Q3 2020 Canadian Pacific Railway Ltd Earnings Call

Then youd, our strong operational performance Mark and the team did a phenomenal job book.

Focusing on productivity as well as balancing service train weight train lengths is businesses came back to the railroads still up 7% and 9% respectively.

Versus last year, both third quarter records for us.

Thank appliance, which which is a metric that balance of service and productivity.

In the space.

Optimizing directly translates.

Okay might currently.

To be able to produce a trip and compliance the bank debt.

This is impressive.

So certainly with all their efforts.

He's got even more aggressive space that we take great pride.

In leading the industry in driving and creating the safest railway we can on the day in and day out basis.

To produce train accidents improvement, 14% year over year in the quarter as well as personal injuries down to him.

Material meaningful 26% is something I am proud of.

So I will let John and 18 walk you through how our performance.

Played out manifested itself commercially and financially, but I want to pause for a moment and I want to talk about cpms future.

You know I can say this is proud of them of the results.

We released and we'll talk about today.

I'm Super proud of what we've accomplished in this pandemic, we think about what 2020 is bad it's been a challenge, but it's also been a year of opportunity.

The excess the the announcement, we made at close of market yesterday.

Really it's a piece of that excitement to propel this company going forward with Maersk, Let me back up to a couple of years ago at our Investor Day, We spoke about how we were going to take.

Take our land holdings, we are going to take our franchise strengths the footprint that gives us an ability to grow in all of our key market spaces.

And convert that into a service offering into a supply chain solution that is meaningful for our customer and how they penetrates and serve their markets. So that they can grow in a meaningful way in in term, we would benefit and grow with them and at the same time its a solution that creates a stickiness to the railroad.

Note that adds true value that.

That quite frankly, its hard to walk away from that matters to the customers not just a price game. It's not just the commodity it's a service offering that is unique to CP into the partnership the strategic partnerships that we choose to enter.

To enter into and that we're honored to be part of with our customers. In this maersk announcement is just symbolic of that it's a textbook example of taking those land assets, creating a solution in partnership with the customer that allows them to realize there.

Goals and objectives running their business and allow CP to be part of something that is not only good for business. It's good for the environment. It's good for our employees. It's good for sustainability, you think about what it does in the city of Vancouver, you think about the the carbon footprint right now today before this facility.

City opens up rough numbers 100000 truck lose a day that are moving on the highways the congested roadways of Vancouver.

We are going to essentially shifted the railway this.

This model is going to allow a shift to rail transfer to this transload facility that is going to take those dray moves off the road the carbon footprint of that alone is can.

Is compelling.

So to do this is something that this company is proud of its something that are I know our marketing team I've got to command, Jonathan Bob and the team and John broke so this has been a long price.

Process, but I can tell you I can't speak highly enough of our experience with the Maersk team to like minded companies doing the right thing for the customers for the environment for their employees, it's a compelling compelling needle mover for us so as we execute this as we build the facility and as we shared back in September the Gray.

Tom has been broken its being constructed now it's.

It's going to come on second.

Second half of next year, but with this most recent announcement. This additional business. This well move where we are going to be able to take product from Vancouver to penetrate can.

Canadian marketplaces with our franchise.

It's something that's very very compelling in siding for a company so its strategic multi year.

Multi year, new partnership that we look forward to stepping into and growing with for the years to come with Maersk.

Couple of other things to think about this pandemic.

I said in the very beginning.

We can't control the pandemic.

We're going to focus on what we can control, we're going to look internally and often crisis, great opportunities a crisis can be a motherhood of innovation.

So thats exactly what we did we ask ourselves what can we do to become a stronger CP.

Our shareholder for our customer for our employee second will become safer how can we become more reliable hakan, we control cost to a better degree and I can tell you. There are several milestones that I'll quickly touch on before we get into the color and the commentary on the quarterly numbers there.

The Detroit River Tunnel acquisition, when we announced last week again.

That's the fruit of efforts.

Internally in area of opportunity if I go back to 2009, which predates My association with the company, but this company was in a position to know nine in.

In net economic crisis, where cash mattered.

Financially we were not in very stable ground.

That's a key asset a strategic strategic asset that CP owned alpha at that point.

Predecessors made a decision to sell it.

We sold it we.

We retained a certain percentage of it a small percentage I think rough number 16, 17%, but fast forward to 2020.

What opportunities are there again.

Where we can focus on becoming.

Safer more reliable controlling costs. This is an area and opportunity with our cash flow and our financial balance sheet and our strength and we've always said our first call on cash is internally, where it made compelling sense to buy this asset back it's accretive to earnings it's accretive to our margins day, one so again.

And symbolic of controlling which you can't control you moved to the SD space, That's a place where you see and you will continually see.

CP being.

Leaders of thought leaders of discussion leaders of innovation, but most importantly leaders of action.

And those are some of the things that we're proud about in this space we've been working at MSG for some time, we made the announcement.

About the solar panel fees. That's another project that in this pandemic again controlling what we can control. We began we broken ground. We are building a solar panel form at our headquarters in Calgary I think will be one of the first if not the only corporation in Canada that can say when we finished this that we're powering our.

Corporate office with a zero carbon footprint, that's something we're proud of that something that matters to our employees and as we all become more socially aware of the impact we have on our environment Thats a needle mover for this company and again, it's something we're proud to lead in and discussion and most importantly, and an action.

We think about technology, we think about safety, we have been safety leaders for quite some time, but I can tell you. This is not a perfect sport, it's an outdoor sport itself.

And we never get there it's a journey, it's not a destination so along that journey, how can we become better at what we do how can we become safer and will become more reliable high can we control costs. Those are the things that we approach safety three.

Three pronged approach it's people it's process. It's technology, we continually focus on the people. That's all about the culture, how do we get home safe every day the process. How do we do things are we doing it in a safe manner does the process make the most sense from a safety standpoint efficiency standpoint, and finally are we leveraging technology so were not.

When the pound our chest about this technology piece, but I can tell you at something that not only have we have been working on we've been continuing to get better at and we've made some extremely important milestone achievements. During this pandemic in 2020 that will pay fruits of our labours for many many years to come not only in a safer railway, but also in a more efficient railway.

The trade inspection portal is a great example of that mix.

I am extremely happy to announce the transport Canada is recently approved the use of our train inspection portal, which is located just west of loose John Our Maple Creek subdivision to handle and create remote visual train inspections on our potash trains now I know.

I know, we're not the first ones to talk about these portals, but certainly CP is the first to receive the exemption and actually operationalize and apply. This so we've got a high speed camera system that is going to do train inspections, it's capable producing full body resolution images train speed to 70 miles an hour and it.

And it's safer, it's more efficient way to analyze the train and we've already proven that we can detect 87% more defects than traditional manual inspections, but when you operationalize that how does that how does that affect the bottom line, how does that affect service and asset turns will in this case alone. If you think about the potash trains that we move 12 to 15 trains a week will remove and.

Rental normal tonnage through Moose Joel everyone. Other strains today are before this exemption and before this technology was applied.

Was required to stop and loaded side for safety mechanical inspection, we are no longer required to do that so think about the implications to the assets in a very busy terminal, where you've got 15 trains a week not stopping in consuming two hours of manpower man hours two hours locomotive time, two hours attract time used.

Chart, multiplying and it hits, the but the balance sheet. It hits your asset utilization across the manned side across the equipment side and locomotive side. So its compelling it moves the needle as part of how we continue to get better at doing what we do and continue to move the needle at CP, both from a safety and efficiency standpoint, Colwell technology is another space.

That we pioneered in the industry, we created a technology using.

Our waste side equipment detection to measure the heat imprint that the brakes are applying to the wheels, so as opposed to doing.

A break leakage tests, we've got to technology that applies that in the movement of the train we know how each individual car is breaking.

We know where we might have a potential problem to be able to apply that technology to drive a more reliable fleet is what we proved with the side some of the technology and our coal fleet now weve been allowed and half.

And application an exemption to apply that to the potash fleet to the coal in the potash fleet, both have colwell technology and we're not done there. We're working on the grain fleet, we are going to work on the intermodal fleet. So anywhere we havent closed loop of equipment within our network, we still have additional opportunities to make strides in safety to make strides inefficient efficient.

And to make additional strides in cost and the final thing I want to highlight that I'm extremely.

Proud of our team Dr. collagen and team we gave them a challenge we are aware, we had some pretty high profile chat.

Challenging derailments toward the end of last year and early this year with with crude trains up in our northern territory.

Where we serve the crude market crude markets.

As a result of that obviously on dark territory, and that's where we don't have CTC to give us broken rail protection, which the preponderance of these crude routes are on the northern line.

We went to the team we had a challenge we have to get broken rail protection.

So they went to work in a very short order of time took technologies from other industries and combined our methodology.

Effectively equip the railway the dark territory subdivision with.

With the technology that gives us broken rail protection by sending energy, sending electricity a low level of electricity to create a circuit that if a train vertical rail were to break them, we're going to know before the train fines in the start territory that solution that we've created internally. The team has created and operationalize and are executing today.

Order comparison order magnitude not only do you get the safety benefit.

With the aborted derailments, which obviously has enough positive.

Enough positive benefits to fuel the investment sales.

Think about the additional efficiencies with asset turns with train speeds today those trains without broken rail protection on those subdivisions, we run a 25 miles an hour as this technology in this innovation gets deployed were able to run 45 miles an hour.

You've got a safer more efficient more reliable network as a result of this and the cost of this this innovative technology that our team came up with is a 10th of the cost the CTC. So we're doing the subdivisions.

A million App dollars apiece versus if you were to go and try to apply that with the CTC solution do the math, it's compelling so.

So again controlling what we can control we continue to innovate at this company and these are just a couple of things and I don't have time to go overall have a modest one to provide a bit of flavor.

The market that not only.

Do we day in and day out creating unique investment solution with our results in with our customer connections, but these are some of the things that we focus on that as an operating CEO I'm extremely energized about that make me extremely proud of not only what weve accomplished but most importantly about this the future that lies ahead and how we're going to continue to sustain.

In these kind of results and be innovative leaders thought leaders action leaders that drives a compelling value proposition for investors for our customers and for North American Commerce.

So with that said I'm going to say the balance of our time for the questions are my time to questions. Let me turn it over to John to provide some color on the markets and then Nadeem will wrap it up with color on how we brought it to the bottom line.

All right. So thank you Keith and good morning, everyone. So total revenues were down 6% this quarter to 1.9 billion.

Our teams are also down 6% FX was flat bill fuel was down 3%. So as expected third quarter played out just how we talked about was very back end loaded we had tough comps in July and August.

I will speak to our third quarter performance by Atlanta business and provide some colors on and what I see for our outlook looking forward I'll speak to the results on a currency adjusted basis. So.

So grain volumes were up an impressive 18% on the quarter revenues were up 11%. We finished the crop year very strong by moving 10% more grain than any prior year in our 139 year history.

Q3 was another tonnage record our fourth consecutive record quarter in Canadian grain.

A tremendous achievement made possible by close collaboration and partnership between the CP family and our grain customers.

There is a potential for a record crop in Canada, particularly strong in the CP draw territory.

And we are well positioned to move to volume with over 3300, New high capacity Hopper cars in service as our high efficiency product is changing the way our customers manage their supply chains.

We are very pleased with by Terra that announcement yesterday to build another 8500 foot Greenfield elevator exclusive on CP in bigger sales gallon.

This development is very targeted in our growing territory that will expand cps competitive reach.

So by year end over 30% of our origin elevators will be transformed.

8500 foot model.

And to add to the good news story in grain I'm quite optimistic this year for our outlook in U.S. Grant.

After a few years of lower volumes related to the trade disputes export volumes through the PME W have accelerated and we.

And we were up by double digits on us green side on the quarter.

I see continued strength in grain on both sides of the border as we move through Q4 and into 2021.

On a potash from volumes are up 20% and revenues increased 13% extra.

A strong Q3, we expected came to fruition and we delivered a tonnage record for the quarter came.

Canpotex is sold out as we look towards December and.

And we have done they have done an excellent excellent job of diversifying their end markets.

With Brazil actually passing China in 2020 of Canpotex number one end market.

On the domestic potash side, we're also performing quite well as nutrient replenishment in North America improves after several poor application seasons, we have.

We expect domestic usage to remain high driven by increased demand for food supply and the need to continue to replenish the soil.

Our diversified book of business with a solid bulk base deliver steady growth and has remained very resilient through the pandemic.

The outlook of our AG franchise, a key driver in our outperformance year to date remains very strong.

Moving to coal volumes were down 23% on the quarter as a result of planned port outages. However.

However September has improved from a volume and revenue perspective, now that the Neptune facility of commissioning we expect Q.

We expect Q4 to continue that improvement trend.

The energy chemicals plastic the portfolio saw revenue declined 16%, we'll volumes declined 39%.

Crude volumes led the decline through Q3, with only 5000 carloads shipped down over 80% year over year.

Excluding crude energy chemicals, and plastics volumes was only down 2% on the quarter and volumes were positive in September.

Moving to forest product volumes were up 14%.

Strong demand in lumber continued strength in pulp and paper as well as strong edge execution of our Playbooks.

Enabled an all time quarterly volume and revenue record in our forest products line of business.

Continued demand from home renovations improving housing starts coupled with our cm Q acquisition, we will continue to drive growth in this space.

In that AMD fee revenues declined 24% and volumes were down 21%.

Frac sand was once again the big driver in this decline as a result of the challenges facing the oil markets and shut in production.

Steel aggregates and other construction inputs, which were challenged by the pandemic gradually recovered through Q3 and were effectively flat year over year and up sequentially.

Since September excluding Frac. This line of business was positive on a year over year basis.

Moving to automotive.

Humans are up 11% setting a Q3 record as we welcome to FCTA to our Vancouver, and Calgary auto compounds and onboard and Globus.

I am extremely proud of the hard work put in by the CP team to utilize our strategic land holdings and turn them into unique customer solutions in the automotive space.

In September automotive volumes were up 40% year over year.

Based on the base auto demand environment remains quite strong and coupled with our contract wins will drive continued strength in outperformance through the end of the year and into 2021.

Now finally, moving on to the intermodal side of the business quarterly volumes were down four per cent.

On the domestic intermodal franchise revenues were up double digits, and we delivered an all time record quarterly revenue and volume in particular, our refrigerated Rtms were up 13 are up 13% year to date setting an all time record showing the strength of the CP franchise for this.

Central service.

Continued strong consumer Dan demand from the big box retailers in Canada that ride on CP.

Well position us for a record finish as we look towards the end of the year.

In international the strike at the Port of Montreal weighed on volumes, but also created a tremendous opportunity for CP and Acorda st_john to showcase some.

This new acquisition that we received from the Cm Q.

By diverting for ships to support a Saint John our.

Our strong partnership with DP World Dnbi, MSR Hapag, Lloyd and Myrisk helped make this all possible and we are grateful for their ongoing support.

With the new capacity being added to the Port Saint John combined with CP, most efficient route to market I remain very confident that we will attract a new steamship line service offerings into St. John in 2021.

Now heading into the end of the year demand at the ports on both coasts remain high.

And looking out further our customers indicate that the pipeline of international ships look stable into Q1 of next year.

So finally as Keith spoke to in his opening remarks I'm Super proud of the work the team has done in creating our new strategic partnership with Mers.

This multi year partnership as two key components for.

First the state of the art Trans load that we previously announced that is under full construction on CP landholdings and is co located at our Vancouver Intermodal terminal.

Again this is a unique rail centric solution.

As Keith said that we'll pull thousands of trucks off the lower mainland and create a competitive advantage for our customers.

And secondly, our most recent announcement yesterday, our multiyear contract to provide service farmers out of the port of Vancouver, and the port of Montreal will.

Well certainly contracts in this international space can can be competitive.

CPV unique value of our land holdings.

Our trans load solution and our.

And our most efficient direct service to key markets were all core elements to enabling these agreements in this partnership.

So let me close by saying September came on strong as we expected and in in talked about on our Q2 release.

We carried that momentum things are looking quite strong as we move through October and we fully expect it to continue to the end of the year and into 2021.

As we've talked about we have a broad based set of opportunities that we are onboarding touching many of our commodity areas. This not only includes now maersk.

The new Transloads that we've opened in Montreal, our continued growth and opportunities with the cm Q, new auto compounds and grain facilities and so.

And certainly much more to be excited about the width.

So with that I'll pass it over to Naeem.

Thanks, John for that very impressive report an update.

I'm extremely proud of the results the team is delivering today.

Momentum we created in the first half of the year carried into the third quarter from an operating ratio perspective, we knew we had smoke headwinds overcome sequentially with fuel lag and year over year and stock comp, but our team of real railroaders exceeded expectations and their ability to control costs and deliver operationally on.

On the quarter with volumes down 6% stock.

Stock based comp headwind of 220 basis points in the casualty headwind of 60 basis points, the operating ratio increased 210 basis points to 58.2%.

The underlying railroad continues to run extremely well as we sit here three weeks into the quarter I remain confident we'll finish the year strong and where the best ever Q4 operating ratio.

As you've seen we updated our guidance this morning to reflect the momentum we've been building and our.

And our position of strength going into the fourth quarter, we now.

We now expect at least mid single digit adjusted EPS growth year over year, a tremendous accomplishment given the global macroeconomic volatility this year.

Moving onto a few of the more notable items on the expense side I'll be speaking to the operating results on an FX adjusted basis.

Comp and benefits expense was up 7% or $26 million versus last year. The primary driver of the increase was a significant share price appreciation in the quarter.

This 41 million dollar headwind was partially offset by improved efficiency and a decrease in headcount as we continue to bring employees back on the property in a measured way.

Fuel expense decreased $71 million as a result of a 29% decrease in the price paid year over year and lower volume.

Our fuel efficiency, which is 14% better than the industry average has improved 2% year to date, which has resulted in 35000 tons of cotwo emissions avoided.

Materials increased 6% largely driven by.

By increased locomotive maintenance related to bringing units back into service as volumes improve.

Depreciation expense was $195 million, an increase of 5% as a result of the higher asset base.

Purchased services was 275 million relatively flat by higher casualty expense in the quarter.

The team continues to effectively control spend and adapt real time to the changing volume environment as I've mentioned in the past the internal collaboration and constructive tension at CD is what sets us apart.

The teams worked together in lock step to drive results and improve on industry leader leading results as we.

As we continue to develop new ways of doing things better be it and technology innovation innovation that Keith mentioned or through improving the operation theme of.

Team of Railroaders look to build on our success.

Moving below the line.

Other components of net net periodic benefit recovery were negatively impacted 13 million or 13%, primarily due to a lower discount rate.

Interest expense was up 4% due to a higher debt level, largely offset by a lower effective interest rate and lower commercial paper outstanding.

Rounding out the income statement adjusted diluted EPS declined 11% in the quarter.

We are continuing to continuing to look for innovative ways to stretch our capital dollars and Mac.

And maximize our return on invested capital and.

In Q3, our engineering work crews took advantage of an average of 15% more block time than in 2019, which translated into a 7% savings on the average unit cost of installation.

Year to date, we've already installed more cross ties than we did in all of 2019, and it and intend to install 30% more than 2019 by the end of the year the suffer.

The sufficient capital work has network in terrific shape as we head into 2021.

Credit goes to Mark Red and his team for finding the right balance between engineering block time and operating to our trip plans.

We remain committed to $1.6 billion in capital spend for the year and managing the capital on the LOE for the long term benefit of the company.

Rest assured we continue to maintain discipline on capital deployment as evidenced by our adjusted ROIC of 16.2%.

We will continue to balance our shareholder returns the buyback and 60% around 60% complete and leverage remains in our targeted range.

First call on capital as Keith mentioned is always the business and still see upside in the stock lover than Detroit River Terminal acquisition was a unique opportunity to regain full control of a strategic asset on our network country.

Continue to it to invest in our core area of expertise should be not finish the buyback before it expires in December you can expect us to announce a new buybacks in the new year.

Expect to finish the year strong.

I'm excited about what lies ahead for 2021 and beyond so with that I'll turn things back over to Keith to wrap things up before going to acuity.

Okay, well hopefully hopefully.

Hopefully you've got a good flavor.

That only what has driven these results, but most importantly about.

What fuels our resolve in our conviction about the potential that lies ahead for this company.

We've been on a journey at this company for quite some time.

Pivoting to growth we've led the industry. The last several years, even in the year pandemic challenges. This profile that this company continues to execute in lockstep with our partners with our customers with these innovative solutions are key.

Our creating these outcomes that are unique in this industry unique for this company.

It certainly reflects the strength of this franchise.

And expect more of it we're not done this is a journey, it's not a destination that sent them. It's woven into our DNA will continue to work hard to the media and exceed our shareholders' expectations, our customers' expectations and arm.

And our employees expectations so.

So with that said, let me turn it over for questions.

Thank you if you'd like to ask a question. Please press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key as previously highlighted please limit your question to one there will be a brief pause we compare the Q any roster.

Your first question comes from the line of Ken Hoexter from Bank of America. Your line is open.

Great. Good morning, Thanks for the update great outlook on the mid single digit EPS growth in this environment.

Maybe you could talk a bit about the assets locomotives and cars things like on the sideline and the need to bring.

Cost back in the future as you flip into to growth and also maybe your thoughts on the employee costs into 21, just given you always talk about that tension Keith between that the costs and topline growth.

Well I can tell you this ken the tension doesn't change the attention that constructive tension and accountability is would allow us to continue to produce.

So if we look at these key metrics and.

Look at employee productivity I look at locomotive productivity I look at car productivity, even as we bring this business back on we can we can talk about the quarter, where we.

Drove improvements across the board, but I'm I'm thinking about the fourth quarter now so if I look at this month alone Weve got to a point, where we are inflecting positive on volume.

In order to RCM basis, we're at 8.6% this morning quarter to date month to date.

Train miles are down 13.5% weights are improving year over year up 7% train links 8% crew starts 14.5%.

I share those numbers just to give you the same conviction and confidence that I have day in and day out this operating team understands how to manage resources to keep a constructive tension. So that we can sweater assets. So as we bring people back on.

And we were down in the quarter about 8% on a 6% reduction in Rtms theyre not going to be one for one we're going.

We're going to continue.

To maintain our productivity measures, we're going to continue to invest and expect a return for those investments and work hard to grow the business. So that we can bring all of our employees.

Back to work that are currently still laid off which we still have several hundred but in addition to those several hundred part of the synergies on the headcount of course is just do more with less as we retreated out employees.

Outside of those crews in the men and women that moved the trains day in day out in the corporate office and all the support functions. We became more efficient. So certainly we have not replaced for one for one we don't intend to replace for one for one we became more innovative more productive and in fact, if you think about the world We live in Ken how many less fly.

Yes are we going to take a how many fewer hours that were going to be consumed in airports are in transition to meetings, how much more productive can we be so we shouldn't be one for one so right.

So rest assured that's something we'll continue to work out to drive additional efficiencies better quality of life for employees, but at the same time harvest the benefits of the productivity in.

And the cost synergies that allows you to to generate.

Great. Thank you.

Your next question comes from Allison Landry from Credit Suisse.

Go ahead.

Thanks.

Given the recent volume momentum and then various growth opportunities next year that are really specific to CP and then considering that productivity improvements you've made this year in terms of train length and weight. How feasible is the in the mid Fiftys LR in 2021, and if you could speak to what.

You think the earning power of the business ended up for the next couple of years. Thank you.

Well, it's a great question I'll.

We've been accused of sandbagging, a bit but I would be doing that if I said thats not the art of the possible late.

Late 2021 is that if things go our way and these things play out the way we think they may play out in the economy doesn't have some staggering shock event that I cant predict that's in the art of the possible I'll, let they didn't provide a bit more color, but certainly this is a railway on a journey not that were seized and focused on.

A mid Fiftys operating ratio, it's just a natural outcome of our profile in the way, we execute day in and day out that allows us to compete the marketplace may deem to provide a bit of color to that yeah. I mean, if you do the math based on the guidance. We've given you based on our outlook for Q4, you kind of hit on that.

Mid fiftys level for the year.

And certainly in this environment.

In this environment.

Sales are benefiting from lower fuel surcharge and the benefit that that has on on the operating ratio doesn't have much of that benefit from an income point of view, but it does help dealer.

So.

We've always talked about improving on our performance and so for already at kind of that level.

We assume we're going to improve next year, and we're going to get the benefits of operating leverage and the unique growth story that that John outlined there is no reason why we can't have a mid fiftys level of operating ratio for the year.

Uh-huh side of what we can control, which is fuel and a stock comp so.

No reason why not why we can't do that.

Thank you.

Thanks Allison.

Your next question comes from Walter Spracklin from RBC capital markets. Please go ahead, thanks very much good morning, everyone.

So I want to come back to your use of land is kind of a teaser for new contracts and and really this is kind of contrary to prior management team, where you were looking for a broad sale.

The sale of your land and I'm just curious perhaps.

Perhaps John can chime in is how much.

Revenue conversion opportunity do you think you can take using your land is a teaser to achieve.

More maersk more forward more and more deals like this where you tie them in not only to win a contract but to win it for for multiple years and correct me if I'm wrong here this month.

Multi year is longer than your normal year with it in international intermodal customer Thats correct.

Yeah, So Walter.

Heavily if Keith brought us back to when we talked about at our Investor day.

This has been a key cogs in the whole growth engine in the story of how we've laid out our strategic playbook, so commodity by commodity.

Where the various locations that we can take our land assets and create these solutions I don't know if I can put a number on it but looking forward other than I've got over a 1000 additional acres out there that were.

That were actively actively working on you know weve created essentially for a new auto compounds on our land. We've we've opened two trans load.

Developments.

I think there's certainly more opportunity there, we're just getting our our new facility up and going and in Montreal. You know you look you look at Vancouver, you got an additional hundred acres beyond where we're building the numerous building the transload facility that is ripe for development.

So we were keenly working on that and and then you look at what we've just done in in Chiller Park in the Chicago market. We've just opened a new auto compounds, there, but being well positioned in the city like we are I think has a ton of opportunity as the begin to think about how this.

Housings housing markets, how this home improvement market with the forest products industry needs to do to further develop some of that area. So I'm not sure. If I can put a number on it but if you go back and you start looking at at at all the opportunities that we talk about whether it be awful IPO.

All in the Alberta Heartland, using our land assets I think were honestly in the mid innings of this ballgame in terms of what those opportunities can drive or as we look into the future.

Good color appreciate it thanks.

Your next question comes from Ravi Shanker.

Morgan Stanley. Please go ahead.

Thanks, Good morning, everyone.

Dean can you give us a little more color on the EUR three Q2 for Q or walk. Please I think you said a adopt the best ever or expected in Fourq, you're going to war or some of the puts and takes there and if I.

And if I can try and sneak into the second question for Keith.

Thanks for the U.S.G. INTECH focus why now is it because of the availability of the of the technology is it because of the timing because of cool bed is it because of increased demand from your customers kind of what.

Kind of what's what's driving that that push towards E. S. G focus for a fourth grade routes.

Let me take the first Robbie then I'll turn it over to May deem to provide the color on the walk through they are.

Listen the world's changing around us we're all living in it we're all becoming more environmentally aware, it's no secret as well, although we were already on this journey we.

We've we've gotta shareholder that express.

Their focus and their expectations and their concern about the environment. So number one shareholder our largest shareholder nadeem and I.

[music].

Two years ago, or I guess, it's it's almost coming up on two years ago, We had the honor and the opportunity to speak at their Investor Investor Day, and we had a private meeting and we discussed SSG we discussed how.

Now this entire space not only.

Is that the right thing to do for the environment. It's also a differentiator for the rail industry. We have been leaders, we talk about the benefits of leaving rail versus truck.

So we decided we committed then that we're going to be innovators are we're going to be leaders in this space. So as.

Analogy has developed.

As the opportunity in space and time to think about how we become thought leaders action leaders in this space Megan in the team layered pit going Wilson.

External.

Partnerships that we've created we focused on how do we lead in this space. We're leaders in safety. We're leaders in financial performance, we're leaders in service performance.

We're leaders in customer relations, we're trying to be the best possible company, we can be realize our potential across all spaces and this is a space with the SG there.

That it matters more than it ever has.

It certainly has our attention it has our focus.

Our employees get energized by the environment is going to benefit from it so.

So theres never been a more appropriate time and again this isn't just a flash in the Pan This has become a woven into the way. We think we'll take these applications will operationalize them.

If it makes sense as we go across the property I think about the solar garden aspect, we're going to prove the concept in Calgary that does not mean that were anywhere remotely close to being done.

You know that the amount of money it takes to invest in that because it is becoming much more affordable and reliable in the return on that in and of itself from a financial standpoint, it's compelling you.

You layer on top of that the social benefits to that as well as environmental benefits of that it's just a compelling value proposition that we'd be remiss not to be executed.

Sure Ravi just on your second question around the Omar I think the biggest.

Sequential change will be the fact that our revenues are going to be a much.

A much stronger in Q4 than they were in Q3.

We've seen the strength coming in that's the first three weeks, that's going to be extremely positive too. So our operating leverage as well you think about the the stats that Keith shared as far as some of our.

Crewing and train debt.

Train density performance, and which all supports our operating leverage and Adam will improve our help improve our operating ratio at the end of the day.

The other points I'd make.

Points I'd make our you know we had a very high casualty cost in Q3, and I fully expect that to change in Q4.

And and we'll see what happens with stock based comp certainly that's been a headwind throughout the year based on our performance and you know I'm certainly.

Correct. That's the continued to an extent, but but we'll see that's a bit of a wildcard. So I think those are the major items I pointed suit between Threeq you in Q4, so really benefiting from operating leverage and a rebound in volumes.

Great. Thanks, both.

[noise] ceramic you know your next question comes from Sandy Chen from BMO. Please go ahead.

Good morning, and thanks for taking my question, maybe thinking about.

Thinking about 2021, and a half you help explain the RPM growth opportunity for you if I look back and going out maybe three years in a in a in a cyclical recovery and then economic recovery and I think was the success you're having in the commercial side.

Kind of feed volume go up between.

Mid single digit than high single digits in RCM and the challenge going into 2021, you had pretty much all the segments kinda working on.

Moving in the right direction, I guess, including grain or both and kind of on the U.S. in various cope with kind of mid single digit high single digits in 2021, given what you know now about the feed be specific share opportunity then what's kind of coming in many.

And the pipeline from a grain and again over market.

Well fatty look I am not at the position to give any guidance on 2021 rtms quite yet we're we're certainly putting all the all the elements into the blender as we speak to see where that that lands, but I will tell you. This.

If you look at Q3 Q4 this year.

Full year exclude crude were positive.

I think that tells a remarkable powerful story.

That we've been saying we can do this without without crude we've done it on the strength of all the things I talked about with Walter's question in utilizing our land assets, we haven't even caught the big tailwind of 33 relates to RCM Q acquisition and.

And in a number of the opportunities we're going to bring on related to that of course.

Maersk will will certainly bring a a nice revenue opportunity for 2021 for us, but but you know as that develops over overtime.

As Keith spoke about that that's going to be entrance formational revenue opportunity for.

For us so I'm I'm bullish on 2021, obviously, we'll we'll have to watch how.

Endemic in economic and all the various things Keith spoke to that.

Our looming out there, but if the trajectory continues yeah, I'm I'm I'm anxious to see what we can deliver in 2021.

Yeah, I would say John's being a bit.

He has been a bit humble here for a bit modest if things go our way in the economy plays out the way, we see playing out with these.

Initiatives that we've talked about with these contract wins with our business mix the right.

The range is you're talking about you know, we're not going to commit to them today, but certainly those of or within the art of the possible into business potential of this company and our business mix.

There you go fatty.

Great appreciate it.

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

Hey, Thanks, Good morning, maybe sticking on the other revenue opportunities you know John can you talk a little bit about you know sort of going back to the Investor Day, you had a a line of sight to a number of potential opportunities you closed on several of those that you think after 2021 can you give us a sense of maybe what still out there in terms of specific opportunity.

We go after and then maybe thinking kind of about the international intermodal side, obviously, the Maersk condition is really interesting.

Can you talk a little about how soon see John sort of might might be able to be sold out over a period of time.

Yeah, you know specific to the I like where we sit today and sort of our mix.

Chris as it relates to the international intermodal space, Onboarding, where school will be a significant milestone and an opportunity for us Hey, John.

Hey, John is going to be interesting.

[noise] I I'm I'm feeling.

I'm feeling really good about bringing a steamship line.

To direct directly to feed p. into that terminal in 2021.

But I think the art of the possible longer term is is is it's quite exciting I think similar to the dynamics of being freight transfer from the west coast of the United States up the Vancouver, and also up to to Rupert.

The same dynamic of going after business in New Jersey, and New York and in working those same opportunities is very real obviously, we hear so much about near shoring, you know whether or not and how that plays out in the coming years global yet to be seen but we again, we think Saint John is it.

It is very well positioned to capture some of that opportunity.

And then just also I would say its share a there was a share shift opportunity out there in that just frankly, our competitor is as long serviced and really been the only alternative in the in the Maritimes for a number of years and and now with our new access into the port and over two.

Myles shorter route we thought.

We think theres going to be just some natural gravitation towards towards VP in that area also so.

You know, but it but it doesn't stop at international in its part of that same John as game Q opportunity. We think we've got a great domestic intermodal opportunity. There we've got a beautiful please piece of land that.

For for Automotives that Globus and others are starting to use.

Effective now it provides great diversification in our merchandise franchise.

Particularly forest products that has been strong.

So theres the Fam Q is a is a big part of it.

You know I already spoke about inter pipeline coming on later this year, we just had Pam Pembina open a new LPG facility.

We've talked about all the all the green opportunities and above and beyond that don't forget Weve got our diluent recovery unit coming online at Hardisty in mid 2021, that's going to give us and and more resiliency in that crude by rail market.

Yeah, I think that's the way I think about that.

Hey, Chris the way I think about the scene Q I'm extremely bullish about the opportunity that.

Saint John represents for our.

Numbers now as well as future is.

As well as for our employees you know the Innovativeness the entrepreneurial spirit of the people would say John that port.

Ill.

Geographically its advantage by distance for Tidewater to key markets that will serve there and then.

They are in the middle of an investment capital expansion going from effectively 200000 teu capacity to in partnership with with CP and with the profits.

It was a key stakeholders division is by the end of 2022, that's going to be an 800000 to use capacity terminal.

So thinking about the growth between 150000 T use.

Which is today and what 800000 looks like which will be key success enablers getting that from tidewater into the more.

The markets internal the candidate as well as the U.S. Midwest it's compelling.

In every other benefit every other associated revenue stream its created as a result of that it's it's an economic lifeline to the Saint John It's an economic bloc line for growth dipped.

The feel of the store growth for this franchise and a great service offering for our customers 2021, you're going to see it seems yellow flag I'm confident.

Planted in Saint John and that's going to begin the journey in the March from 158.

800000, I said this ingest you know a year year and a half ago I think at the Vancouver, the east that's going to be a major gateway it's gotta.

It's going to be a major gateway in the future for Canada I forget.

For Canadian Pacific for St John and and for our customers and something we're super excited to be a part of an honored and proud to be a part of.

Thanks for the color appreciate it.

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

I'm just going to ask a similar question in another way on the land strategy, just trying to get a framework here or a sense for what do you think we might be and I'm glad strategy. I think you described it thousand acres that working on but is it still at two to three year five year seven year development strategy that we'll see continued benefits.

From or where are we at thanks.

Well forget we've got land in the bank deposit is a savings account I guess, so you know we could play it out we've got different playbooks, Steve but.

Certainly over the next two to three years Weve got some contracts some ideas concepts in discussions in play that well see additional revenues be converted because as those land strategies, but I can think out five to seven years from now we're not going to consume that all every key market.

Vancouver, you know there is a phase two thought about what we might be able to do with that additional hundred acres.

As we develop those business opportunities, it's compelling it could mean more than what this transformational opportunity. We just announced means for us creating stickiness, creating additional revenue streams I can take that thesis in case to shut.

To Chicago, where I'm at today, and our terminal and this in detail in the capacity that we're going to unlock is we continue to re purpose that yard I can think about shell. The park. We have open. This auto compound we're not done there I can go to Toronto I think about the compelling footprint, we have at bond, which is in a strategic location that.

To double essentially the business, we handle as we bring the business cases alone I think about Milton.

That facility ended up itself compelling value generator. So this to me you should expect.

Every 18 to 24 months at least for the next five year time period, there's going to be one of our strategic Playbooks that go from concept.

The application operationalize the conversion, bringing additional revenue to this railway that's going to fuel growth as well as create unique supply chain solutions that create that value proposition that.

Makes it a value offering not a commodity.

Not it's not in our interest to do contract swapping.

We're going to pick our partners wisely, we're going to create value for them and in turn build value. The service, we give them a we think thats the way to win business, we think thats the way to not only when it to retain it and they continue to fuel earnings as we go forward.

Appreciate the color. Thanks, Thank you.

Thank you see.

Your next question comes from Jon Chapelle from Evercore ISI.

Please go ahead. Thank you. Thank you good morning, everybody Hey, John your revenue for our T. held in pretty well, especially the most of the headwinds that most of your peers experienced in Threeq you. How much of this is pricing for service specific to CP and we know how the volumes kind of progress through Threeq you ending at a much stronger than they started was it similar.

With revenue per TM and should we see the same type of momentum through October in Fourq, you, Yeah I think.

I think I think I see a little bit of acceleration on that sense for our team as we move into Q4, you know on the pricing front the team.

The team is staying disciplined.

And again I know I talk about this all the time, but they're part of their compensation is based on staying disciplined but look you couple that I think customers are certainly benefited from lower fuel prices.

And and frankly as capacity continues to tighten we are seeing it in the truck spot markets.

Some of the shorter haul lanes for sure and but honestly as rail capacity Titans on both sides of the border I I'm quite bullish as I look ahead to our pricing capability and again to your point really based on the value of our capacity that we have and our service off.

Offering we provide you know Keith mentioned in earlier trip planned performance through through this past quarter and through the pandemic staying in that high I think 80, 788% range.

Is compelling to our customers as they look to save money there they are depending on quicker cycles.

So I I see ongoing opportunity in this current environment on the pricing front.

Great. Thanks, John.

Your next question comes from then that's what he's from Deutsche Bank Capital markets. Please go ahead.

Hi, and good morning, everyone Uh huh.

Could you talk about you Unfortunately to bring more volume so were the Detroit. So all in all though over the medium and longer term and whether do you see murder in many unfortunate. These follow what you see in Q and the Detroit total thanks.

Well I think been while we we talked about you heard a lot about our opportunities for the a C N Q and I think that naturally as a.

Perfect connection with the Detroit River tunnel and.

You know it.

The thought of having steamship lines second.

Look to bring traffic through the.

To the Midwest.

And leveraging that that Roading advantage certainly went into our thought process. It wasn't the sole driver, but certainly we would benefit from increasing volumes and increasing opportunity to control our own destiny well, that's that's what I'd point to.

As far as additional M&A you know there are being.

There being a number a short lines a number of opportunities that have been.

In the market. The last 18 months I would say you know we are very focused on rail M&A, that's that's going to be where our attention is and it needs to be.

Connecting with our network, where we can provide value there have a better service opportunity for our existing customers enter new markets or look for even operational benefits.

Say that we'll continue to look at it all his deep.

All his deep our powder dry you have the financial wherewithal and the free cash if you look at our performance.

Our performance and what we see is the next several years, our free cash generation and where there is a network fit and a strategic fit and we'll continue to pursue it.

That's great color. Thank you very much sort of thought.

Mr going on.

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

Hey, good morning, guys. Thanks for your time, just real quickly as you think about the sensitivities on me as much as well from the potash thing if we get something specific about that you keep that allowed you to kind of get that Lee and what's your expectation for when you might be able to roll that technology or <unk> or <unk>.

With a growing part is all about proving the technology out obviously, you know for transport Canada.

To allow us that exemption, it's something that's it's been in the works it's been in the process going through probably are a case that we have an improvement in safety that it's actually not just about productivity. Its most importantly about creating a safer.

Environment that we operate in so that has to be proven out weve through the data through the technology. We've we've proven initially that we can do that so we're gonna.

Walk through this we're not going to try to run through this we're going to make sure that we continue to.

Continue to drive safety improvements as a result of the technology with which bodes well for our case for change as we look at those additional fleet. So.

Right now I look at this this portal technology that we've deployed a we've got one in service now.

We're on a journey.

Numbers the capital it's about a 4 million dollar expense to deploy these were going to do another one in 2021, we're going to do one more in 2022, we're going to do at least three to try to cover the network and then depending how the application of this goes and depending on the progress with the regulators. We prove its case you could see us expands.

So this is a journey again much like our safety journey, it's not going to happen overnight, it's going to be incremental change over the next two to three years, but we'll continue to move the needle.

Thanks, if I could just squeeze one last one in you know that that that step up in more let's say job well capacity on that's a pretty material increase in <unk> <unk> <unk> <unk>.

Hold on one of them right now and it varies additional need for capex in that quarter, what's it sustain that kind of growth do you think you can hit bottom I go through the existing infrastructure yeah. The.

Yeah, the the capital plan that Weve laid out when we purchased the CPQ taken that you know from effectively a short line railway to a class three main line CP standard railway is covered over our three year plan, we don't have to change that at all or the capital that's required to get from that 200000 to use 800000 has already been approved.

Through the province DP World.

Is working lockstep with the port Saint John Ah to convert.

That existing footprint that existing terminal. So the money is protected the journey has started the timeline, it's going to be completed by the end of 2022 to 23 and beyond.

We've got a world class terminal, that's going to become a world class Gateway and we're going to do our part in the partnership to help enable.

That vision into reality, we pulled forward some of that capital work into 2020 and take advantage of.

Track timely availability with volumes down during the pandemic. So just with our approach of wanting to get.

Track infrastructure up to the CP standard Def sooner than later yeah.

Yeah from a service standpoint, and asset turn objective by the end of this year. The objective is to be able to get from Saint John to monitor all within 24 hours.

48 to Toronto, 72 to Chicago, and obviously were going to exceed that once we get this.

Well the capital spend deployed but that's what the objective is to degree that compelling service offering in that marketplace.

Yeah.

Hi, Thanks again guys.

Thank you.

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

Hey, good morning. Thanks for the question what do you think about the incremental growth opportunities from here that or essentially being enabled by the thousand or so acres of land that you're sitting on a when you compare this to to your typical business wins in the incremental capital needed to.

Sure a comedy additional volume opportunities how does this type of growth change either the returns profile or the overall capital intensity of the business.

Well said and I would say that.

You know we factored in.

Some of these growth aspects into our long term capital planning process. So you know will contribute the land and the great thing about these partnerships. They truly are partnership so it's it's us committing some of our land capital some cash capital through the building of some of the infrastructure.

Sector, but in many cases, it's a customer also committing their capital as well.

And when we look at our returns.

Seen our our ROIC continue to to increase you know we generate.

Meaningful returns that are that are required if we're going to contribute that type of land and additional infrastructure tap.

Infrastructure capital it would be in line with what what our ROIC kind of reported ROIC is so beyond that it's it's not detrimental to our our overall returns.

Okay I appreciate the time thanks.

Thank you.

Your next question comes from owner <unk> data from Scotia Bank. Please go ahead.

Thanks, and good morning, everyone I'm. So just on the sense about the and I wanted to come so a few things on the E. C. P side looks like defense brought DM are very strong I think in the last two quarters, how much of that stand up would you say is driven by more favorable mix as says crude by rail is down and also.

So the liquidated damages study are collecting.

Yeah. So it's it's significant and then or sort of.

The sort of the run rate we've seen.

Well really through all of 2020.

I would expect to continue to see as we move into Q4 and again, we've structured all these youve crude by rail.

You know contracts with that Backstopping, if we're gonna come into service and the capacity, we required some sort of liquidated damages.

So so naturally if the market turns and any opportunity to haul that freight presents itself that'll.

That will change a little bit and if it doesn't we'll continue to collect that and you should expect to kind of continue to see that a similar run rate going forward.

Yeah. Thanks.

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

Hey, Thanks morning, guys. So the Dean can you just clarify if the fourth quarter has got any gains that assumed in there or if that's upside to the guidance and then just as you think about the earnings and cash flow and how they're holding up so well does that give you comfort and maybe raising the.

The leverage targets going forward.

Yeah, sorry, Scott that first part of the question can you just repeat that.

Yeah, just if there's any gains on sales assumed in the fourth quarter of node or if that's upside to the guidance.

Any gain on sales would be upside to the guidance we gave.

And as far as leverage you know we've had discussions with the rating agencies just.

Committing to our approach to capital allocation, but also.

Sure you know reminding them just how we perform through this pandemic. So the defensive nature of our business the defensive nature of our business mix and I would also highlight the offer.

The operational excellence that our team.

As shown.

In times of crisis that we've gone through in macro.

Alan just having gone through I think that's being.

Well received and appreciated by the rating agencies.

I'm not going to say that we're going to change our our leverage targets.

We've been operating kind of at the high end of our range, which is that that to 400 to five range and Oh I think we're comfortable at that level.

You know we need to do something.

Short term because of a unique kind of opportunity to to to spend capital. You know I think we're we've been given the the freedom and the breathing room to do that and it's justified by our ability to to operate in this town downturns, but to say that we're going to.

Take our leverage up to three year, three and a half a I wouldn't go there at this point Scott.

Okay, and then I know there was some talk about maybe a 50 60 million dollar gain is that not likely in the fourth is that more likely next year now.

Sure Dan miles right right. So it's there's potential.

The mechanics of the DRC P. transaction, we would get again of the write up our of our existing ownership that 16 half percent would be written up and we'd get a gain on on that it all depends when it closes though so in that it has to.

Pass for regulatory approvals to do Oh.

For it to be realized and whether that occurs in 2020 or 2021 remains to be seen so we just felt since.

Prudent not to include it in our updated guidance and if it comes all comes in addition to that so be it but the fundamental nature of our business is whats going to generate that mid single digit and above you Jesper.

Very helpful. Thanks, guys. Thanks, Scott.

Your next question comes from Tom Wadewitz.

Yes.

Please go ahead.

Hi, yes, good morning.

You know I think you're and you're talking about growth it highlights the.

Value by extending the franchise both in terms of the land Bank you have so to speak.

In the <unk>. So do you think about maybe more aggressive inorganic expansion are you know expanding the reach of the franchise.

You know on a multiyear basis is that something that given all the success you've had with leveraging current freight franchise.

You think inorganic and kind of bigger yeah.

Extension of the receipt of the of the reach is something that you know.

Is in the cards in the next you know whatever three to five years.

You know what Tom that's a that's an aspiration will fall and certainly could be possible you know that Canadians point, we're going to keep our balance sheet strong we're going to keep our powder dry and we're going to look for those accretive opportunities there.

That give us a compelling value creation.

Stuart if we can extend our reach we can provide better service longer length of haul more competition than you know we're gonna be interested so theres nothing.

So there is nothing eminent I'm not going to suggest that there is I don't want you to misconstrue My fault.

But what is an absolute as this company is always looking for those value creation opportunities and if we can do that and create a more powerful franchise.

You know for our shareholders for our customers and for Commerce in North America. Then it's a discussion that we are willing to happen we're going to look at.

Maybe if I can ask a different wrinkle on it as well does it make you less likely to consider kind of major deal given all the growth that you have in the pipeline you just kind of more likely to focus on executing on your plan.

No one I don't I wouldn't suggest less likely I would suggest is when we look at.

Other potential deals or if I were to evaluate another deal.

Is it complementary to what we're already doing what we're already doing because I can tell you stand alone we have a very compelling value creation opportunity in front of us So I.

So I'm not going allow something to distract the focus of the leadership team.

Or what.

Oh, what if it's got to be compelling because we can continue we will continue to execute you know we've been leaders in the industry, we've got initiatives that we've.

We've talked about that are coming into play we've got some we haven't talked about we've got these land assets, we're not resting on our laurels. So standalone, it's unique and compelling opportunity, but with that said that that strength serves to strength. So we have an opportunity that comes along that complements that story. A then obviously, we're certainly willing.

And a couple of that too.

This powerful train network that we already have but again, we could do that with or without so.

So I wouldn't say, it's less likely had to say it has to make sense and if it hits.

If it hits those metrics and it hits those those qualifiers for US then obviously.

Well take a look at it.

Okay, great. Thanks for the perspective in Q2.

Thank you to.

Your next question comes from Jason Seidl.

Right.

He is going to go up thank you aren't really good morning, guys. Keep you know your pipeline looks really strong guy you know from here on out, but I want to take a closer look under the Hood. There's been a lot of obviously you talk about the demand that has come back not only in the rail industry, but across the supply chain, we've seen the global supply chain.

Turning to many many places so much of this a snap back do you think it is just a function of restocking from very low inventories and how much do you think is just pure underlying demand coming back from from the consumer other places.

You know how do you.

Good of Panda that I'm not sure I'm, you know I'm not a I'm not going to suggest that there is not some additional tailwinds because of restocking.

But I do think I'm bullish on the overall economy, you know we're in the middle of a pandemic.

There was a gap we all see the same store sales that were empty that has to be field, but as we go forward I am of the optimistic view I do think the vaccine is coming for this terrific.

Disease that we've all had to battle I think that life will normalize a bit in 2021, I think that that we had a very strong economy going into that pandemic and I think we emerge with a stronger economy. Once we get past the pandemic past the election I think the fundamentals are there and I think they get even more compelling.

As a result of some of these opportunities have created as we as we in you know, we take offshore stuff and bring it back to the North American continent, what does that do for us in job creation, what does that do for us in rail freight demand not just for CP, but for the entire industry and so on.

So I'm bullish on the economy I'm bullish on the opportunity right now there is some tailwind obviously from the restocking, but the thing.

But the thing again, our own unique opportunity before the pandemic without restocking even.

A discussion topic.

We had a very unique first quarter that was counter to what the entire industry was doing so as we come out of the pandemic. We're a stronger company, we have more opportunities coming online than we had going into the pandemic in 2021 that fuel that conviction. So we're in a good place.

I think it outside of any kind of.

Catastrophic shock to the economy that I cant predict will continue to be in a strong place and I think the real industry. Overall again is in a strong place to provide the fee.

The feel to it.

To continue that economic prosperity in North America, both in Canada, as well as the U.S. and Mexico, well on knock on wood that that's the case can you just a follow up really quickly you mentioned near shoring or without obviously getting specific are you talking with multiple people about near shoring certain operations from abroad.

No no. Okay. Thank you appreciate the time thank you.

Your next question comes from Brandon Oglenski Barclays.

Hi, good morning.

Good morning, and thanks for taking my question guys real quick at the end of the call here I don't know if you guys mentioned, how big the Maersk opportunity will be in and keep I think I understand it is taking congestion out of the port infrastructure, but you're thinking longer term controlling what you can you know we.

We saw your competitor or get into some service issues as they took on a lot of traffic or are there things that the port needs to do longer term to remain competitive and keep taking share on the west coast.

From a capacity standpoint is that just for clarification, yeah, and just the unintended consequences of you know shifting service patterns and where you might find the next bottleneck.

Well listen that the port of Vancouver, and obviously, that's a that's where our bread and butter comes from the ones. We're most focused on and.

Our Canadian network.

There's investment.

Being deployed across the entire spectrum now you've got investment that's transpired.

Down at Deltaport, a you've got.

With our partners at GCT, you know that capacity has been brought a lot it hasn't been fully consumed obviously theres talks about additional opportunity to build whether it's an extension.

To the existing.

[music].

Infrastructure, there or a new terminal both those concepts are in play if I go to the south shore. The expansion. It's in process with syndrome, that's coming online next year, that's a substantial increase in capacity the work that we've done redesigning the port on the south side again the work that.

Customers like that terror have done the work that Neptune is complete.

Completing relative to the coal supply chain as well as their throughput capacity G. Three.

There's a lot of things a lot of needles that have moved and investments that have been made in Vancouver, that's creating capacity for growth.

For the next 510 years that allow us to create supply chain reliability, which I think is unique.

Even creator compared to some of the west coast experience that our customers Uh huh.

Yes, if it had been faced with so I think we're in a good place you know I'm not going to suggest that we don't have to continue to invest there is infrastructure plan that is being rolled out in the investment will continue but I think we've made a pretty good dent in it and I think as we become better operators we operate.

We operationalize and optimize and improve some of the existing infrastructure that gives you a whole nother lockstep, increasing capacity that does it benefits the port of Vancouver, and unique legal benefit Canadian Pacific as being part of the solutions.

Okay with that let's wrap up the call today again I'll I'll then.

Finish where I started thanking you for your time, hopefully you've got a bit more color Inc.

And can appreciate the pride that we feel at this company for what we've accomplished I'm extremely proud of you know.

[music].

The World Class rotors, we have it enable these results that we get to share today the conviction the enthusiasm the it side, but.

It's not wanting you know were convicted were compelled we're most excited looking forward about what is yet to come for this company 2020 will close strong the momentum that we carried into the fourth quarter will execute on driving improvements in service in margins in financial performance today.

2021 to be even more compelling force will continue its our objective in certainly our potential to continue to be leaders in this industry and servicing cost control and growth in earnings in 2021, So with that we look forward to discussing our.

Our fourth quarter results in January.

Yeah.

Have a safe day stay healthy and I wish everyone, a blessed Thanksgiving and Christmas holiday.

Thank you. This concludes today's conference call to discuss.

Huh.

[noise].