Earnings call transcript Q2 2023

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Operator

Good afternoon. My name is Leo and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC’s Second Quarter 2023 Conference Call. The slides accompanying today’s call are available at investor.cpkcr.com. All lines have been placed in mute to prevent any background noise. Instructions] [Operator

like and de conference. Treasurer now President, Assistant introduce Relations Investor to to would Bruyn, Chris Vice I begin the

Chris de Bruyn

you, everyone us afternoon, Leo. you Thank joining for and today. thank Good

and to with on Before contain we information. results the Slide influence other X differ may actual you and release presentation The uncertainties, that contains in Actual risks, remind in materially. factors begin, filed forward-looking this results also the want MD&A I could are press regulated non-GAAP described outlined and are U.S. which presentation Canadian today’s we’ll in performance our This X. some Slide to supplemental operating discussion note investor.cpkcr.com focus quarterly measures Please available and regulators. on there at on. data of -- addition combined financials

Creel, John Operating and Brooks, Officer; Executive Chief here Chief Executive and our is and Mark our Velani, and Vice-President me Executive our Officer; President Chief Nadeem today and Financial Redd, Officer. Marketing Vice Keith President Vice President Chief Officer; With Executive

be is would It appreciate Mr. Formal remarks limit and we of to our one. you to President followed interest the will Creel. introduce questions CEO, your my if time, pleasure now Keith In Q&A. by

Keith Creel

afternoon. and Chris thanks Hey good

orders start bringing been our family me and across other. each together, customers that [Indiscernible] two CPKC Let so America all companies hard of thanking North these rail of in by has working that our

quantum the the has the been work imagine of been work has quantum can inspiring. against You monumental, the now effort

EPS last We quarter. quarter volumes John's we the revenues a few $X.X ratio head of the So demand dealt and of operating as a no let’s at that produced moments. more count doubt, so of we quarter, in year, the environment saw that take second billion up quarter, speak with from softer $X.XX. a X% results core In X% to about look going versus in down the and the XX.X% challenging

continued stated release, to the on as out our guidance challenges expect Now laid in that day. quarter, we deliver despite in investor the we press we the to our at

a wins, just about spent XXX extremely into us to team we've accomplished where moments combination, early me talking so work we're forever days to today, this the the we done of old, this of I'm some but the over get point and has proud few looking Let so far. stand what

which Now understandably, results a shortage no but that the pointed of with first in operationally, and challenges. it's foremost, to small transition terms, of combining is those histories, merger feat, networks related two based and skeptics been history most there's the historical no to seamless an but refreshing services industry histories, on think see versus merger the

As a these I bring and would, and paid two more measured dividends. approach its we realistic taken humble networks we’ve to and approach together prudent said,

the identify before instances the making. in continue we're Schneider, announce proud XX areas together, we lands, for that these to bring better said to deals the improve to months Maricold If In operationally. we'll service to opportunity Knight-Swift months several [Ph] customer are networks make in to we and the of XX second some quarter, key

Mexico, as the executed the March unique again transit advertised from across single SLP, single we three this we've as holdings, our well service, consistently our beyond times Chicago which utilize of than service our less each way. fastest time to They XXth, only line including advantages or again is launched and U.S. And on the transit guess and well nations, the $XXX of flagship, line land Mexico. I our Express Canada network spanning XXXX, only Mid-Bus

we we reach again, Now various and United service States. connected to gateway to creating R-Transaction new strategic continue Southeast, with point between offering expand on Texas, CSX, partnership Mexico, hydrogen program. we’ve from also Alabama, sustainability and our front, strategic been on our the not locomotive a in the announced a announced, that the resting our a laurels CSX And the view, within on we expand of

just And hydrogen the in finally, to we we and also utilize plans announced part of portal. renewed, locomotive our the our with Western extended the that contract partnership tech

I'm this not a day the lot tremendous not That to this everyone if challenges, I'm got listen, great macro contract that agreement. the to, a prior to that port. of have strike, result environment, the this been and perfect. with out the on anticipating involved that from get And that’s strike that's the best come So, a assured a of say everything's back-to-work, listen, at result. made and work today orders for should and encouraged tomorrow, we've combination for this ratification said leading applaud possible out since Certain been rail one, that, softer this the is to ratification, outcome of

companies, I’m heading to going on of were to we allow short into also the that last the resources. combination these the thing be is

place in accommodate grow to can't certainly You it. the resources without

if the about long-term reflected but that of of grow to with prepared position a is success. This the of we're see to ensuring quarter right game. end that long company. first coming that not quarter, company in cost this It's day, combined our about in a absolutely this the You'll do. for thing growth VC the is It's

this where early relevant, last poised United amongst Mexico, unique to States, America, is laid is despite in So, continent, growth stages North short-term the the we're network closing, month you're and commerce, well-known out combination, CPKC enabling not some unchanged. Canada. the in a in we outlook in we're be that in headbands of most

and before to Mark Redd markets, that the to speak and and the they I'm numbers. going With elaborate for said, over some turn on do the it operations color John brings Mr. to

Mark Redd

thinking work good best to Keith, delivering I'd like to or customers. professionals continue right. CPKC deliver by performance, service and start All afternoon. members classy you, and on to to Thank to to our operating who our tirelessly

and updates our the management to have in onboard business with pipeline, would the evaluate John long-term team working marketing As asset the them network. use within and to closely discussed opportunities not new

in upon accident a lowest-trained quarter, report safety as continue frequency pleased combined a the X.XX the which I'm comparable company, declined quarter, that, industry-leading our to we QX XX% to a its to at to CPKC, first at X.XX. performance to Turning during build

From our rate area of a personal it FRA in a increased QX to leadership a It's XX% to is focus. space. injury on-going reminder just critical that reportable to It would injury to be to would safety We that have continuing lot a X.XX. perspective, work to a do personal journey. is continue Safety development CPKC key and be success. still of continue

by to in across back and CPKC engage into days engagement an it to and CP the consistent our record process side out in the where we are personal rolled to our the safety we back our across Safe property employees our reduction U.S. Home also help feedback. program in the tapping with introducing entire we drive system. both the Mexico. now improvements XXXX on with injuries along directly strong Home safety designed safety walkabouts initiative XX of property culture In human Safe building safety We Home safety promoting across of across essential in our of the launched have network. property Safe This program is on the but CP first or build culture is

fully already this with top U.S. priority. leadership by KCS through remain gone program. Safety our We to XXX year has based nearly expect two-day pleased I'm who and through operating leaders end. also been have our have program the leaders

Average the year. metrics train comparison and train X% CPKC had last we a is versus weight the to XXXX-XXXX versus I'll Average speak down Turning combine metrics, our speed we is X%. on during if year.

Our average flat is year. length train versus last

versus the X% XXXX. for Our QX improved productivity locomotives

Bringing two the companies of size together CPKC is no in feat.

spent I'm smoothly. is to planning, We a in say preparing lot our pleased that have network of time running advance.

aligning to that, identify in and the ensuring merger, implement network, Keith I for talk These prepared We models cars resource to This into happen. environment heading spoke about improve puts continue practices. that As training. improves. the will also to, efficiencies. to strong we're of volume the we we network a perspective generate by XXX spoke reduced locomotives operating operating us as and from opportunities as we part We're are leverage continuing reduced hiring and improving and about a that position of to the from X,XXX operating efforts yesterday

the three half months first recovery take the confident some of to of to I'm strike in which continue In of made on will achieve. Vancouver, will focused the closing, the have or year. time generate back stay the in We'll make changes we benefits the

With to turn I'll over that, John. it

John Brooks

right. All and everyone. good afternoon, Mark, you Thank

And tell over our done that the just days will capture undoubtedly XXX I'll the as challenges, this volume to CPKC. we broader of I'm while us begin in industry are team compared So has work not us and extremely self-help serve growth said, unique franchise and deliver continue the unlock. and immune the and my recovers. to chain proud to initiatives the you, as well a in French headwinds business to economic strong new we're position Keith to supply put environment certainly

standalone X% year looking while X% On CPKC quarter ago. volumes revenues declined were XX%. quarter versus basis, versus revenue volumes XXXX, a total Now forma on saw CP on reported up CPKC in second a XX% basis at grow the while total pro our a up results, were combined

our expectations was a renewals fuel continues was with book environment headwind pricing with to a on be line FX business. The plus X% quarter. of and X% across the tailwind in inflation

second were down our revenue performance. a revenues Grain on results were Now speak occurred crop the versus we'll for this grain on XXXX. look strong the year-over-year driven in a on by were at basis, the combination improved I'll adjusted harvest quarter volumes year. comparison FX had CPKC down an take X% closer Canadian to quarter, X%. a XXXX-XX volumes

the was lot challenging or the grain drought. that Canada demand U.S. corn moving a offset out of due for of U.S. stronger we to softer comps However, the driven by volume year-over-year into faced by Western by

year's expect to into As return to franchise we this move our growth. harvest, grain I

decline front, Volk Canpotex’s potash that in volumes April. driven XX% on by revenue The at the the failure mechanical quarter. and major happened were volumes quarter in down a in Portland Terminal were On the

online North planning working end not Neptune, terminals Bay, hard with of meantime, Thunder Canpotex America. to a are across variety the we're year. come Portland volumes the Terminals We to for back to the the In of divert before other in

opportunity of about has export globe. despite as and recent Outage, the long-term share Vancouver, across for effectively their expand the as potash strike excited Canpotex in I'm to ever and the of course ahead, most the market Portland Looking continues the impacts

business, growth see revenues half favorable and of Teck's out the following year's coal XXXX. or And bulk last coal our back the Elkview X% outage of volumes the I on expect to up With mine, back of to strong the were were half year, X%. in down quarter in close compares

our crude to X% energy plastic by decline Now, is moving revenue and saw market out volume. businesses the saw impacted on and the an in merchandise, maintenance plastic portfolio We spreads in and core as respectively. chemicals

through While also network. spring LPGs warm were our a lower our across

of our across pleased our refined execution leveraging fuels And network a growth steady driven network. On we will of CPKC contract network, across significant material today the with partnership of announce business the share lanes entire our by a service through remained deep new new contrary, expansion are our the new offering. have multi-year broader growth of Shell volume that all unlock to

Looking ramps as half see move up back ECP year. to expect we upside in August, as ahead to of through Shell the in the we begin

on a volumes. revenues in decline decline X% products Forced X%

record long encouraged seeing about is residential markets construction the This our building down from related economy this products a previously customers. portfolio, for where by that Canada and lumber sand our onto legacy on Although is volumes. steel, and area. the we haul was driven markets. of impacts didn't frac of connecting the in volumes very grew in and KCS for on The drove prime X% example exist of we which the a consumer metals, products, the growth The X% and area development network creating are opportunities are higher software increase new minerals, shipments this quarter

encouraged we trains Cárdenas of added from Mexico. the steel products We recently are units new Lázaro by into growth as Mexico in particularly interior

area. FDI and over business opportunities their the XX% further We in are this new that or inventory were that North volumes Demand and result remained course this of an the challenges. as time shortages supply shortages revenues are industrial up Ternium development months. accelerate growth on continues on for Automotive record chain to play up working closely also vehicles with strong industry finished coming up will both of American will catch XX% for part all

partners EPKC working to franchise is new automotive that key benefits of also with our compounds. leverages develop transportation unique our auto this unmatched development solutions of and expanded

the Domestic decline. revenue inventories over more certainly was a market intermodal down rates. quarterly X% demand, a across side, and America, On intermodal competitive the XX% was challenged volume North road by high and soft

Keith of the our encouraged cross success we XXX new spoke as However, extremely XXX train. early by are border to

increase partners this in service unique as We advantage have truck-like North steady on fast take offering. our volumes service our South seen the begin of to

volumes. International intermodal helped record a with insulate our QX intermodal business

wins of port Our offset the and with St. self-help CMA growth John softer macro in to space. international the helped continued at demand

pleased we to as of to see the Mark Keith strike the at finally are very And spoke finally, Vancouver get and resolved. port

are working We backlog outage. customers move our with during not operations of to and could this network the to traffic in closely that rebound move

in At the to million which much had in claw $XX revenue, strike will of over of remainder we're this about point, a back the the estimating QX. hard impact work and negative of QX we

can XXX days we're excited, this incentivized and this my to is team we're unmatched out we're get journey I out energized, let growth by on over CPKC. saying into So close of the just are street, opportunity. say we capture me

locking As our the commitments ago at this Day, and and focussed we are few to strong pipeline in all out on a on right laser in we stakeholders. laid Investor of for we business a us weeks delivering front of network opportunity have very

or that, it with to So now I'll pass Nadeem.

Nadeem Velani

Thanks dedication CPKC companies works entire to also good for afternoon. and the team to two together. their Great. like these John bring and thank I'd

for proud Although and we I path am family. a that it challenging the the financially, made combined excited was progress about quarter the CPKC very ahead extremely have of

combined a was on was core the combined the adjusted the XX.X% earnings share combined came and XX.X%. in for quarter, $X.XX. operating look and Taking a reported at operating at ratio per ratio core few at was $X.XX CPKC's speak share expense for adjusted Earnings items quarter Looking on closer XX January estimated acquisition operating operating I'll on a reported illustrates the combined X, effects operating the XXXX. the slide and both the XX, the expense side, to expense closed expense as the if of on acquisition second slide

comp million combined or benefits FX on expense was a basis an Reporting and million adjusted $XXX basis. on XX% $XXX up

combined base This quarter's The adjusted acquisition $XX have driven comp costs core results incentive by on and an higher stock been compensation related and expenses basis on price. year-over-year adjusted million primarily of excluded include a share benefits and with basis. which increased

increase. Wage the inflation and teen higher head drove count also year-over-year

the XXXX. or of growth expected at starting day, we've mentioned investor re-sourced I As appropriately half volume in back

the carrying Given some of the additional incurring surplus shorter term volume quarter. headcount and headwinds, in expense we're

as the it growth comes in and we be However, second margins. half a incremental XXXX strong will on handle into prepared to

lower pension Comp by and current partially benefit the rates. were costs from service increases resulting in plan discount offset DB higher

volume decline side, At transaction year-over-year on $XX prices a in $XXX as basis by XXXX, expense FX reported million basis. lower on declined as an million fuel would on increased the combined expense quarter the lower On fuel basis. the adjusted driven occurred year-over-year. The was fuel on have well a fuel

basis, by million the on maintenance On and FX expense driven basis QX, materials mostly adjusted up versus increased results. increased across activities expense safety XXXX an combined a network. was $XX CP Materials million $XX

QX, or combined chain $XX of Equipment rents at $XX results the use pooled in to bulk supply increased million all leads due Equipment lower XXXX an businesses with driven million rents versus FX on adjusted were increased XXXX. CP difficulties. of along challenges, being equipment inefficiencies by basis

Combined up or in an was Purchased reported higher basis. in XXXX $XXX FX adjusted up million up was FX a million a $XXX at at other base. on came million basis a services on businesses million, Depreciation asset basis. being the PSNL and $XXX combined $XX an expense from on adjusted XX% reported resulting

driven than variance expense The year-over-year costs primarily FX. million. million includes $XX increased of services totalling by the for $XX expense of purchase acquisition quarter's accounted which is half casualty more related increase The excluding

expect Assuming a casualty half PSNL the from quarter the in excluding I $XXX more land a acquisition level and million normalized the perspective of quarter per year. to related costs, in back

the million, expense pickup other components and quarter the equity $XX to $XX benefit the Moving compared Other rates discount first million. KCS reflecting periodic increased for from higher recovery of million. net line, XXXX, the days of XX $XX was below second decreased

expense interest million. was Net $XXX

KCS control consolidation will You of tax also the attributes a recovery. as from equity on of relates loss the from this to realized bond re-measurement resulting to $X.X $X.X separately quarter. investments, equity The a of billion transition which note loss accounting billion tax deferred are

These two tax rest I basis includes the items to impact income effective approximately $XXX net of billion, the moment of ago, $X.X that tax recovery million. tax XX.X% core a mentioned together favorable the earnings for rate recovery for which a reported CPKC to adjusted of to expect outside XXXX. be continue Reported

income statement, $X.XX. was the out adjusted Rounding EPS combined core our

generate by to cash million operating continue activities provided strong in cash flow We QX. $XXX with of

on million. first remains capital business, Our just call over we $XXX in quarter reinvested the the and

$X.X XXXX. We combined million expect the free $XXX billion continue to to cash in in invest capital approximately We quarter. generated flow in on adjusted

we U.S. our X.X is combined to EBITDA. adjusted the target $XXX of In to path leverage down in combined our leverage quarter, adjusted On repaid times debt back term debt times. to and combined net million adjusted our X.X

the program close while from to transaction, our increased $X.X billion, credit paper billion the also $X.X of Following our we billion. $X.X to increasing commercial facility

hiring sit I to have and and a from pre-spent resource when and today, training. are position a some as invested here it perspective, in strong degree we comes So to

are Mark back to carry I team XXXX. for year John's hold, on of and and synergies, our think as take and the into us well bring the we're continues to the the on team up deliver operating making changes set half guidance

look I our ground strike Port with to up the to forward. of forward going Vancouver, a and the bright, at is you have prolonged some we success certainly from While future make sharing

to I'll turn over Keith, you. back that, With it

Keith Creel

time and of Operator, we line. questions. up open if Thanks, the Why the you spend our Nadeem. don't could Mark, rest taking John,

Operator

Your you. from Thank [Operator question Ken Hoexter of of Instructions] first Bank comes America.

Ken Hoexter

at a looks bloated the Great. run of and thoughts you kind for blended maybe It should expense. there I here. things there obviously gave we in especially here, It of terms your are about understand Maybe Are Maybe in lot the a on back and you got little how can see look can half question. a things and lot there. like out, that thanks on continue think of to little Good just purchase and what a Nadeem, casualty just blended? costs coming going on we and ran see through in elevated. side. of expenses ways you like and want about now rate you cost numbers the look Maybe to take network out afternoon, costs in what near the services that to taking the kind accounting as talk you combined the Thanks. was term

Nadeem Velani

Ken. Thanks, Sure.

we a was casualty, a couple So would two derailment book, a settlement, one-time very was $XX added to that and litigation million. of faced expensive I items. it. One in characterize one a

say So to aren't that about the normalized things is part more of going a reason are occur these $XXX basis. quarter why I on number, million,

services So purchase other we more a come normalized that to down and very will confident feel million. $XXX

we're point the takeout Certainly for view. stages long cost game. synergy We're a in early of in of the from this

on bulk have John the knowing down mitigate we and to of view the it, gains us a short-term strong backdrop, said, That the the we've year, kind the mentioned, to take side hired. that certainly hit wasn't headcount of in environment, kind we as being what mentioned. as we the So volume surprise. some macro market Certainly of by take expected, half back going were and we and of share just as

of in recovery And then and macro natural we expect. XXXX, then enter as what we have the as we front us

the volume to see single and we half in path back QX, digit. the high So recovery in a strong

right long term, a and the choice level So we're people employees. people. to time and train, It of right to short make but hire that long attract now, to maintain also it's to retain takes

costs, it doubt. elevated so no And our there's

to is inflect single back being the get peak. its and a It through almost digit. year. X%, labour that flat at positive year-over-year of to that delta I With expect the as be down the will high volumes slightly up normalize half labour to had, volumes we we

see the the performance So productivity you'll half year. and better a of much expense in back

Keith Creel

we'd Yes, you little color of if one that that, word I we wouldn't say here, a the bit timers Ken, intentional if the that, I to. was a could that used headcount, Obviously, have bit bit perhaps been Nadeem bloated. that hired known spoke little say hearing little the softness But this I'd later. It's to would decision. a had bloated. add above issue. a timing trained an have we have would and later

we demand. employees to lot growth are give us four doesn't to them have got weeks losing macro great having of when now, unique lay you've very now, of very five counter and not that the a potash the nevertheless, lot risk that opportunities environment. it sense a They But weeks moving, make from confidence from of them strong off,

You've came exciting hasn't that's going coming health costs August start a these from talked pretty some we're the to some that help in about John we carried. shift those going in share some we've harvest of that's that online. of got benefiting cover detail, to that of there's initiatives but gotten intentional wins lot business and we've got to

has sure done the network beginning, network Mark that. we other to the make in front, the I going said We've -- and on say this we would we're The stabilized. the and U.S. point operational team Canadian get

we're our Now attention turning Mexico. to

improvements you at way in our in numbers see If you serve way business. manage same costs, and numbers, lot Mexico our There's Mexico customer, we the some opportunity look the the we we the of the I for a the way see. control

going operational are from or week, approach commercial the themselves the for standpoint, side, plant locations team go preparation customer actually holistic the XX and got officers in we've -- next So and Mexico about there from that, effectively, John two or to a transactional to of side, XX, from a side. that in business

getting improve, that see fully expect where brothers producing. it Mark those to at productivity and to and our the costs our point So are Mexico, be to time to train that velocity I the dwell speed to and able we're going operation in Not getting end, intend sisters complement that needs of members car improve, to team to spend and our locomotive in a the to with indoor. see going is tied we're some excessive lot that it side to of already be starting family the are a

more start So more the certainly, benefit word, that, is to next on over come to but loaded we right would I intentional the expect not realize quarter again, say and as improvement if this of those initiatives.

Operator

comes Your of Tom from next question Wadewitz UBS.

Tom Wadewitz

afternoon. guess, Good the We're I question pushed that two bulk are, or railroads to the to thanks. talking you're from I the some products, relative in news How impact just think improvement and, some we weakness areas about the, of So could and good beyond how on transports about idiosyncratic of the a year, forced you conditions, or that your Yes, of maybe so demand of obviously being about just that. of kind out of like kind market XQ to figure and those underlying caution chemicals. side? volume combination hearing maybe maybe on weakness think and trying things that look on, ask Maybe, maybe of of next into optimism intermodal do John, I terms kind generally other about framework. think and

Keith Creel

Yes, no, thanks, Tom.

no there's yes, doubt. So,

Frankly, intermodal the of tell on started same we half of valley think or April, the you've beginning point again, to what at companies in these last trough actually saw I very last stick boat of as little improvement, business. the combined to you, heard week-over-week terms the I'll in starting see least of the our a legacy we've bit of basis, a we're ten other hockey sort but but improve May, the from look if rails not eight over bit. you looking CP, to improvement. a legacy are weeks, at little KPF, numbers a

a amount tell Tom. the I've is now. do I'll team, I self-help, right believe got certain you that of

our that blitzing not the and We're out mandate I the We going are more on too north-south ground, is going that. X,XXX calls. Mark’s in the the self-help. to idle. all that add blitz, are on boots been on hard a but We've the time intermodal our service three-week there we're footage challenges business over We're trains major We've intermodal got territories. cold team and do a persisting, superhighway. train. to put giving fastest sitting got the small, continue make me see to we're to to go

as think working were think solutions of opportunities think given plays, upside the of felt there's new OEMs opportunity, benefit we we remain in There's Tom, see in where see with to you are automotive I on down create the about long-term ground and vehicles those business. a closely lot that that with initially the going I to those some but I some there, situation, the we're term opportunities. near some Mexico,

Our frac be stand strong. continues to business

to And about hard in other the initiative we're Mexico. spoke term, you to I see but the near dissimilar strong and space doing of the rebound major rails, we're think not products a in the in in prepare. space in lumber on self-help quite I that forest to out for a as It's lot to, business, you steel the is me Our front business. that tell can as

when our with customers around out my creating these into, working and bounces it's whole probably cycles to opening for but market an of area be headwinds, success housing that back. that as the see area I ready, moving we're comes back, in that new Dallas stuff deep in So Texas in again, these construction create we're and center markets. you the given new long-haul in mousetrap this set term, mind, with space near a to lot up a the up going We're needle won't think we're beams, transloading,

can already maybe I that bought to We starting build-up went again, that's we we're the but the to think see beyond of is see That opportunity X,XXX and Laredo you spade Kansas to well service built I to that finally, point market. into City and a on getting as our of just building announced product Americold journey. that of opportunity the dry that in terms the is and and, that the started reefer and months, I'll now, development, ultimately train reefers of start nice And in not and the tell other journey progress long has ago. building to down a pair, we going that out Mexico look to thing not down we're reefers we underway, coming in XXX-XXX that ground getting of a

we're about outpace domestic in out I remains if if product. as can think marketplace, another think that soft, some the that helped. where this but again, to it and there, the the think, hope lot I one it So, build we you this reefer market there unique degree franchise that's, an we I there's opportunity only potentially A area doing intermodal

Operator

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

is open. line Your

Walter Spracklin

Operator. Thanks very everyone. Good much, afternoon,

I wanted the in happened highlighted bulk Terminal. John Teck focus to bulk, in Canpotex’s volatility but, in of a your at created lot So, at have key the Mine franchise few here outage that within you that have and on a outage and, things particular,

a a seen for year this little favorable less We've the look crop that pretty now also significant conditions next year.

just double lots we and we where that and high single crop just in significant next for some you big sure XXXX, correctly. to all to single developing outages. on it layout risk the put do based increases modeling side from simply the just bulk go outages looks high see of year are Is to side, on see risk those possible trying we're of your downside we digit now, low of the kind what as in going it coal here make for I'm crop on is together items wanted a lapping of on, kind here it flip digit, the to like those business given So, your franchise potash that's see digit

John Brooks

it been six Walter, Yes, and has its noisy months ago.

would little been Portland and and potash. being early, would on that you fingers our If frankly, bullish believed as number look, of remained their QX. get I strong our tails I transpire worked ports, all their around have big looks CPKC for said one very diversify We've franchise, all have wouldn't off actually for belief in for belief At a yet. think our is can our frustrating. a plan provider, to in Canpotex’s some I crossing position we're the nonetheless said, the opened We've transportation XXXX. our I maybe But very that both got it's outlook

think, So a at XXXX, double we've you given if seen definitely about potash. what if you looked I is expect, I would digit, expectation, reasonable think

so jump terms But, see tech the next, as as in as compares On look the took out That close QX, of with big don't be XXXX, optimistic at the will know positive you QX. if strong comps. And right I in or a to it side, not see as looking end we're LPO to relative relates probably place Tex us outlook, mine of extensive discussions as that that far, coal potash. growth, least that year Last our give really he year. to a to to we're at issue space. you year, look as next QX, going good the described

what XX crop in the to of if metric are this I front, the customers point And comes saying. on in of now our is what think grain tons, kind closer middle million look,

You remember, year, metric post million call to tons. a in we've maybe carry got a bigger XX got much this it

impact as see and that don't slot think So gut time I period. any in the about QX the in you really

the there. hard, see it's we'll to We're be see, then probably spring. I And grain because going and run they'll to right, run think not into going don't we're we'll hard, out

issues dryness the persist to expected sideline certainly saw the did have happen. sort we You than as put But year, and move. farmer to this weather that the on this we of more

I'm the And I it thought a be much compares you actually Canadian certainly farmer grain sideline in stooped what the extent would to at that said to would U.S. transpire I but look longer bigger. [Ph] with year-over-year, as see I the you, and our and I'll little Canadian in think QX, space. on farmer tell some pleased got

we're the and But KCS a haul railroad markets. create network with grain now more in combination the to of

the comment some Alberta our certainly feed XXXX continue a in build in just cattle going South grain, some begins a in one to dryness and to we've be that to present expect those we I volume, three it maybe see and to And I that southern to be connecting on to developed, crop gotten pretty train territory, Walter. throw Saskatchewan, deterioration West over weeks on in grain. us significant further out growth can for markets. As Southern opportunity those seen for area into last more that actually those cornhole beginning just you uptake market. And markets If that there tell area some I'll for

in the franchise upside But little that a have further provide Walter. could an further of develops. that the Calculus weeks we a didn't few part U.S. ago. if Again, certainly area Thanks, to that's our

Keith Creel

the to is if John, I And just bit when it's key Calgary. us up more one add point West to open operational there’s allowed the work engineering side could a from

So fold get to we game have west it when a into a QX certainly QX, coast. in potash can this way the we maintenance grain we do so won't cycle

Operator

Wetherbee comes question next Your of Citi. Chris from

Chris Wetherbee

through kind possible. Hey, in of particularly wondering Was some maybe RTM in for some of the afternoon. of and it's year, the mid-single-digit ratio, back then thanks. you EPS around of thoughts Good the and sense -- operating the a a pace maybe if run half, assumptions get so could around back even half, growth the recovery maybe the

Keith Creel

in quite we with today, got is the then Well, of year back, about -- and today, I remain see, going for we expect way as year We there's if July and we Chris, end where to about my here ourselves you as upside basis. slightly into expectation QX. our to strike, move dug think RTM fit think the a July piece, improvement on and I the we positive we're but we through a whole full certainly going you're quarter, as a think the claw sit RTM

volume growth. So, I see we ultimately, think

John Brooks

Chris so synergies, than much wins as performance the, get we especially getting OR larger stronger we given when And a the a a certainly full just of year OR, we the see the rate, and sequential we see the run QX. improvement snare to in terms start the think of, in about QX, some synergies their see first QX sequentially, QX, for from But example. and we earnings,

we it I order, single kept wouldn't, it's But have XXXX. be there we up for well is and it. was, to EPS think breakout confidence in the reiterated digit QX and going we have think wouldn't that guide I that

just up our I there, some is have, but think and the the to catch from volume franchise, bulk perspective. we synergy do from the strike,

Operator

next comes Your of Oglenski Brandon Barclays. question from

Brandon Oglenski

look XXXX. with in about. Hey, just for maybe the and some But my does can that unlike guess you these given outlook? you had early for I Nadeem, following and potentially set thanks that, in chime self-help up of at you John up taking too, through that XXXX, talking you a that XXXX XXXX maybe When afternoon, stronger contracts are question. good headwinds guys that

Nadeem Velani

described a but some Yes, a I we quite know to mean, I absolutely. wins think, factoring couldn't till and what I today speed investor of John day and get some be had in we've perspective, perspective, into on customer has confidentiality my weren't that since frank.

QX good I XXXX. honest. very to I very feel about about So, be good feel

think a we're volume as long do said I of come like And the peak from, about work you kind force. versus had we've people,

the delta year QX it [Indiscernible] back QX, a non-productive this peak into XXXX way. sets into a but up offering in we We half of about very the and leverage both to out a looks in us of and well have talked strong.

think for hiring we're we network. we're as of on capital this investment the to cars. yourself network, rail well And doing place the work doing operating on capital well on benefits the dividends, expense the on then side on the the from on synergies as a have front, work taking that to and and that's see work the recovery, And going front so as hiring to I the it's to starting in leverage improve pay operations path we're as that a if training,

So, I'm reporting obviously rails. the pretty excited, tough a quarter seen very and for although all us we've

a have into year on this XXXX. and we think I pretty view optimistic

John Brooks

I Lázaro of Brandon, you're challenges but have and I mean, a I about the now projects. you fact some the been up the smack-row right, it's you our see benefits we're might when efforts just some some to as planting that, to you're say, environment just I now, Cárdenas to seeds these broader get think think look all right that add XXXX. right begin of very these you BCOs frustrating, right of of set for

down the in about quarterish announcement think that'll Dallas, I XXXX. auto in be on compound our second up

to that those investor about transload that The in Dallas think at XXXX. terminal, in day and map you background, All and off think, XXXX. fuels if I spoke on all that little the think come in what the lumber to, Corps, then Toronto Melbourne, support a get to As in will spoke market [Ph] macro up tailwind, coming supports the there Agent down we're we races. again of Covi I Nadeem the up the things, bit

Keith Creel

but add help can't that. color more to little I a bit

an automotive since servicing in about of So, CEO, facilities been of a automotive it operating as manufacturing I've my closely network dreaming XXs. days the back having been, late I've visions

car the the opportunities. empty pain because and could suffering ever and old scars through guy, forget, destination, that, the they created having you the keep when the of lines don't not supply of that Going got least enough going app being and to it production control your you

visions step very reach in point car that the going them and by there end Ontario, manufacturing the with between going significant to sell beginning the in create get compound can book this that powerful. ordering are from of feed to this from of set close in the own you network tell to I loop. that what to with service and connect them turning you empty They're we've those automotive some vision, the we our the loop closed Mexico, the the guaranteed supply need dealerships The to that and closed this us. extended allow car assets supply space network, we're is the taking to when ends. more it's made network to their manufacturing those facilities manufacturing an and network, faith own cars, that vehicles partnered the this opposite create So, are to have of in we've this loop progress of

itself fruition. a to coming in anymore. That's way to powerful dream that not be is of going my very a and ahead That's that's So, XXXX, in expectation. showcasing

development. that about excited super super, it's So,

Operator

comes of Your Research. next from question Wolfe Scott Group

Scott Group

afternoon. thanks, Hey,

come overall should think in a on headwinds down labor or year-over-year, just are actually maybe drop. couple the QX, digit talked have you there? things. that'd rails then, you make will or other color that sequential costs be segments different of back growth the we here, half just Thank high kind you. year. a any The saying of headwind best. to down just all you fuel to do pretty, sequentially about Are So the which And same Nadeem big want clarify, assume from in then come single some And

Nadeem Velani

sector, I think Scott, steel to Keith easy a to, sector, how our going that coal. We've a our things sand see fully frac our compares materializing got spoke so strong see demand. push sector auto grain there in as marketing we'll I’m to business,

see I So lot a outside coal. in

potash. you'll We have see, see growth hit the you'll a we our If decent year. potash QX last and we'll, of partners, expectations good

not contract some ECP this us. growth shows and in our, also. good is insulate, call think I our, our And I potentially that'll only in areas for is, August start [Ph] So only in to business out then in lien those And shell that's going help, in, up significant.

Keith Creel

does. stock base Scott, so what us. headwind comp see should just of headcount, been forth. be sequentially for in our terms That's flat does the terms stock on we'll of price what workforce a in and And

flat. will point the increase relatively We'll productivity volumes is headcount. my stay So,

So, and I a then year-over-year, think, benefit we see headcount. QX, on

our year-over-year I meaningful us. efficiency that'll for think be

say On for the wouldn't side, meaningful headwind I that fuel see on a us. we're,

Operator

Markets. Your Chamoun Fadi next question Capital BMO of comes from

Fadi Chamoun

Yes. the Good afternoon. Thanks taking for question.

clarification quick for on us. Just

is $X.XX. Nadeem guidance basically So,

just consistently we CP in hour productivity like XX, the in what we're But want second lanes on the the so you the Is first the years-to-date down this is record mix years just past we're four in highlighted these versus see that to going network is going these you June thing and kind up some the half. consistently road, investment maybe same the to kind now this look I talking XX $X.X on highlighted is the or Keith commodity metrics what infrastructure did does earned a of train that. is need the my you're of the sequential once three I'm all key to drive? in of same is to understand sure XX this per in in look it take we're improvement that you're doing revenue programs this like trying or June. business does that XX% that speed Mark a miles look at and if to page half step do? about of like kind this done on you as that make You've what's or question

Nadeem Velani

that energy is CP this working all know this all about investments about. to. now those going own you what bringing merger we're something the volume right is for it That's we’re Certainly Fadi, talking to we're but at way your kind standard need look the I of

integrate former in what Moody train which speed operations improved. put has we is we working. it's place improved, KCS it the operating expect and as plan we've this on So network is the seen we

Mexico. improvement the what's point Phase why On on the that's Mexican network and at our X this focused deluding are we exactly that's that's overall opportunity

fewer cars done to you'll turn. of in we're the synergies you'll business and house yet, material XXXX. a need I are way see expect because amount car move assets math get should that we'll the going So those and we'll our going of haven't same improve from to driving a you see so savings to to

speed revenue car to not to we drive revenues. more improvements. supply to the We're as more have get going for our We're we to all You're Mexico. going create loads up network enough in own feed There's supply. to the see car automotive it's going demand going

our sides material top some line So on you results. it start line get bottom on to you'll the both to see on and the impact

I haven't have XX I'll But math to it's again be going somewhere certainly I is to point. XX, not the I do not very will it going a expectation later, that way. know it material but it's firm going a this XX, XX. just between be maybe to XX at it's be improve in

Keith Creel

XXX as guiding to Fadi And adjusted EPS. core diluted combined we're

Operator

from comes Bank. question Gupta Scotia Konark Your next of

Konark Gupta

you result the shell any good mergers as ask flying as into lie and opportunity expect stand, wondering I John is XX? conversion heading by you of afternoon. color any want contribution it do Thanks operator, well [Ph] if of to Thanks. you more a on and a contract synergies

John Brooks

be that I package And work that lot say I been our early ours, just great can't the they And question again of this culmination meaningful that exactly knew teams and to a of combination and customers you're provide was the them. right, number a one years going probably and entire an right a it's between of somebody identified CPKC and network. of to then a now and is opportunity the of will I it's those this create leveraging think to have on further any I Shell coming details. from partner

we that there. So, areas, to again, you'll come once begin see into the results that our through ramp get ECP business August up we

Operator

Your question from JP of comes next Ossenbeck Morgan. Brian

Brian Ossenbeck

the Hey taking for thanks question.

a Just a you wanted in exposure of walk there's can walk. I slide what FX to the line item just ask the on through now think looks XX terms right Nadeem, clarifications. couple of see like

in And and actually you bit more talk you how work there? through just it that? to fluid? you trying of about bottling the Mexico, network you're hedging then can terms get So that will take, about what's generally just challenges should long can extent elaborate think thinking little be can a on if the we How to you or the what

Nadeem Velani

just [Ph] piece, great. just Hey Brian, AFX I'm to it's on Chris up [Ph] you have and follow Ashley with going

Unidentified Company Representative

in me have I we think our it. details call that's late the website the here, all it’s and on give Pretty so but that don't composed

John Brooks

very on our Brian, the There's the this phase at create opposed be two sense existing until and not modernized of fluid. That's to a also compelling. the more going is still to main a conflict We're say agreement. no distract we're we one. a as reduced so Mexico in taking on potential focus phase terminals interested can operation getting our renewing a kind overall. That's more to get concerted any that ourselves focus benefits trying I contract we that see to integrating can think inventory not more it's not moment to

optimize order Our the a They'll But right deal. better network now the lot be then employees quality a have and that our the and discuss correct. two business sure and making first we're existing step with we seized on fluidity need modernization contract focused of is much life. for to the more we when of time to It's employee. want make will money. which They'll have our better

Operator

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

is open. Your line

Jon Chappell

Thank Good you. afternoon.

little Nadeem fuel bit not will. have you're surcharge about you of the pointed others talking yield the same that headwinds a to most Just going the out side that already

portfolio half get the the business then pricing business. step the that in You're to second combined up to yield the of of year lot both of kind back opportunity kind help guide Is the perspective a and a core the half? to there from you of

Nadeem Velani

lot CP that in changing and I from network contracts our there value repricing seen out opportunities that think And renewals No. I'm approach high think Jon, and you've still those working contracts. service. remainder sort guess and customers of we legacy single with how that overlay type of move there But we as on the we The leaps? of step to legacy I doubles. that the the that's approach KCS range variety certainly positive we're of of quantum that pricing. discipline would don't a I capacity digit seeing through, low are and about. We're how a quite I foresee function some there's around the Is some, which contracts I say disciplined singles the our year. -- and of is and for the

create terms XXXX But, about think those you to a function and in we actually that creates the if into don't probably benefit areas. step that And could, a of QX some for a in renewals. larger us I some going as look bigger major not call I'm driver of

Operator

Markets. Your Desjardins next from Binwab comes Capital [Ph] of question Fawrieh

Unidentified Analyst

everyone. afternoon, Good Yes.

average all be from your than of I of Looking customers current what Intermodal obviously the truck now. lower at more combined? an Thanks. length number wondering brings discussion environment expense fuel softening rates the if increased for to lower know side would the was competition growth I story bring with important be and would it's on the opportunity spot whether and going curious right the part of your more forward. Intermodal, an

Nadeem Velani

for terms Yes. their Binwab, I of of and prices. depressed the before, comments maybe my more aggressive becomes options is typically sales that. buying and buyer couple this team said people. transportation these looking That in I've a to on opportunity do lower marketing for types a believe, markets,

said, I to pair add looking the to we're waiting As to also, up. train that pavement fill our sitting not get We're continue and Canada. across the business going pounding for We legacy by out phone the to on ring. frankly, XXX-XXX length back need that and, to franchise train

in to Potosi so historically, I movement some quickly against think shorter to think down wheelhouse think this sort specifically, similar Chicago, X,XXX-mile down quarter very if of about to very do Toronto that be truck. might Canada. about, conducive insulated at I X,XXX slip San area the a we're as across or Monterrey Calgary, I that length, that to and our to more Train you length. network and back extent, and between Laredo believe, that legacy Luis about, think And I to more area. It's look you similar haul

that sticky. corridor. think our to little density more focus I that So us on makes again adding is And a today

Keith Creel

touch build for long encourage have performance results. out our to we're it's when in continued points integrating operational address if comes this to themselves base growing most We to forward function quarter third we available get us be But said, going stepped improvement and follow-up. the as methodically everyone, any sharing to any apologize meantime, been network focus other can't on specifically well, for very I Mexico. it obviously that. with to that a uniquely make we I In to Okay you look call. And they'll would

we'll this day, have afternoon appreciate With your and safe soon. a time that said, talk we

Operator

today's concludes This conference call.

You may now disconnect.

Canadian Pacific Railway Limited (CP) 27 Jul 232023 Q2 Earnings call transcript