

you. Thank Yes. Good morning everyone.

of a what of supply see leaning just Saint look just on you're understand kind a where you Saint is revenue kind I made kind the using or a different you you opportunity leaning is from do think kind the coming out Saint XXXX perspective traffic and East. John of you would kind kind that mean, of, be from I So, Is on your going? do question around we materializes there. that be And XXXX and where opportunity opportunity off John chain your wanted market like of, comment it? Saint perspective? that a see to competitor through John of originating like this for this the where would John port

Keith Creel

turn on to Fadi John tidewater, to if lead lean I'll say it over some color. to level. I'm high provide XXX-mile And me a Let that's at a things to couple then, going a port on the But I'm There's advantage. a market. route going one to of to closest

the a gets create our sight we'll of service unparalleled. railroad there crow that flies is the a take best day, line with You the on faster And service. you as market

development, that's in to competitive and I the with conceptual province that on it's that's XXXX won and New that look guess out being Saint opportunities Brunswick, confident aren't We've If with These forward collaborating we are a collaborating planned, two come know now these based are XXXX taken options. John, I customers. So had going collaborating one, are commodities. the that feel our all steps over that's ideas. what saying, got business of there infrastructure been business, being of I with Port invested, space being the from

have Customers And You track you on tell are can something to that of when had from this has that's you. team truck. and will you And reliability record competitor the get those or a step I the service lot solutions trucks our truck-like a in there standpoint had of the competitive road. established. you with time, you into

domestic the Saint of across a celebrating in more it's not year a I'm we from that John. by LPG have XXXX, would that's automobiles of Saint things you, across-the-board that And moving be and just the I tell developing, convicted. next fuels. if would tell So disappointed if John. don't or are to in time steamship wouldn't of flying, forest if given the line I'd be I end the lot products This I'll destination Port flag be whole be opportunity. extremely I'd a the board. moving in we're got disappointed, you, are we It's disappointed Port

You're the for to competition that's transportation win interjecting products allow market a get great a success. customers And them and faster railway, to compete market share. that best-in-class solutions more to powerful and recipe our

we do do because it, going I going – happen. company. north the toward conviction I that And my that million it we John? it, by we little annual believe going this $XX not is we're we're I'm something, say we're we of $XXX U.S. to to in saying CP hope execute. when because XXXX think be can it, So to in And railroad you it since say we'll and bought end working margins. and well of at revenue dollars it, million at

John Brooks

of years terms of bucket also Keith Port we're You you haven't South whole well. Southeast a over team about Coby that, and opportunities those in and well the excited more for there opportunities built access let's category the And attacking into think a two, of what that surface us India, new talked and said CMQ past, a Maine, those consumer a like. team I in sets merchandise know, forget, I categories. singles second part of three our the will seeing prospects look opportunities. frankly I've that potentially we've lot partners. with as like of America and in know, goods doubles manufacturing John about Bullard, of Asia, we shift what vigorously. scratched places lot more Fadi, And are Saint not up of add port line that it near-shoring and even the U.S. to and Searsport – his might over gets the up And last us hit that, believe I of short and these opens the all

things we're the all understatement. opportunity bullish an Keith beyond, is to So spoke on say that that, about

Operator

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

open. is line Your

Konark Gupta

Good morning, everyone. Thanks for question. taking my

guess. your for key some revised for understand assumptions operating ratio, full to guidance year. I behind the wanted growth Just for Especially, EPS

comps You have some assumptions last and then What still kind back in obviously of volume half relatively for kind tougher the versus the expect especially crude-by-rail the frac down you do And sand there? are half volumes environment, Thanks. here. year. second of in

Nadeem Velani

outlook as crude-by-rail think I into baked there's guidance. a our John not So, lot that of we've mentioned, on

we're is you're actually QX, Certainly, our difficult So stronger XX%, about than we originally which a it's the We've far expected of guidance we're first bit down very very volumes. in thought. minimal XX%, RTMs QX performing half have down which we in kept as on comps X%. seeing, is so

– takeout I very on his operating side. exceptionally what's by cost the driving the mean, cost on the are upside that's we're And and and well strong opportunities our around Mark performance really EPS. the the it's team. performing So, led

Operator

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

Chris Wetherbee

maybe bit of difficult I Yeah. where what on Hey, season of go we've tell in confidence intermodal. to it's little the could as of a some inventories morning. demand a peak consumer the sort of look through level great. Obviously, rest is those you hit year. but better, guess, Thanks. little seen sort the we Good numbers John, are and

give later what they you're dig hearing terms this kind little intermodal? So any in of color – deeper from be a a can little of or kind year might the customers? you of setting for How up on bit

John Brooks

side, domestic On Chris? the

Chris Wetherbee

International.

John Brooks

International? Yeah. Okay.

next I'd little the QX, to So, and all back continue bit We're that's at a bit I on a those and but a move does the sailings a we think in of pull what there's little happen of all to September. the our America. in your you I we we for see to continue schedule blank now say seeing, weeks forward retails of our uncertainty this are this the what August see, maybe sectors of continue then point exactly now into the across say what of think But on lines overall the and back. the we seeing bit that right either, a pandemic coming I methodically I and right and And how be Look, the of pandemic. push volumes sort this on steamship little look space have water. strong was out going as dependent North and surge consumer is QX with to what's think opening here two-week with forecast normalization I still would encouraging. been looking July, laid lot depending sort into

Operator

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

Walter Spracklin

Good Thanks morning very everyone. much.

Obviously, going parts year. question for guess lot have of of my here a moving I here your some John with line yields into next So, you items. on is

below sure price? additive -- core in I the referring So, wanted coming frame on I'm yield be to -- or that's question to to yield core could minimum here price, you've to right negative I'm revenue or cap grain expect you relative for the just your make If getting press. I the down core you. got do or above

switching Teck got over. You've your volumes

You've come the maybe next off year, got liquidated damages that year might later.

enhancing So yield your if core looking all I'm you price for or next just moving to to year. see as see parts. detrimental those

John Brooks

-- our existing mean trains. sort whether been spoke to leverage picking strategy the I those core our maximizing on of lengths of partners has Well train capacity and or Keith

this. that responses it's we initial tell think we've been the how And year, front, large out Walter continue part this able facing. you tough they've deliver. some discussions to tied on all my with I'll me, to performed challenges cases despite margin sales is trust of compensation a to very been and uncertainty. see of the first I to pricing I we've So, been the been discipline in remind half there. opportunity I've their go can the pleased with team I'll customers, But given is you say price on --

ramp to and of to And where the actually pushing half year, up some discipline with to sector back from challenges other rail think on recovery I across to we're look also I volume, think I an maybe these of I As tighten for in acceleration capacity some that think opportunity the price as the lanes we're roads maybe at. areas try the I'm trucking front. continues seeing back leads and certainly as

Nadeem Velani

as you which is bullish just as year, to automotive be very if volumes next going outlook overall And we Nadeem. it's a add, think about have yield. far I'll to Walter, our beneficial

to to the beneficial of that's revenues some off As going yield. be Teck roll

now. way So, impact yield from detrimental long see net-net question. don't too it's a to think I much I certainly But on your

Operator

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

Ken Hoexter

good and congrats Great, great morning really see on and to operating performance, the impressive. great

out about the Just of maybe talk structural your downturn. change

about Your of sidings? still is Any CapEx weights? anything train guess you closing I to lengths thoughts the the near question, room increase revenues? a Is XX% cash CapEx through that still? moving further to to given on free this peer just as this and or some upgrade you've thinking downturn, the And flow facilities talked Are in given done there see that. like yards wanted if really improvement of

Keith Creel

say improvements. have been company it non-pandemic of and driving high I'll very do or is pandemic level. a this at always -- for at Part me doing rationalizing let Ken, productivity what and we

like your we've and we respond have team most it as So, as you served quantum the you done, is any it's several responded bring through far -- consolidate Mark ago. lowest productive yards shedding we've best years today down, changing terminals do traffic structure you facilities. that when at But your changes what where and into cost gone what

over last I So, just XXXX redoing came yard. the spent we've in Calgary, guess in -- point lot our money of here -- case in in it a online actually

closed do It's back we XXXX. was that locations. So satellite because is We other to down PSR when in what not in came Calgary back but switch was first hump yard we cars. had this we our -- to larger "Listen we and the said the with have, place do a switching all priorities optimizing journey we started that outside network, may Calgary extensive

consolidate. Let's

invest. Let's

Let's what very is XXXX through what is and which optimizing this productive Mark done has which been in we've create facility" a pandemic.

us. a So blessing that's for been

to more was So terminal grain evolve we'll structurally in grain haul X,XXX per trains. to an as of elevators that's I earlier, we retain. built becoming those that about got this the We've our got modernized. increase green a change that that cars of and are that fleet X,XXX-foot best-in-class That's industry -- Ontario by end again, this to being excess better coming in length I think lengths. for that asked to question that Shore. Canadian that car, can we'll program. we model. structural drive And We our of train Even in be North of operating this now productivity. that We've a space out cars driving us GX company. innovation shorter the facilitate led was of Hamilton, launch the allow year, of the that's the up XX% on We're we're X,XXX-foot

mix as in that program on stick. work opportunities go the The match full elevators forward just our grain make make the on bullish realize and productivity well the see to Shore be more we baked North continue in year And increases we'll get GX these by our of to this in. to continues. structural you margins, on very the our as Shore this of about capacity efficiencies as of we'll the I'm the X,XXX-foot changes So and these South will performance XX% end a that year be and and

that we'll do on well. to based our expectations, So we again, that strong pretty fundamentals darn and it do and conviction do continue sure educated we're we're at high not and pretty what efficient but perfect,

Nadeem Velani

track Yes. side, some my I'm extremely saying as And much to able been just more commentary. to efficient with on advantage CapEx be on we've in pleased time of we're what I take deliver mentioned the Ken,

capacity taking volumes this in of we're will the initiatives a resilient, build volumes opportunity safety like the we can X,XXX-foot that that very to seen support network spoke around increase that forth, that look and initiatives some this is of so build look with that so the down And unique years can network network. down model many Keith that to we our and haven't to a our

that's XX, dollars And so to it's from us call -- set and revenue months future for talked can the over to the and it's significant those that economy this capital years, the going about. up it Keith in or something next is say, I'll have going advantage expense John and well to -- rebound opportunities extremely going take of these some pull-forward of XX we

we model, of bit So a it's different to different. bit a a but be tend

Ken Hoexter

Keith. Thanks,

Keith Creel

you, Ken. Thank

Operator

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

line Your open. is

Benoit Poirier

in the maybe you that of Nadeem, you And quick very M&A fuel if quantify Thank you much, strong very potential and the be CMQ? congratulations Thank you Could for performance. the little a much. for a very further QX for very Yes. on about talk great? would top could bit lag question

Nadeem Velani

Quantify what?

Maeghan Albiston

Fuel lag.

Keith Creel

lag. Fuel

John Brooks

Fuel lag.

Nadeem Velani

lag benefit it about -- $XX yes, fuel you won't in a the That of see will was I quarter. think in QX. -- million believe I

Keith Creel

maintain focused far to to anything M&A a network, a thing. don't little our to strong there. sheet. of keen team optimizing railroads. that going able going operating be But going to out best-in-class to right this but open move. That's our our always strengths the there's listen a sense, other dilute keep CMQ. that eye. maintain couple immediate. MMA we But -- we're balance to we running we're our nothing and it been are not eyes while. any see complements hesitate if always If want to there's assured, is We're Certainly, or Benoit network which And as busy efforts on to immediate stick and a there, something potential the that's network But rest as Yes. fundamental our I I don't makes have might for to we'll we on now now, us realize right core

Operator

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

Scott Group

morning, Good guys. thanks. Hey,

So…

Keith Creel

Scott. morning, Good

Scott Group

just first of XX%. give directional us some up earnings So on think the expecting? Nadeem any is I color growth chance you you're can half magnitude

worst only the quarter of down X%. Second it

there. third would Thank thoughts So ability to thoughts be again maybe in on just great? And margins the you. then the improve quarter any some

Nadeem Velani

comps, it We into significantly the half I I it don't eases grain on grain a but crop, time. -- start coming first we very of a mentioned have want grain given to get guidance was pretty decent which necessarily. quarterly assuming QX some tougher last then didn't bit a moving there's as for And of year with do do assume. crop wet

very versus QX We we have a ago. as in where comps year were potash easy for well

QX I just so you're being economies And pandemics have what how reacting now the back. assuming been the how stronger we think know than going been coming with see and to QX

for mentioned, in kind QX operating So ratio those things OR far going exact I beyond to I'd given just point better right? that than a the of in see as as OR say, you're guidance So to QX I'd reasons. same

volume performance I than QX. QX think have better in we'll

continue as And me. so surprise team as I've can they pushed to they deliver the far and

there is to Scott. at it that deny Yes. continue I'll And I'm leave that. improve just the not potential to OR? So to going

Keith Creel

of There's you improvement So nature job versus not of could there. last Scott year Nadeem the we sight opportunity We're margin which end line see don't We conservative if get being probably is healthy. for in of our convict there. doing certainly year.

Scott Group

Yeah.

Operator

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

Seldon Clarke

Thanks mix you Hey, efficiency? and trended about highlighted of to morning. just some maybe becomes and to challenging more the Can weights have talk a or productivity how point relates initiatives for it along back Keith question. anything in as there fuel manifest good train mix come Is to those start cars the autos. categories in terms bit lines? maybe a that You adding volume trains of know, little certain where lengths July certain like as

Keith Creel

tell can this. a on keeps you I gift It's that Well, giving.

should look this XX%. morning. points versus Crew almost a up down quarter. you Train what point So this of starts X%. I When Train effectively starts expect. in down RTM People similar almost -- versus your way took this XX up your morning. second XX%. down at lockstep you miles is weight July X%. them XX another assets year as Train this XX%. demand down metrics run length the quick control almost business is and you last and

as and we've know got business start looks what these to already like. plan plan. on, So the back we a come on autos bring We

way for you're some never to trains. We're short tweak. So to to transition this going but there'll plan, to expect be running company the see going look a to

the -- plan a the make execute constantly plan. you you You tweak you plan,

customers. your with communicate You

satisfy. You

And going you're outcome say you the this to do. just is of what do You it.

You're low going get operating to a margin.

we're having complicated. a that's going It's You're growth that to not a And a this service getting drives this in offering. have The is that is execute formula produce stronger company the at comes it. about. it. And perfect, earnings and marketplace complexity get at And service when competitive what every culture necessity right advantage in all but consistently. the can you high day. compelling we the cost low not We're a to great

all to performance We're improvement expect margin still. operational see our operational can well You sit metrics. as as of to in continued improvement not going

you by. going not That's this still passed company. sit You happen at get to

Operator

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

open. is Your line

David Vernon

could much then maybe And this actually we in a plan or for contribution XXXX? Yes. revenue coming to Hey, John here you're crude give year? for liquidated what the for XXXX, back us about back that or Nadeem, from do think recording setup the the that damage you does either fee that that is not sense coming as volume in how

John Brooks

the liquidated run prior you've say not to I continue to see rate the number you're quarters, into David, over specific a we're damages. on is not going seen moves What what if that the to and crude-by-rail, moving So think XXXX. I would I'm that going give

be damages Now XXXX, obviously this liquidated there'll year. that comparables some we're collecting natural given in

this, to and but the the competitor as start-up also to that's is, I moving Now be that freight. significant a know I'd continue that to and we us got much we mid-year, David, -- my DRU line to for this forget don't the equation, going be that rather in we've and expect future. say look we And opportunity said bottom

and So, our team looking shippers, window and that opportunity of close is when it's energy all with working crude going the to for be.

So, Mark work can with the to XXXX. handle and to we able half Redd be in resource year in up to early it back of or team the his

Nadeem Velani

improvement benefit, David, And we as this I saw just as would continue. see year-over-year a it We to wouldn't benefit. one-time don't margin we add. a If one-time expect

Operator

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

Brian Ossenbeck

question. for Thanks taking Hey, good morning. the

a quick crews. one Just on

rest the were callback industry care shorter that see has you and flexible, sure Given in exchange weight, and know expectation able get the to time. to train how the lightly. pretty size you you're volume what Also and give some availability given you bringing I don't were outlook and folks and see do the can callback from us the half on for the been, this some year of for of the back the you making curious back of the crews furlough? on taking

and the So, half just some the recall rate the year. the of in you. Thank back thoughts outlook crew on

Keith Creel

line lockstep. Running this to need employees retain stick some think some be we'll And get at it, me back. business of expect did, and work. and our by to you about I productivity. that CP, for on system-wide. X,XXX back were decided U.S. Let we if those we're of to headcount not the It Canada down bottom to going we that CP if peak. should I we're end important This going furloughed. and pride We call fact our back same the can Unfortunately sort that to the we outlook take the depends that increase We Obviously, folks unique the But to a our just where year. of Trades we We've in in what we employees this the thing mid-single-digits, don't standpoint We'll the Obviously, through that part up ended is is responsibility get overall, about of we're is. of at anyone them. I we to were but crew employees. railroad, -- any the I called do need, again family. so They're to think working to back -- back no drive we work. great and hired hard business those this appropriate most had

as has that those a created have help can as for laid much that to this off. We are crisis responsibility we mitigate impact do this possibly to

maintain increased tell or medical actual So, them. only And with their exchange they get collective do otherwise insurance into care for know mechanism back they I it’d be agreements you to have But that union come incentives all can top their we've required. created wouldn't be whether each to can't we the commitment whether individual a worked details. a also I in it’d we their get our and up unemployment insurance employees that, and not have. would otherwise earlier about They've than committed to because

with gives to instance employees hours. those in agreement come to up of Canada, collective largest The XX XX employed increased committed them for in that we've given benefits back. in back lockstep So, to them Running days percentage those have Trades the come

together. turn everything our about and We're think were around drove company through can crisis the didn't in change about we last restore of the you as of, years first its you tell So financial has listen, honesty, base hard this been partnership. employee as and What growth, together. thing much this you of burned bridges maybe fast rebuilding we've talked on on we've we've I'm the I all And brought in in strength some focused four get three years, that our been focused But a to this relationships. We in turnaround. this right. think past, this proud is culture and the company, about this the most

and We the seen the that leaders have XX relationships we've space. of I've and quite came that the and never, established frankly never with relationships with in my railroading, that of union respect depth our employees trust our years and pride levels that in growth the and

we've again, And have and done. gone they're efforts in not spared in that to employees our perfect protect their we're in and if for you still communities assured, they not a out their this protect we've spared no to Now and we we lives talk them it with you the we're We're go no our in families there's lot and more with the do. effort. now the as us. and expense. operate through to We rest But property livelihood

back. going The to So I respond. just -- business comes we're

people Our ready ready to to as to go I'm them and work can. get as back are we quickly

customers We're will of for shareholder going the see we're going going take We're the produce produce what do. no to different. and our We're to with care do going customer. to Our to going to we employees. we're said

Operator

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

Justin Long

Thanks. on congrats and Good the morning quarter.

Keith Creel

you. Thank

Justin Long

you the ask or pro-forma scenario so. incremental So thinking period? had business some margins. should at Investor if a I of given we look about in we But to we wanted the for Day, kind margins incremental of How If to the margins which XX% go talked multiyear about now structural, looking are a cost-outs are recovery temporary. we've year of this over some about which that incremental be back seen

Nadeem Velani

a it come where volumes it's question, Sure. and depends come react. No, the when Justin. how back I'd back good we volumes how quick and say And the

in able way absorb volumes on a spot to be the good So I think, to we're up. the

of lot side. the things on we've As unique mentioned, labor a Keith done

volumes in place. of take assets a got step will side. have initiatives to bulk the on on We number We've the as that us allow function certainly they come on

and past, incremental that the in fuel with ex-depreciation, would surcharge today. I mentioned margins, and I've stick As XX% comp stock-based

change don't all why equal, else going so would And being I that see forward.

Operator

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

Allison Landry

Thanks and morning. good

the saying risk with complex going there's under constraints. on and without it pipeline the like pressure So the that shutdowns whole but some interesting obviously capacity sounds Bakken goes dynamics in energy is it of

that you Bakken So moving think a again opportunity the with or out start you. Thank these dynamics conversations do producers have potential there's to any play the had intermediaries crude out? of extent and you to

John Brooks

I Allison is. certainly there think Yes.

[indiscernible] Now would shutdown of the the I those the customers courts discussions. in as have generally you active say but know, pretty are the stayed

out don't those half either. just greater. just of some plan Bakken few say, built at all in if our there as Bakken a continue is one bit would is sand lot relates into green to through we shoot frac I dialogue sand to area ramp terms to that and region. last I the ability also into the frac of that it the up some little over of seen But ongoing a QX expect weeks moving we are in have We would I volumes second any movements, say now terms QX. right into our of is to have our And move the

areas, So could built some they're present certainly that both that's But upside. -- watch in. aren't

Operator

next comes from Please question Barclays. from Your David go the line of Zazula ahead.

David Zazula

how John you'd end-markets? taking Nadeem, how maybe bit a versus know for but touched Hi. consumer industrial my on I little intermodal just earlier, talk the you about, given it either contrast change, in a capital CapEx for a or in little Thanks play the about question. that seen might forward. the then, gross strength consumer And how change you're dollar composition thinking a into we've and/or the of moving

John Brooks

reduction I'll latter. now fairly generally with of we've refrigerated products, sailings goods, right and spoke the essential Well, our of bounce retail, as strong blank to. are Look, on market I the that comment movement back of the let the the said, our Nadeem consumer

recovery sort the this by pandemic driven a industrial But as into certainly our board move strong going I to the would certainly and we recover. and say, building pretty across a -- say it's actually the year. through QX. and gradual recovery a see little think has well recovery -- remain slower. optimistic The steel I through We'll frankly little QX been are And pretty created. we industrial products have those be that slower to on UI I that movement sides markets, would the to are of

Nadeem Velani

If what capital capital bit say would hasn't some our XXXX, we've outlook given from we've XXXX forward efficiencies, pulled anything our I talked about just before. our capital probably into changed XXXX. of of some XXXX even

anything if for million through pretty us, investment about a get talked the we $XXX car cars. that's we've investment once so, with hopper significant X,XXX And

the it And moderate so that two $X.X billion. as $X.XX years, CapEx that our see next we to closer you'll call finish billion, over

we good heightened, speak bit but a it's for as today, reason. So

Operator

We are now the out call remarks. turn of over time. for Mr. closing I'll to back Creel,

Keith Creel

exceed XXXX. to low our growth. It's It's cost. if the then, should proud And take as unique today. unique do. be we that proud how away trust And this to that's to PSR years it results, to story take we conviction should do and than we time drive growth, XXXX control you we'll that took Okay. investment said And we're then, do innovated. And create said customers led railroad. This is customers to outstanding work that we're team. should It's us, our in and and what going live not targets. we meet same It's last a And set We've what going in the to year. to reward call seriously. I'll that our Listen, we're be And you day. unique in do sticky we'll we for that you fully We continue That's to breathe We It's world. dedicated we that. as us. thank earnings. to It's afraid the to. able going reward several from it's this every a with We reward expect. that were the you a to solutions works this anything for We've industry what responsibility fully our these do. were innovative drive going to from network a partner what something do line our employees be It's at ago. is other unique. listen this going within years that woven that, PSR a to our We say, we That's sight expect producing a we pivoted this it. expect that We of And of able we're story. Well, to your we're to shareholders the growth three company. them. DNA. and about team set results. to model It's

your our you look to sharing Everyone when time thank stay Take So third quarter for results, time. appropriate. forward healthy. And the is we care.

Operator

That conference call. concludes today's

may disconnect. You now

Canadian Pacific Railway Limited (CP) 22 Jul 202020 Q2 Earnings call transcript