CP.TO - Earnings call 3 2023 | Canadian Pacific Railway Limited

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Operator

Good afternoon. My name is Travis, and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC's Third Quarter 2023 Conference Call. The slides accompanying today's call are available at investor.cpkcr.com. [Operator Instructions]I would now like to introduce Chris de Bruyn, Vice President, Capital Markets, to begin the conference. sir. ahead, go Please

Chris de Bruyn

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

I and remind press The Velani, want In contains here President one.It be begin, Slide influence we Before is is to described This Marketing my are in Actual note, MD&A other filed The quarterly that Mr. and supplemental on.With on discussion President Executive President may the Chief actual questions to Brooks, to our formal Slide Chief and results is forward-looking non-GAAP Vice in you, X.Please focus results differ in of and measures, uncertainties operating available to materially. Financial contains combined the risks, today's X, Officer; Officer. performance Creel. factors you Keith Nadeem could financials, Mark release information. presentation Executive and Keith your CEO, Chief Executive will today and appreciate our with will Canadian some Vice at introduce QX there presentation President John and interest and we'd the revenue Vice and investor.cpkcr.com, outlined pleasure also U.S. of me our Creel, remarks Operating Redd, limit regular addition our Officer; regulators. our data Officer; President Chief Q&A. and on now this which Executive by followed time,

Keith Creel

Alright. Thanks, Chris.

demonstrate we execute The commendable. effort nations. Let for customers. providing been passion work of truly railroaders they hard service start XX,XXX across our me thanking We've is each X integrate great the by family as CPKC our and day and at

versus the quarter of at and year, $X.X take last core XX.X% the revenues And X% EPS with that volumes results look of so, were operating an of quarter.The down a ratio second for billion on $X.XX. produced let's

the but the challenging you've impacts our given and Port 'XX minutes.As but it's strike outcome let we're do stressed planned, rather few certainly demand thing the talk it's prudent more to doubt, that of adjusting this And at release, proud a dealt That the respond. press I'm we define that by this to with point. seen very the It's softer a me but a I'll had team, us, how how said, accordingly. few challenges chain case further CPKC about the collective we excellent in no not family challenges.Let responding supply respond That's in the of So, force. Vancouver, as guidance the task in we from environment an the John in to the at how point labor things our say about challenging a strike, task quarter we environment, force. is Mexico not more the

seeing as effort. EVP focus task others brought quarter of second a network services, can across our that from marketing, KCS enhanced And deployed of an in to monumental was I back from the part results of we mechanical and services, every his Ops previous recall, on operations You'll you, objectives. KCSM. talked force engineering, the led force task in employees a information lot was in after Nearly the and support John together And with, and many effort experience call, XXX from this together organization. tell of many to Orr. John we're on Mexico. railroaders came by Shortly role has John, Mexico familiar are you that about we that, Mexico

on the U.S. and is perspective. the productivity our some always moment. is in #X this a for Mark combined in integration. important that frequency the few ongoing. a But safety safety personal more transformation to improving, the tell, to FRA the and most in progress year-to-date infrastructure as train train on noticeable want to And never-ending of in see comments improving, priority.A a part, can service Safety dwell terminal a our improvements, result across a this operating continues per can of speed speak car tremendous journey.On process, I day You this front, from seen improvement on is is journey, we've commend metrics, which lead reduction, the will people, injuries miles the ultimately, XX%, experience continue continual and Mexican I team to to all space. car as in Canadian be challenge entire detail our basis, as in industry it continued customer. And will technology XX%, of rise operations the and FRA we investment accident we've well the the operations, and locomotive a

we're the our together They've mining that working We are the integration to There today's so in merger-related front, will our with communities couple customers, improve day obviously, and that, certainly But of been the not companies, X every and that these particularly M&BR. the from On united, world challenge industry a CP in opportunities have a legacy the produce challenges. of and teams integrating is with embraced perfect. challenge. points a have of itself, history to service benefit on KCS each an XX/X. outcome other.A legacy unique

softer the maybe operating application said, hand transaction to challenges differentiated in to We're we We these While X we our our operations October markets we've progress to closing, our numbers. progress continue and the in from railroads, to environment. there's Xth.So, months deal doubt announce growth this story. integrating in the network. with forever filed this on some performance.So maintained remain on over seeing we're with to we're the X in to regulators, laid a to going elaborates the we brings the few that There's successfully M&BR no opportunities customers, unchanged. also into momentum before over make Regardless, guided combination on little Mark commitments demand speak it our a STB we our to a near-term I'm announced to John for colors Pleased and and that out the continue that the integrating to June.

Mark Redd

Well, good and to work operational tireless I'd afternoon. dedication the by operating safety CPKC excellence. thank and for professionals like and the you, to start thanking Keith,

priority.So, we merger the our to while I'm both at months The the challenging. exciting on of we has This the safety as and industry-leading their up and build and first maintaining for delivering CP's been task, integrate the they're X team continue network pleased report that look the KCS mandate is to to to safety quarter, type if seamlessly, CP record.

X.XX. improved by to Our QX FRA injuries reportable XX%

improvement X.X. to accident has reported of train X% Our

to safety partners in engagement of where CPKC engage a best engage directly with stakeholder our ensuring discussed quarter, leadership alignment. union last X, the the across we field our core collaborate regularly performance. employees I day As We the property. leadership, our safety pillar is our regulators Since efforts, have and safety held walkabouts employees, X

Our weight speed X%, operating combination productivity on safety metrics and turning X%. year. Locomotive CPKC I'll to X% train length comparison the from was down strong, occurred last speak culture.Now, the improved versus -- to walkabouts are key consistent to in with the train a and performance, a average the with Average QX respectively. And XXXX. X% declined combined safety the

good on the We're train have progress ] efficiency. since first look made feel As productivity if QX and To about our as practices that locomotive the to we beginning fuel we [ the to optimizing expect we in that, I across remain aligning our dwell X months. operating improved forward.So, improve and focus third XX% opportunity sequentially area our we very fuel for to the look concepts network, sit and network-wide we quarter. that at efficiency QX, today, continue improved of an has where we

metrics continuous taken will improvement, I'll for the the we and We of delivering service merger further the -- gains our early closing, next the at in have of per our and team is development actions the will capital strong car right feel stages of that all productivity, service X made, go, the target but journey in We months.As I'm sidings. in are to combined John. operations, -- XX% this sustainable.If We should at of of day be on second that, be X -- within look within the story moving to we alignment look the in in If have my capital across focused a in it to for board, locomotive we we've X results.With continue year, bridge turn car as remain over confident to span the put on sidings look and we the company, these X when direction. confident our the laser construction We complete. the be [ by commitment dwell projects the XXXX. the are operationally, end $XXX at ] the of -- network have we look miles Laredo very the

John Brooks

Alright. Thank everyone. good you, and Mark, afternoon,

So, in we're -- excited customers. to that has ever as about just that want over And this half as unique year offer Keith the I'm CPKC. a franchise over said, to say I our opportunities

unique XX% grain as were remained expanded this differentiators accomplished taking versus I extremely economic improved combination up down of at ago. occurred forma what that and of volume combined territory, a were harvest, the XXXX, we were renewals this revenue I'll a total results, been While in exciting solid CPKC's a opportunities year fuel pro with expected, to has declined business. versus bulk, the new headwind the reach. up hard strong prior benefiting Starting volumes CPKC a a My to CPKC, footprint X% look a extremely term. comparison market year's performance, we've I in work growth creating were initiatives as on by nothing X% total was grain The guided RTM closer results On grain quarter. despite the proud third was up FX-adjusted the over our CP XX%, challenging as environment that volumes date basis, it's the up are destination third drought-affected X% book our been has volumes revenues X%, while are had driven inflation service U.S. plus in versus capturing our X% basis backdrop. lapping seen were diminishes we've on XXXX. environment tailwind, the across while positioned quarter markets, and a team I'm to year-over-year, a was this business.Now, X%, quarter And marketplace. speak in certainly long X% challenging are year. pricing harvest our from the our been with new the while growth. to reported FX up any And self-help XX%. volumes Canadian on more of we've revenues quarter stand-alone rebounds.Now, at well we in look on than revenue

We the of continue has to past.Now, crop ways taking in see new for QX on the and Canadian looking and in origination to CPKC down our system. harvest current grain unique opportunities advantage emerge destination flows the call. the projections available connect since them to grain come forward, never are grain Customers

Our with to now offset size headwind XX capacity are Canada, customer planning, in ton million this metric to start to we to million crop the available XX resource estimating crop of us of customers grain. levels below demand in some the year be at U.S. our are Currently this shipments seeing giving range.

of make franchise, front, up reminder, now XX% decline. a grain were our a XX% grain diversified more further revenues.On our grain U.S. the has the potash down revenues combination on volume and As markets half CPKC than the

this Our is of Vancouver true potash challenging outage our supply continued year been Portland with the for quarter has export a of the chain terminal. Canpotex's understatement. in by a Port at strike potash were volumes say Canpotex and impacted To volumes the

X% coal on line although ahead, and are the favorable of met some our a prices we here of volumes finish decline a X% hard a growth Canpotex the chemicals, strong out Portland in coal driven plastics less end have year.And do we volumes decline on in to a crude coal a last finish looking year.Now, growth. I we terminal do was decrease a as compares the merchandise, come saw demand and the business, today, business we momentum outlook the to all strong portfolio with Now, year, demand as Lower working -- expect the were back terminals QX, in in not for our before we outage through moving out and X% facility a close year's to LPG. maintenance available as revenue in result very on volume revenue a to following With volumes. by see in out rest QX, mine, bulk higher flat build energy, Teck's sit of this and maximize to we as on strong Elkview of

partially was business and to into began all with and fuels, up, growth the U.S. new August by growth of Canada this refined However, including continues in and the that Mexico. our out offset into down way ramp plastics Shell in

as continued we decline continues into fourth strength expect as in Now, share by to energy, ramp onboard new RTM quarter, driven we up fuels positive a products declined revenues plastics, Shell chemicals, move on I and in refined wins.Forest X% X% in volumes. growth

route capture this volumes. it mixed up a our X% frac long-haul synergies market market as of products seeing as network on to a of slower development consumer quick about the Southern continued and well to we metals, The economy but consumer products housing was transload seamless from the position in this impact to were the down have our was product rebounds.The strong decline in are down, softer of Canada While us very metals will development a in we are and performance. of markets. markets, our encouraged portfolio and and combination X% forest shipments to space minerals Performance sand

a the encouraged for industry positioned and is demand are the on industry vehicles for to in high available to support We move continues this exceeding be finished vehicle Mexico be space. the XX% and particularly strong, auto Demand service growing revenues finished CPKC's footprint infrastructure projects, to market.Automotive as growth, to growth for up construction quarter. supply by auto strong ramping from continued strong to is with Production XX% remains counts ground vehicles Mexico challenged chain volume up capacity record continued steel uniquely market. these to

with finally, the note auto improve that the working rail I'll to that higher business strike the are servicing we help OEMs to do efficiencies impact side, rates. market on materially as of volumes clear in XX% inventories on a the focused Canada unique strong inventory. be XX% soft are of solutions from as facilities we Domestic decline. demand, increase create Mexico.And continue by capacity in over-the-road expect volume and We and pressured many production intermodal our to this will demand intermodal was down our to and now, not on revenue competitive

space opportunity cross-border the our significant. the uptake in new we extremely remain by However, encouraged of XXX/XXX service. The intermodal cross-border is

volumes consistent is the the by earliest the truck-like, quarter of challenged rail and stages and this in demand. in service strike premium we over are Vancouver developing Our market.Moving and to were international softer intermodal Port the area,

ocean the combined demand.In certainly we are about is to will continue not opportunities our uniquely and synergy And that, Saint deliver John Lazaro in long-term exceed certainly, remain to ahead customers franchise rail differentiated Cardenas, of now we immune expectations.So space the softer us expect powerful positioned look for to continue to services new we headwinds economy growth. blank while our this the and impacting Nadeem. Although to our headwinds and grow. opportunities our and to and gains to This the the the entire excited grow out capacity we to Port over of it we sectors, their near-term pass with I'll as continue creating ever are closing, to of transportation as carriers so expand right-size to reaction and sailings

Nadeem Velani

expense XXXX. closer ratio resulting on X, where compared slight Reported at a and expense fuel fuel in was ago. and to comp point Slide quarter, a very I fuel was focus $X.XX. price price and combined at combined to and would was $XXX ratio January the expense were of and their our down lower perseverance and combined we operating an we effects on expense to its million, pleased in headwind pension resilience. third in ratio from the to by to closed was a $X.XX to on acquisition CBKC's adjusted includes combined and core like QX team FX-adjusted and of was this and stock-based quarter, year impact headwind $XX history, of QX.Now, fuel the team was FX-adjusted translated XX on more XX.X%. acquisition entire Thanks, for revenue. price provided million $XX is John, last decline operating impacted lag operating by illustrates making Based and benefits and EPS, when combined the from challenging and adjusted million in This afternoon. to income at for $X.XX, benefits on came Headcount $XX combined effect prices both taking good and the railroaders earnings with sequentially QX. share share today, operating decline if X% current to what operating unfavorable the headwind the was reported per The Driving combined operating hard operating combined Earnings service a thank per statement, compensation. Similar plan, discount quarter and first XX. reported combined change comp be adjusted respectively. CPKC work, dedication operating sit quarter macro a our as the expenses. That rates higher core The fuel environment.Looking in expect the basis the slightly XX.X%, look costs operating in of down face on million XX income. Results income revenue the expense on DB estimated partially a basis wage the shared core inflation. offset This was impact tailwind a is operating lower Slide I'm

year.Fuel sequentially to FX-adjusted fuel an accelerate us compared XX% lower driven versus or basis the QX XQ, We as when give will into XXXX. the million operating to was GTMs or improved leverage prior down headcount decline in The volumes continue fuel end expect combined $XX along price, of in to $XX primarily expense again a XX% was which million be with on in by down combined decline year.

automotive an to expense reduced up FX-adjusted moment combined Columbia volume other equipment and basis, basis. growth, car was The services mentioned increased ].Combined by rents other materials increased asset rents maintenance million flat base. driven flooding and combined $XX business a wildfires by an I in interruption Equipment roughly reduction and million, payments offset fuel X%, recovery British year-over-year largely use A depreciation million, equipment from [ lower use purchased a by on intermodal or related in an FX-adjusted on expense $XXX was due was Equipment quarter on to hire increased price up from CPKC surcharge As X% FX-adjusted were revenue.Combined material basis. fuel on expense basis. decline or headwind of casualty in in XXXX fleet than was spend. from ago, FX-adjusted insurance $XXX that XX% a of resulting decline Combined or the cost offset an to roads higher due $XX down inflation. more was million expense higher resulting locomotive pooled a and a

basis. on come the XQ, XX, basis, $XXX for still now million. income reported an other the core rate reflecting adjusted PS&O tax to On effective expect to expense driven by year, periodic was the the interest We approximately a tax QX. outlook year.Moving are on combined be debt decreased XX% $XXX a or combined line, benefit XX the CPKC balance. flow million to was operating provided I $XXX cash basis decline Slide a in And $XXX to with of million, $XX in expect higher a reduction recovery was to million in components points in adjusted The generating million from expense cash reduced strong $X,XXX quarter provided by of activities the net $X of Looking we below basis. discount rates QX.Turning XXXX. million third was other close compared Net around up expense to million,

over invest on And remains million, capital $X.X on in approximately and combined just the generated the in $X.X line billion we in flow our million $XXX combined adjusted quarter, business with reinvested Our the We expectation in billion quarter XXXX. to year-to-date. first free under call $XXX capital in cash growth.

this X.Xx, leverage We Our on operations team's I'm and this to combined especially me momentum, are forward.With sharing guidance, with you quarter, to I to synergies, leverage to of execute. can going and Keith, forward things remain target deliver challenges, of I excited continue ability path about gaining to back our our long-term X.Xx.In in that, success the our over Mexico. franchise our in on our on am bring what deliver, extremely John's turn to well look and is despite positioned let review teams confident you.

Keith Creel

Okay. you, Thank gentlemen.

to it open questions. Let's go up and

Operator

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

Chris Wetherbee

guess, from you've I the just some deal. capture to that mentioned of the able been synergies you

targets you of take others to earnings macro there into So then, growth of maybe getting if you Is to longer-term towards better cost it of it or incremental sort that simply the can And here Or will just reaccelerate what you some think, understand realize profile? reaccelerate could you'd be actions in environment? XXXX the maybe early a help earnings some kind XXXX? in us of you sort perspective, synergy back to that are have? I able guess, from a growth take what

John Brooks

on I'll John. It's the start, piece. Chris, Maybe synergy

all So, things I at the Despite focused we're lot out of really we certainly certainly Investor the said, the and a on the laser in team and on has laid as macro facing, going I'm we're that Day. the facing challenges been geopolitical synergies delivering pleased. things on all

I'm north in that. number quite we're not to number annualized. to can you like of I'm we about I'm a beyond pushed that an up that peg rate time, think at but that said $XXX comfortable to we million that at and I quite tell end we're Day, -- $XXX I now. of million telling know comfortable run I -- conferences, you some you we we for Investor of going saw you a going immediate talked this sort at

I'll opportunities in ready will continue And but So pleased. there's you, to will are I'm a that go of number that quite contracts story. but add that to XXXX, tell and to start up

Keith Creel

I'll add as XXXX, little I what the we well. cost a to We're improve side. on If upon of Mexico to our expect that infrastructure experiencing we just the talk in cost debottleneck year as and Chris, even continue. of see accelerating, investments target will continue that to ahead on made got side momentum color in year, was last we the that's numbers the November that We've this the tied physical to back merger application. about

line we've think X on close the then I on X about sidings more year got come are to month, within out. that now, a got more we've and

the 'XX. we'll So get in that of benefit

day. to we've There's the as we you committed we in we been thought side, getting exceeding as where I a I'll takes So every And would should see is, far synergies to be accelerate good to puts productivity locomotive expense started. networks, ] X ultimately, you you'll faster. miles after together, productivity, you're care where cost will going to bit months. and again, what from spot assets better railroad We're that standpoint. I these a better tied those X on And a put run car that. the realize synergies, But to the we continue we're to finish the last operating And per our fluidity expect and turn your where be incrementally rate day. some improve [ the or have standpoint including X expectations. We'll from car

Nadeem Velani

add, We just to year with us And network, clearly Yes. and number, certainly about which going the on is lower today, finishing side, a going fluid we're had talked headcount the Chris, running be that's seeing labor cost help the case. to ex a operating synergies. I'd

think about timing just projects sequentially have also and reduction that's normal some seasonality. X,XXX of person works, your attributed incrementally the I of headcount, to we'll and in just

of the from leverage. So We going see in this standpoint. growth to see you're us a operating benefits to do expect volume see quarter

-- we're sub-XX% provide the take in down to get the to expect going now. our leverage cost that hit going it OR fully ability fully I'm some and naturally I'll and improve question, our expect to is I So, margins. operating sure this so And and quarter. this I -- us

Operator

Our question Group, Wolfe from comes Research. next Scott

Scott Group

So, about Do when already, talked high-single it you me And you I rates then, you visibility mid-teens but is ask in growth. this to the point? growth, too on kind think about back know growth RTM to at digit get of so in won't it's kinds earnings 'XX? revenue got the the thinking OR How just I Day, Analyst I question again. to are Nadeem, you early Or early, of have tell those growth into quarter? it

Keith Creel

Yes, let me take the RTM piece.

So slightly positive Scott. now for the quarter, we're

expect I mid-single, up ramp in probably We continue expect to X% to to ] [ December. And RTM X% record last to November, fully growth versus year.

Nadeem Velani

-- X-year on of look now, long-term a from without level X when perspective. Yes. talked at frame. And be expect during it Scott, or changed has that just months you didn't when X we some a Nothing we had gave to plan. it time our guess, about in that guidance, I We ago front cycle

we're challenge so, that macro seeing now. And

the QX us what softer crop in grain to year. see affect back in going X-year reliant we stronger consistent as that That next a but said levels, I period of be have probably that out. sights. pointed that ability in We're as to but the on going that we're buy synergies, of ramp-up the We've the to X-year, to of Canadian from diversified we said, benefit some guidance the going because synergies. We've our when grain, we're provides that in -- John also our only franchise, EPS over June, in what -- in ramp the January, it's And up fully EPS count XXXX. going double-digit described not I guidance being to a share always think growth and at as bit and outer accretion. of we're Canada shares not give expect, we'll years, lower with

double-digit I'd perspective, here So, stand our we growth. as certainly today, expect EPS from

Operator

next comes Our question Oglenski, Barclays. from Brandon

Brandon Oglenski

last coming of that the in specific volume line Is call incremental the be talking wins to the you coming relatively opportunities some on the your those you guys talk term? thought Can here, way had in you think that network near still bullish John, for looking on earnings quarter. on back pretty we the through I then? for outlook we that about were should business fourth

John Brooks

Brandon. Yes,

winning certainly, seen we've -- we Shell. with the about So ECP area the talked in

that's see have positive. inflect ECP or share team about contract that We ramp There's good to up. in I'll CPKC growth that seen renewals X X ramp-up. And the caused frankly, you has that the really an volume that area delivered that the definitely continue has tell feel that, in I and to I area area. area recent where

you'll that continue see think in I So upside space. to

we're and down. and and at an Laredo. reefer to growth. area you said, started pair to I There's number year, up pieces that area is say, it's We're North-South. intermodal in pair, Mexico train Chicago, just getting down our of been year business a that much projecting on into XXX start where of of business going nearly, of train That's I'm of should an to and that XXX on As to Kansas City, this a expect see growth, growth going XX% in be

then to maybe going North-South it come this. leave I'll continue you that on You're And pair. train to to with see last,

minus at got all about import-export of seeing today. across look terminal. with think I'm Lazaro It's where American that ports, quite pleased Cardenas we're a you has not minus XX% And Beach, sits double-digits; to As -- you growth the North Lazaro Coast seen ports growth. ways XX%; I'm the East suggesting certainly XX%, And recently port making a Long Rupert, [indiscernible]. saw, so long LA We're but challenged -- and go got know we about if business doing announced with are some headway. also up but do of working Lazaro ease Zim only to you X, call of But of a that's lot lot the of going into we I for shipments to international work area. don't into November new thing. start domestic in We're a U.S. not Mexico, a minus

good going spot another continue there. in I be just well. position us to things you're that's really And area So that rebound, to we're going when a to think ourselves

Operator

BMO. comes next Fadi Our from question Chamoun,

Fadi Chamoun

that And this John, at eyes now, take if I'm kind a year given a have seem not of of the of cost sure hope some on? of commentary, just like opportunities look all stab follow-up to a million. the that kind you $XXX would to pipeline you like from on willing you're number these your Nadeem. What to

into You items new level versus going you're decline QX headcount improve Like Or quarter QX take quarter is on XX% again items Or impressive, ex any was of the we obviously. there had get a -- kind a in ] fuel [ in which into is calling from? in some we your there that should second third volume, in the this account? I to unique unique slight QX down are maybe going QX. But there? that mean, costs --

Nadeem Velani

No. This is a new base.

some related Now, growth so you're expansion We ramp-up. recovery volume services. did purchase an to QX, we expect some volume volume to in in insurance have going have

higher had also casualty. Now, we

that's benefit million. does we expect don't the $XXX we'll Attrition down. labor small up a net of But services that and $XXX that X on that to was why the And a bit mentioned certainly, this down backfill. come little And job costs front. I in as to we comes closer million ramp from other. headcount So purchased

John Brooks

in And what look what, at say right sort I us pace that. know we continue revenue Day, multiyear just say, that you to of our on that our -- for We're plan I'll as would some Fadi, expectations to again, even, we I to Investor synergy annually. would I And see exceeding guided our our or -- be upside area.

Operator

Our Hansen, James. Steve Raymond from question comes next

Steven Hansen

significant for you, described. disruptions the as have far, question facing The thus a been perhaps. potash you've and constraints John,

some of the Do got of the to a us well. as through for as we Eastern Seaway looks now through some X want outlook in the quarter maybe constraints direction with get or you volume constraints? how next You've the potash just give these sense sort

John Brooks

Yes. Thanks, Steve.

Without terminal, been a them the So a significant Portland for which is to horribly their execute. QX. Canpotex and book us, for route It's has pretty good good it's challenging. on a workforce for sales ability just

XXXX. Canpotex as they and November plans XXXX in challenges I into market momentum hit ambitious to sort share hoping through optimistic I'm that up the low, December a we're and the a at potash. sequentially faced. we And are lost ground as If move they've the said, get back the as And end know has we I'm terminal sequentially some going look of of you the to of that to over of result back improve running really improve. we'll that we QX I gain So XXXX year. better in these as numbers gain so number

Operator

UBS. from Our next Wadewitz, question comes Tom

Thomas Wadewitz

Yes.

of So had questions little to 'XX. want to I couple of bit. I that you've think on circle back kind a a

for XXXX that broader to weaker freight somewhat think expectations for I theme has of markets, kind momentum. of the been lower lowering transports just reflect

a of you have conversation and bit. potash, think know I comps the grain easy little would you've on I in Like, But a got takes, think 'XX. Canadian you right? that's puts clearly, lot down

well, up you do Street with let's just comps decline to numbers, you Or got little it's to a markets careful towards as had growth? kind that ought X. make growth into comment And you potash. in well, that for as there macro -- get earnings little easy we of the Nadeem, bit Tom, comps potash at a frankly, to and careful where expectations? would growth do you and where of of then stronger that low weakness level, easy I in view I and I maybe But in that's think than maybe or coming thought weakness high the enough of in on can So couple base XX% potash a be kind go comments, we want you into the you that is I make thought a a XXXX a XXXX. isn't hey, or normal then I'll be like, look, XX% 'XX, have have a -- kind because XX%

on fooled well. expect going set up to we're a that me more little I Again, be once, area, it's to front. but be in that cautious So

environment going materializes, Canada.Maybe that ramp-up as do That's feel of synergies part we next more what couple with watch year. move continues what? is, lot to and hopefully this quarters last look and believe into this certainly the my crop. I challenged Tom, move we of a QX We're and beyond here, You as know Canadian grain, U.S. we'll grain over favorable. the of to the I be pricing in overall, about to comment good southern next

all prudent areas macro As to we're just or XXXX. those base how not. be intermodal of consumer-driven the to the very business next these going I look look volumes at in it's heavy we about And how rebound about very and and the some year, into

Nadeem Velani

fundamentally, successful I growth, And volume 'XX, usual some We've Yes. by much I about into mean, But price too the impact, in to be it, just in It's hurt call accretive. comes and October it in which I inflation I to past, above still ability a significant back which how pricing. Tom, not get But the think -- is been XXXX. think, general in inflation. the been, been transportation about you 'XX. way detail positive should will think in of think it we've is -- in here

to be -- I could as think currency is well. be supportive going

the revenue thing mid-to-high I the factor you to single-digit And then, leverage. more of you can get And that that important operating think and so, number. is in kind

start benefits continue of you the decent think get mentioned, network a mentioned Keith of a line running top better sidings it on Mark this growth benefits costs, the formulates on to and to operating I EPS invest, we get and the number. a some humming As of that pretty the both as the whole, as synergies starts you the capacity network

that So Sure, backing to off we'll of in some we're challenges and not macro off, think we side be I'm backing on we're of, what the going fully aware achieve. there's we that can not of get changing the earnings I we've have at But both successful we as kind stand at how view here don't think we're past in that. the of of now, KCS. a better and CP January model and been into

Operator

question comes from Jon ISI. Chappell, next Our Evercore

Jonathan Chappell

John that pricing you've you that in, the for something to you do pretty or full can something that you a unique we where entire stand Nadeem, as enact at should portfolio? about demand your do see a fourth soon integrated on year, Is to that's of Or opportunities as when you you easier benefit that think the of months had across quarter? once have and the X was more true-up quickly tailing start back? the

Nadeem Velani

that Jon, would we I I aggressively. Yes. we've pretty feel -- attacked say good.

give -- you'll story of that XXXX. quarter of discovering of still you And a work a little you, are, -- of think pricing look whole. into and you to the In number I terms the areas QX. believe QX going to we year. you us maybe we a of some next don't that's we're I some of next our But opportunity that probably start bit as can see that given we're I over we're have us that terms think this certainly about as do -- RTM of of does tailwind and of benefits in in to as those things, where know, mid-innings come still I as tell

Operator

Our next question comes from Cherilyn Radbourne, TD Cowen.

Cherilyn Radbourne

freight As aware, softer everyone environment. is demand is a facing industry the

that network scenario. contemplate an lowering once into the curious synergy company we and there for projects get advantage would of to better capital you recovery any And levels accelerating whether activity be so, I'd are take capture eventual condition

Keith Creel

a got at the from made industry, that sourcing network, we've line maybe as as the we Bensenville, But say a full STB, executing projects the the at commitments the look that. materials, bridge, actually pretty with would across this Laredo uniquely capital sidings. plate I Cherilyn, expansion in we'll to far standpoint, in our

don't start people get cycle we don't want So, of aggressive laying because much want a an think bunch do right be have to thing for up to would we the certainly into. us I of a off. to think size that's I don't too to and appetite

So we'll Maybe perhaps, opportunistic at look be locomotives. on material steel purchase perhaps. on

our our commitments. demands developing fleet demands, at the our of and some as looking well unique business for an to locomotive as industry are our strategy We and objectives long-term ESG relative overall growth,

think So those some to opportunistic they'll X give not again, leverage. may But large together anything I be us scale. chances and

John Brooks

ballasts putting Yes. and the some get getting the fundamentals what our point, and access can the your of -- network. It's tides of on changing to capital helping done of terms in overall we to efficiency

So overall, benefit we're the where seeing that's Cherilyn.

Operator

next Scotia comes Capital. Our from question Konark Gupta,

Konark Gupta

expect October. mid-single digit the Coal, potash Just start there bit -- Do head about think intermodal contracts first in month? this a point grain sort and down of you They've some might to are on wanted down rebound intermodal easy are of RTM in But I to you you QX, as doing you growth. maybe can any weeks soft grain out to, And John, X new comps. are fine. figure still here. which December? and Currently, November, flat I into

John Brooks

Yes.

I today, So from as into move perspective, we we're an October. in actually, positive here acceleration RTM December. and November expect as I slightly do Konark, sit

franchise I grain, think positive. only looks our grain Canadian but outlook, U.S. grain also not the

some outage. I been couldn't As with said, just to to frankly, area we're Met strong coal have We're potash. troubling. the lapping again, And the And prices really potash really ramping. going are gain more rhythm that optimistic out year close has high. we're Teck I'm demand.

share up ECP help wins get coal our and to That as ramp strategically carry day in of add that volume met low-mid pretty U.S. more coal but all will to synergy I some you'll us sort fourth continue single us some got of only growth see in we've strong the the So thermal wins. said, not our for XXX/XXX. believe, We'll our digits to to continue I to also quarter. do And

Keith Creel

color continue would is pent-up power railroad have subdued I in been as add the the free I'd of up. revenue of obviously say because and underestimate the that's and of we the demand RTM generation last we the don't capacity challenges, of that with operational bit Mexico that to to lack that

at now, shortage of Mexico franchise, and think in the RTM we're GTM, no level I demand. high right fact, all-time In an

drivers those up, free demand market, that move. the automotive metals the and more we we get capacity market, drivers economic the X are the that of more So key to

Operator

RBC. Walter from Spracklin, next question Our comes

Walter Spracklin

when impact is were into back? enough route? an offset continue? saw back how Do alluded backlog decline, your you September. is wondering West is for given aspect cleared some that is volumes structural the I'm and some to going volume that And September. now continued pretty this that on it, the that the that the a Vancouver, it Chicago, call let's And here big Prince of not in great, comes there. to John these Are have and of can just to Vancouver, more, you strongly. from the but volumes, any know, up all is kind Mexico, concerned decline, another in to offset? come offset just August July fact, and And that occurred I if discretionary into in discretionary that's to you're So, into actually be to Rupert, view on they're strike enough you're charts you you enough July, while happens declines strike they if substantially offset? had entirely this have found quickly, If port certainly of at and of out you going Mexico? we come to it is This that volumes Mexico in to the there by very long the which Or I -- it strike those to Coast quite back? concerned wanted off And have looking at port

John Brooks

Yes.

So, first, a maybe question, Walter, [ think I to no. answer that that's call-out, ] fair

up. what I at it's of we to that growth expect Lazaro. I'm [indiscernible] the do future as about We at And can excited said, port, but ramp that

means. little and on Canada. is domestic far, a got our I not is ports. import US. into we've just all going and the where West a going, do believe, that the you look So, it's somewhat structurally, one-for-one And of at By been volume volume change train very any lanes Coast our there's by

Rupert, also why through there's it'll in think a we how visiting to does this X paint the that and actually be reason Vancouver had And a picture. very XXXX and Certainly, have watch. One my had rebound. team Certainly, over I quickly steamship function be Prince market see didn't they ramp that And things. in we'll up. and as just to a all is carriers I it's of success. then, Europe. bright going Asia

port fluidity. have We

economic some have advantages. We

laser we domestically how confident volume Mexico ton in there. into that leverage are tell the that improves with within grow domestic I As a is the port and things that market. one-for-one the And handling and up as focused be focused again, you we Texas Lazaro. that we also moves offset. this we're we're capacity will you that will back Canada. if Beach, But of tighten on But Long business really be meantime, and tell in into it up on a I'm And on what see the freight grow won't back at LA can down

Keith Creel

ago port with of a we very up think a and and just John came and of Governor City. encouraging actually had the Kansas comment the Lazaro, in met trade I weeks about Michoacan mission, team X the myself

So historically, a this, state Lazaro challenges. economic local for growth. the that motivated can you that is potential KCS has. the He government, that's understands had And Governor I tell

over provide that ecosystem I Canada think, growth alternative. reliable structurally, that take us you a there we're that new once was to Coast lot in opportunity tell think he are transportation, the can this XXX. He serve. perhaps, in now, Midwest and do. in and And of can products they consumed is didn't interline parts rates X committed trains not day to reefer consumed state tell case other that was There's West track day go is deep to not into ecosystem port. the you just to that I the strikes, and and the competitive proud are the create met keeping That's and we was back are other the that that an the port, US benefit a of to the He the weeks from open. that teacher many blockades. growing with forth reliability have challenge ago, with I to the of products, committed creating And that Governor issues us gateway. the with

both leveraging on opportunity. as the does coming it unique the So, as domestic on that. more Again, for of but a international come us well it? ever certainly to No, opportunity move, replace all it's from Mexico growth

Operator

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

Ken Hoexter

a just question a Nadeem, long-term numbers question. and quick

was you historical a $XX million, kind why here. of didn't of is to numbers? $X here of $XX and [ want tale kind Just there take million X -- it's term, you then was out long there of why understand left reason if the the And cities thing. million a Just that that ] there in and a

On sub-XX than it a OR. It's kind more sanguine and remarks, we very Railroad terms the, talking heard more negative message upbeat, to the Q&A. the of bit prepared want outlook just to understand was economy, digits, even I about about of what position. about send on But like trying into I talking different guess, much Nadeem, now it we you're the from the you're was know, from. maybe peer and a Canadian it your that just the the or I Eastern in don't seems just a more because, here upper-XXs just mid-single heard or

thoughts the into delve there. maybe Just

Nadeem Velani

like Ken. we them them, We answer see

for time. and known us You've a what long we visibility for expect the that's term near have we And XXXX. on

So, think we transparent that's hold and for. what honest our we deliver of and what accountable answers can each other we

had, we the robust focused X% we're top it, not John so mentioned, insurance, costs line, settlements impact items for it strip million the term of X%, think made over on the the at out on a of, the have that. $XX macro-environment. we that genuine.Why and casualty, I what onetime controlling control, But we There the Same the that as the $XXX with economy in in RTM we bunch of I jury near flooding is we of in concern million from leave had $XX view is about And think, guess year, So increase we'll through think to visibility and can didn't call when we deliver. up a it's and We're the such. I'll didn't any out by cause associated that I strip a we reason, million XXXX. stretch.

we recovery. how with thought we would being that about just how be insurance that we're consistent approach So

Ken Hoexter

And around? down I Mexico, a talking Have follow-up, again, were could of there. there in changed that? just I guess, a or team you squeeze about Keith, operations if XX any XXX you you sent just update any on is

Keith Creel

to there were round of tweaked yes, of the better discipline a operating initially within It were XX the kind was the Ken, adjusted. We with we XX, we to egg, But, for of up. that course, service company IT We've to were a down Yes, locked from congested. We to customer every engineering lack have. descramble clock. the started, and officers group of term.

response phase and point now a to That's to the So has everything south then, Tex-Mex of a focused for the left there. Mexican and course, is we with made We the standpoint. led He's We've debottlenecked. the crew And to team, John operations phase. of structural train all natural take enhance Beaumont, leadership change actually changes is through which north Houston. day. of Mark the now Orr, shifted an from break. day build to from responsible a who

to creates our a again. excited not got partner encouraging. continuing union our explained the smoothly past parts it. members members. can with that are team. got kind of in testament focused what's could I our and of energized place change change journey, develop monumental the history. you in this, to a experienced quantum our like and you, of network progress progress the And very to we our make labor, and of I that commitment the the his He's we've is is and understanding relative talent. our been we've with about we're how and very We've tell But employees, the president personally leadership. the explained running changed structurally, talking which union met tell I'll opportunity in with We're to It's by So, the he making uniquely other

would that's and So there's is, continue. change, there's to it's expected what progress say ongoing, I structural

Operator

JPMorgan. Brian Ossenbeck, Our question next from comes

Brian Ossenbeck

an that been we cars? potential. So, been right the in John, you've something uptake this What's update back coming perhaps supply? is don't with that, on making more But Obviously, are car close some UAW the from the XXXX? progress now. about of the some wanted been had I see interest some automotive can It guarantee But to OEMs? ask, just recently. to if you and just looks think maybe significant the to go like you closed-loop could What's level the noise we forward ordering call.

John Brooks

underway there. for auto been it's got compound Dallas market Brian, update, Yes, as an our the Maybe we've in far as strong. construction

frankly, next that. about to and, We that out and quite sold see expect year, by active mid so up excited

So got currently the closed-loop, levels now. we've receiving -- new buy right

we'll really that to so think be or at X,XXX coming months upwards closed-loop I over of the receive targeted model.

And good expect we wins into move fully being deployed XXXX. we've you as got So, some I the of to there. start early see that

Operator

Nolan, Our Stifel. Ben next question comes from

Benjamin Nolan

it you Gulf remember to a -- years mentioned that ago there might as move potash the potash, relates to be maybe, I couple I remember, last some to John, or year opportunities Coast.

do something there that's Just given that everything that's maybe to materializing? Or gone opportunity on is an in Portland, that? is

John Brooks

potash in little changed don't believe in I of what create given a opportunity that's that. bit gone has everything now, terms to right think, of I the we of anything there's on, pause ], of Ben, Yes. BHP think future terms sort think outlet term third opportunity. what it's as Canpotex, export Whether for I consider a we continue see of long Canada. would out K+S, true I [ to a that

timing terms ago thinking when of when pushed about out further about about bit than year we that, on it. spoke In it's it little a were I probably a

Operator

Justin Our question next Long, from Stephens. comes

Justin Long

about when gap, early the we I of update quarters trending how for seeing this if in move And expectations business into cost for was compares your an versus that could you the year, XXXX. expectation as you your to inflation provide ahead? that think you the in kind inflation you're and that how see price level of wondering that around

Nadeem Velani

I that, Sure. take Justin. will

seen has closer X% we've labor so that pretty of been all-in side, been biggest buckets. lot on And you So, inflation level. to the it's apparent. that as A know, cost the

impacted changes rule seen have the the north, and We have benefits. also some of rest work comp also, of that impact up

moderate. a we And year. reason I than expect, beginning partly that margins the the headwind would of think anticipated challenge. been I the where say they to a it's It's has in inflation higher overall, at been we 'XX, So much been have are. that that

that hikes I should Bank as Canada start seeing some we I some of and Fed kind of rate think think moderate, and the the the action of of by settle.

even think we I start some should have inflation seeing -- of numbers recent the moderated.

So, I it, call getting just -- bar our to, ability just level. an think of this it, X% what particular think inflation. still been John have confidence nature me in of level and one price team And to some the, his that's job. increases. rather done X% labor that in of we'll pricing. We're I a call a because excellent high year time above strong It's it's the gives be closer than

Operator

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

Benoit Poirier

network? Keith, great John, with Port you there's upcoming the color Montreal, part opportunities Vancouver, your but worker. what's of the Mexico, the about eastern at provide the obviously we Could you If labor look agreement also about happening. rationale an about and, dock of around great maybe provided color more

seen we've opportunities longer long-term you some uptick. with having do shippers potential challenges. I wondering term? cargo So, some are very if with some how which the see And discussion lately. for is any Saint the volume having a CPKC opportunity, expansion, Contrecoeur just I'm announcements could of John But know get whether Port diversion respect about it's some and potential you to

John Brooks

in just meeting Again, labor, troubles recently various and with the topic. But readymade it. and team with ocean get with was say, all the I Unlike lot big World new seems have certainly option it overseas Benoit, we've would a annual yes. I I like to there and a option. partner didn't really eager capacity lines an of years after had don't now BP certainly, know, we the a the got And equipment past, Montreal. an

move Saint move John as will a backstops serve. So us I Port to or do a to that terms of of terms be need facility port we Contrecoeur, presents does opportunity believe those great it's if now Montreal, looking now, freight in out freight.In not that of to of right of

frankly, of service efforts are John is Those ongoing. knows? who Saint the of to Montreal to focused and Port access and port discussions on our grow maneuvering But continuing the Now, [indiscernible].

Operator

final Our Bernstein. Vernon, David question from comes

David Vernon

shifting Nadeem, like us wanted Can what on you sort a bit growth. to for the Is commentary. and we're I to you Sequentially, to shift? employee cost for should what's understand And, Is it heads I'm down think sense we just function? down and the network going the here? coming kind in and the bigger the of happening expecting we up help are a the of Is function? dig choppiness to moving just where what's headcount in jobs get mentioned sort QX transportation of the be looked this be it little this trying driving headcount per I in in with overhead had headcount. headcount.

Nadeem Velani

fair A question.

terms So, we grain doesn't of pointed know training, But same of volumes as QX that change. work our the hiring I qualified to you think through the than and curve time. through this you servicing terms see given materialize had opportunity been we example, getting going that kind this just and it's a of for seen way the I attrition as that expect, customer. year of be anticipated in economy for and That some to employees see and robust ahead work to inflection. can We've the as in an as less don't year. challenges our next system industry has

make a from call can you You of and what in terms hiring do a training.

density get side. being forth, trains, on you of and And some you some synergy as operating so as about leverage, as to synergies, headcount.And able volumes more as moving. when mentioned I and for have think you headcount opportunity And natural to seasonality so, there's the then, per run as opportunities to in far you're well, less turn going were as as employees you as the the we so earlier, longer then, far GTM terms need

reduction going that's to factors of as sequentially.And on drive employee, bit a a a in as all somewhat So stock-based dependent combination far headcount those comp it's comp. per of

to is but today. knows a end tailwind year, end, stand mid-single a that's going that's kind fair as of Now, been a bit we of term. here of estimate near digits the Who where probably

Operator

call the Yes, for reached to allotted have I'd you. back sir. We turn over the Q&A. time like

Keith Creel

grow the operator. realists. economy. that we're say, favorable, what with a this shift, share this to off can't gets very that's on customer to executing. both X-nation of Well, we're uniquely is story. into We're to integrating control. to time sell that in always, thanks the be when solutions created macro and macro not at And making, And tell with for be now to we're markets, with spend facing it allowing we've proud of be it unique us turns level, network you, safely that's take the can everyone in that Okay. we the operate new trucks us But the controlling our macro the continue forever we're and can extremely I'm Thank efficiently, listen, you, that taking macro-environment. X road immune I it and afternoon. what months to in challenges exciting. focused I progress We're all spite And closing, it back comes a

to January. Thank you. in forward fourth results sharing look quarter we time we next our talk So

Operator

conference today's call. concludes This

now may disconnect. You

Canadian Pacific Railway Limited (CP) 25 Oct 232023 Q3 Earnings call transcript